Late SOFR/Treasury Option Roundup, Put Unwinds

Option desks reported two-way put trade in SOFR and Treasury options Friday. Better SOFR put buying was noted prior to the July employment data as accounts hedged a gradual increase in rate hike projections. Looking past the stronger than expected AHE data (4.361% in Jul from 4.413% in Jun), the lower than expected (but still solid) job gain of +187k vs. +200k est. spurred a strong rally in underlying futures. In turn, rate hike projections declined, spurring various put unwinds or repositioning to higher strikes. Fed funds: Sep 20 FOMC is 13% vs. 17% w/ implied rate change of +3.2bp to 5.360%. November cumulative of +8bp at 5.407, December cumulative of 3.8bp at 5.3667%. Fed terminal slips to 5.405% in Nov'23. Salient trade includes:

• SOFR Options:
  • -10,000 SFRZ3 94.25 puts, 3.5 ref 94.625
  • 5,000 SFRZ3 96.00/96.50 call spds ref 94.60
  • 2,000 SFRV3 94.37 puts, 4.5 ref 94.595
  • Block 2,500 SFRM4 94.37/94.50 put spds 4.0 vs. 95.10/0.05%
  • Block/screen, 20,000 SFRV3 94.50 puts, 7.5 vs. 94.625/0.35%
  • 20,400 SFRZ3 95.50/96.50 call spds ref 94.60
  • 28,000 OQZ3 95.75 puts, 35.5-36.5 ref 95.83 to -.81
  • 1,000 SFRH4 94.37/94.62/94.87 put flys ref 94.84
  • 6,500 SFRQ3 94.43/94.56 put spds, ref 94.59
• Treasury Options:
  • 2,500 TYU3 109.5 puts vs. TYV3 114.5 calls, 6 net Oct over
  • 20,000 wk3 TY 107.5/109 put spds 10-9 ref 110-16 to 110-26
  • -15,000 TYU3 109/110 put spds 21 vs. 110-12 to -10.5/0.17%
  • 5,000 FVU3 109 calls, 2.5 ref 106-09.25
  • -7,000 FVU 106.25/106.5 put spds, 8.5 ref 106-06.5
  • 2,500 USU3 117/118.5 put spds 25 ref 120-17
  • 3,000 TYU3 112 calls, 15 last ref 110-04.5
  • 2,500 FVU3 109 calls ref 106-07
  • 2,100 wk1 TY 109.75 puts, 6 ref 110=07
  • Block, 4,000 wk1 TY 110.5/111 call spds 7 vs. wk2 TY 111/111.5 call spds 8