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Late SOFR/Treasury Option Roundup: Rate Cut Hedging Continues

US TSYS
Upside call volume remained strong Tuesday, mostly position adds as option accounts continued to position for more aggressive rate cuts, as much as 125bp by year end. Large Dec'24 SOFR call spread sale a notable exception as paper unwound buy from early July. Large Tsy 10Y midcurve call buy that expires this Friday looking for a miss in CPI/PPI inflation measures. Projected rate cuts through year end have regained some ground after receding Monday into early Tuesday (*): Sep'24 cumulative -33.5bp (-32.7bp), Nov'24 cumulative -73.3bp (-71.8bp), Dec'24 -115.4bp (-112.0bp).
  • SOFR Options: Reminder, Sep options expire Friday
    • -3,000 SFRU4 95.12 straddles, 6.75 vs. 95.10/0.30%
    • +10,000 SFRH5 95.75/96.00 put spds 5.25 vs. 96.535/0.10%
    • -10,000 SFRZ4 95.62/96.06/97.00 call flys vs. 95.37/95.50 put spds, 9.25 net vs. 95.90/0.17%
    • -50,000 SFRZ4 95.25/95.50 call spds 23.0 ref 95.50 (while the calls, outright and on spread have seen a lot of trade since this summer, todays sale likely an unwind after paper bought over 80,000 on July 10 at 6.5 vs. 95.21/0.20%)
    • Block, 6,000 SFRU4 95.12/95.25 1x2 call spds vs. 95.06 puts, 0.0 ref 95.10
    • Block/screen, -30,000 SFRZ4 96.00 calls, 14.5 vs. 95.905/0.42%
    • -4,000 SFRU4 95.00/95.12/95.25 call flys, 6.25 ref 95.0975
    • -3,000 SFRU4 95.00/95.12/95.18/95.31 call condors, 7.0 ref 95.10
    • over 23,000 SFRZ4 96.00/96.62 call spds
    • Block, -7,000 0QH5 96.00/96.25 put spds, 2.5 vs. 97.18/0.06%
    • Block, 9,000 0QM5 95.50/96.00 put spds, 4.0 vs. 97.13/0.06%
    • 1,500 SFRZ4 95.87/96.12/96.38 call flys ref 95.905
    • Block, 5,000 SFRH5 96.50/97.00 call spds vs. 2QH5 97.50/98.00 call spds, 6.0 net/steepener
    • over -10,000 SFRU4 95.12 calls, 2.0 ref 95.0975
    • 1,000 SFRU4 95.00/95.06/95.12 2x3x1 put flys ref 95.0975
  • Treasury Options:
    • +10,000 TYX4 113.5 puts, 21
    • +10,000 TYV4 114.25/116.25 call over risk reversals, 1.0 vs. 115-07.5/0.45%
    • 3,000 FVV4 111.5/112.25 call spds, 3.5 ref 110-15.75
    • 4,350 wk2 TY 115.5 calls, 8 ref 114-28.5
    • +53,000 wk2 TY 115 calls, 21, opener, expire Friday
    • 1,250 USV4 120/122 put spds ref 125-28
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