SOFR Options Market Catches Fire With $100 Million Wager
- Long volatility position uses June 2023 3-month options
- Structure was amassed via block trades Friday and Monday
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The derivatives market that aims to supplant U.S.-dollar-Libor-settled eurodollar futures and options has taken another stride forward in the past week with the emergence of a sizable volatility trade.
The position appeared in June 2023 options linked to 3-month futures referencing the Secured Overnight Financing Rate. Over the course of Friday and Monday, almost $100 million has been spent on a long volatility structure called a straddle, involving the purchase of calls and puts with the same strike. The position grew to 40,000 contracts Monday, after open-interest data revealed Friday’s activity as setting new risk.