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Late SOFR/Treasury Option Roundup: Rate Cut Hedging Via Calls

Consistently better SOFR call structures drove Monday's option volume. Rate cut position builds reported even before underlying futures bounced off early session lows. Projected rate cuts for early 2024 have gained slightly: January 2024 cumulative -1.1bp at 5.318%, March 2024 chance of rate cut -63% w/ cumulative of -16.9bp at 5.160%, May 2024 chance of cut 91.9% vs. -86.8% this morning, cumulative -39.9bp at 4.930%. Fed terminal at 5.3275% in Jan'24.

  • SOFR Options:
    • +10,000 SFRH4 94.75/95.00 strangles, 9.5 vs. 94.945/0.26%
    • Block, 5,000 SFRJ4 94.87/95.06 put spds, 4.0 ref 95.38/0.15%
    • +10,000 SFRJ4 95.62/95.75/95.87/96.00 call condors, 1.25 vs. 95.365/0.10%
    • +10,000 SFRJ4 94.68/94.87 2x1 put spds, 0.5 ref 95.355
    • 18,000 0QM4 97.00 calls ref 96.535 to -.54
    • +5,000 SFRM4 95.62/95.75/95.87/96.00 call condors, 1.0 ref 95.33
    • +4,000 SFRZ4 96.25/96.75/97.75 broken call flys on 2x3x1 ratio, 15.0 net
    • Blocks, 7,500 SFRM4 94.87 puts, 5.5 vs. 95.33/0.19% adds to 20k on screen
    • 7,700 SFRU4 96.25/97.00/97.50 broken call flys ref 95.695
    • 4,000 SFRJ4 94.68/94.93/95.75/96.00 call condors ref 95.325
    • over 10,000 SFRH 95.00 call/SFRM4 95.00 puts
    • 35,000 SFRH4 94.87/95.00/95.12 call flys ref 94.925 to -.915
    • 8,000 2QJ4 96.00 puts, 5.0 ref 96.67/0.18%
    • 3,800 0QH4 95.00/95.50/95.75/96.00 broken put condors ref 96.365
    • 4,000 SFRJ4 95.12/95.37/95.62 call flys ref 95.335
    • 8,200 SFRU4 96.50/97.00 call spds ref 95.715
    • 7,000 SFRF4 94.93/95.00/95.06 call flys ref 94.92
    • 6,000 SFRG4 94.75/95.00/95.25 call flys ref 94.92
    • 4,000 SFRJ4 95.37 calls ref 95.325 ref 95.325/0.45%
    • 4,000 SFRH4 94.56/94.68/94.81 put flys ref 94.915
    • 3,000 SFRH4 95.00 calls ref 94.92/0.38%
  • Treasury Options:
    • +6,400 TYH4 107/110.5 put spds ref 111-24 vs.
    • -3,200 TYG4 111.75 straddles vs. +1,600 wk2 TY 111.75 straddles, 20-21 net package
    • 3,000 FVH4 106.25/107.25 put spds vs. 109.25/110.75 call spds ref 107-29.5
    • Blocks, 12,000 wk2 TY 111 puts, 11 vs. wk3 TY 110.75 puts, 14 ref 111-23.5
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