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Late SOFR/Treasury Option Roundup: Puts Sought as Underlying Sags

US TSYS

SOFR and Treasury option trade segued from better early call interest to mixed in the second half. Put structure buying and call unwinds evident as underlying futures reacted negatively to a weak 30Y Bond auction that tailed over 5bp, while more hawkish messaging from Fed Chairman Powell at an IMF conference added to the sell-off. As a result, projected rate cut chance into early 2024 are evaporating: December at 3.6bp at 5.358%, January 2024 cumulative 6.6bp at 5.387%, while March 2024 pricing in -16.5% chance of a rate cut with cumulative at 2.5bp at 5.346%, May 2024 cumulative -6.5bp at 5.257%. Fed terminal at 5.385% in Feb'24.

  • SOFR Options:
    • +10,000 SFRJ4 95.25/95.37 call spds, 2.75 ref 94.95
    • +12,000 0QZ3 94.87/94.93/95.12 put fly with 0QZ3 95.12/95.37/95.50 put fly, paying 1.0 to buy both
    • -5,000 SFRM4 95.00/95.75 1x2 call spds, cab (1-leg over)
    • 1,600 0QZ3 95.25/95.50/95.75 call flys ref 95.53
    • Block, -5,000 SFRZ3 94.50/94.68 strangles, 3.0 ref 94.605
    • Block, +2,500 SFRZ3 93.75/94.50 2x1 put spds, 5.5 ref 95.54
    • 15,000 SFRF4 94.68/94.75/94.87/94.93 call condors - widens spread after:
    • 19,000 SFRF4 94.68/94.75/94.81/94.87 call condors ref 94.715 to -.705
    • 3,000 SFRH4 95.25 calls
    • 1,000 SFRZ3 94.37/94.50/94.62 put flys
    • 2,000 3QM4 96.75/97.12/97.50 call flys ref 96.08
    • 1,000 SFRM4 94.50/94.75/95.00 put flys ref 94.945 25
  • Treasury Options:
    • 4,979 TYZ3 105.5/106.5 3x2 put spds, 25
    • 4,979 TYZ3 108.5/109.5 2x3 call spds, 13
    • over 10,400 FVZ3 104.5 puts, 11 last ref 105-03
    • -15,000 wk2 10Y 110 puts 163 ref 108-00.5 - unwind: over +46,000 wk2 10Y 110 puts, 137-14 yesterday
    • 3,000 USZ3/USF4 117/119 call spd spds, 15 net, Jan over
    • 2,000 USZ3 117/119 call spds, 15 ref 114-11
    • 2,500 FVZ3 104.25 calls, 126.5 ref 105-16.25
    • 2,600 FVZ3 107 calls, 5.5 last
    • 3,000 TYH4 108/111/114 call flys ref 108-16.5
    • 1,500 TYZ3 105 puts, 2 ref 108-06.5
    • 2,000 USZ3 116/117/117.5 call flys ref 114-22
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