Traders Ramp Up Bets on Half-Point Fed Rate Cut by Year-End

Traders are piling into wagers calling for at least one outsized Federal Reserve interest-rate cut by year—end, betting on the potential for more aggressive policy than other market watchers currently foresee.

Recent activity in options linked to the Secured Overnight Financing Rate shows a buildup in positioning for a half-point reduction either when the Fed meets later this month or in December. That’s more than the two quarter-point cuts now priced into interest-rate swaps.