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Late SOFR/Treasury Options: SOFR Upside Hedging, Rate Cut Pricing Gains

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SOFR option volumes far outweighed Treasury option volume Tuesday. Mixed trade appeared to favor upside call buying and unwinding or adjusting low delta put positions as underlying futures rallied off lows following weaker than expected flash PMI data. In turn, projected rate cut pricing moved off recent lows: May 2024 -2.6% w/ cumulative -0.6bp at 5.322%; June 2024 at -16.2% vs. -13.6% this morning w/ cumulative rate cut -4.7bp at 5.282%. July'24 cumulative at -13.6bp vs. -11.1bp earlier, Sep'24 cumulative -25.6bp vs. -21.1bp.

  • SOFR Options:
    • +3,000 SFRM4 94.62/94.68/94.75 put trees, 3.75
    • +10,000 0QZ4 96.25/96.75 call spds, vs. 2QZ4 96.37/96.75 call spds, 2.0
    • +5,000 SFRM5 99.50 calls 1.5 vs. 95.535/.20%
    • +5,000 SFRZ5 96.00/96.50 call spds 17.5 ref 95.745
    • +15,000 SFRU4 94.81/95.25 call spds vs. 94.89.5 to -90.5/0.34
    • +8,000 SFRU4 94.81/95.25 call spds 11.0 vs. 94.895/0.34%
    • Block, +5,000 SFRZ4 95.56/95.68 call spds, 2.5 vs. 95.16/0.05%
    • Block, +10,000 SFRK4 94.75/94.87 2x1 call spds, 1.0 ref 94.725
    • Block, +10,000 SFRZ5/SFRH6 93.75/94.25/94.75 put fly strip, paying 8.5 to buy both limited downside structures. Paper bought an additional 5,000 in pit
    • -4,000 2QV4 95.37/96.37 put over risk reversals, 0.5 vs. 95.87/0.50%
    • -5,000 0QU4 95.50 straddles, 65.0 ref 95.55
    • -3,000 SFRZ4 94.62 puts vs 0QZ4 96.50/97.00 call spds, 1.75
    • -10,000 SfRM5 94.62/95.12 2x1 put spds, 3.5-4.0 ref 9539
    • +3,000 SfRM4 94.68/94.75 2x1 put spds 2.25 ref 94.725
    • +4,000 SfRU4 95.25/95.75/96.25 call flys 2.0 ref 94.87
    • 10,500 SFRZ4 93.87/94.37 3x2 put spds ref 95.045 to -.04
    • 1,500 SFRM4 94.81/94.93/95.06 call flys vs. SFRU4 94.87 calls
    • 9,600 SFRM4 94.81/94.93/95.00/95.12 call condors ref 94.725
    • 7,800 SFRK4/SFRM4 94.56/94.68 put spd spd ref 94.7
    • 2,000 0QM4 95.62/96.00 call spds ref 95.41
  • Treasury Options: Reminder, May options expire Friday
    • -6,000 USM4 110 puts, 19 ref 114-26
    • +5,000 TYK4 109 calls, 2 ref 108-06.5
    • over 44,000 TYM4 105/106.5 put spds 19 ref 107-22
    • 1,700 FVM4 108 calls ref 105-00.75
    • 2,000 FVK4 104.5 puts ref 105-01
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SOFR option volumes far outweighed Treasury option volume Tuesday. Mixed trade appeared to favor upside call buying and unwinding or adjusting low delta put positions as underlying futures rallied off lows following weaker than expected flash PMI data. In turn, projected rate cut pricing moved off recent lows: May 2024 -2.6% w/ cumulative -0.6bp at 5.322%; June 2024 at -16.2% vs. -13.6% this morning w/ cumulative rate cut -4.7bp at 5.282%. July'24 cumulative at -13.6bp vs. -11.1bp earlier, Sep'24 cumulative -25.6bp vs. -21.1bp.

  • SOFR Options:
    • +3,000 SFRM4 94.62/94.68/94.75 put trees, 3.75
    • +10,000 0QZ4 96.25/96.75 call spds, vs. 2QZ4 96.37/96.75 call spds, 2.0
    • +5,000 SFRM5 99.50 calls 1.5 vs. 95.535/.20%
    • +5,000 SFRZ5 96.00/96.50 call spds 17.5 ref 95.745
    • +15,000 SFRU4 94.81/95.25 call spds vs. 94.89.5 to -90.5/0.34
    • +8,000 SFRU4 94.81/95.25 call spds 11.0 vs. 94.895/0.34%
    • Block, +5,000 SFRZ4 95.56/95.68 call spds, 2.5 vs. 95.16/0.05%
    • Block, +10,000 SFRK4 94.75/94.87 2x1 call spds, 1.0 ref 94.725
    • Block, +10,000 SFRZ5/SFRH6 93.75/94.25/94.75 put fly strip, paying 8.5 to buy both limited downside structures. Paper bought an additional 5,000 in pit
    • -4,000 2QV4 95.37/96.37 put over risk reversals, 0.5 vs. 95.87/0.50%
    • -5,000 0QU4 95.50 straddles, 65.0 ref 95.55
    • -3,000 SFRZ4 94.62 puts vs 0QZ4 96.50/97.00 call spds, 1.75
    • -10,000 SfRM5 94.62/95.12 2x1 put spds, 3.5-4.0 ref 9539
    • +3,000 SfRM4 94.68/94.75 2x1 put spds 2.25 ref 94.725
    • +4,000 SfRU4 95.25/95.75/96.25 call flys 2.0 ref 94.87
    • 10,500 SFRZ4 93.87/94.37 3x2 put spds ref 95.045 to -.04
    • 1,500 SFRM4 94.81/94.93/95.06 call flys vs. SFRU4 94.87 calls
    • 9,600 SFRM4 94.81/94.93/95.00/95.12 call condors ref 94.725
    • 7,800 SFRK4/SFRM4 94.56/94.68 put spd spd ref 94.7
    • 2,000 0QM4 95.62/96.00 call spds ref 95.41
  • Treasury Options: Reminder, May options expire Friday
    • -6,000 USM4 110 puts, 19 ref 114-26
    • +5,000 TYK4 109 calls, 2 ref 108-06.5
    • over 44,000 TYM4 105/106.5 put spds 19 ref 107-22
    • 1,700 FVM4 108 calls ref 105-00.75
    • 2,000 FVK4 104.5 puts ref 105-01