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Check out this interesting article exploring 3-Month SOFR Futures and attempting to solve the issue of creating a reliable pricing model https://lnkd.in/gEKVCGye

SOFR Interest Rate Daily Mid-Day Brief (Sample) 11:00 A.M. EST 3 Minute Read Reach out if you'd like to receive this brief via email regularly From Constitution Capital: Jeff Schuh: The last few days has seen more and more targeting of the?SFRU4 95.1875?strike.?In essence a play for a .50 basis cut on the Fed 9/18 meeting date which right now is pricing in a 100% probability of a .25 basis cut and a 42% probability of a .50 basis cut at the time of this writing.?(Updated WIRP seen below.)?Yesterday the?SFRU4?95.0625/95.125/95.1875/95.25 call condor traded .75/19k f=9510.25, paper bought.?Overnight this same structure traded .75 another 14k on the screen, and during the morning the Pit sold another 15K at .75 !!!!?In CC’s opinion, locals were able to leg into this structure the previous 2 weeks for next to nothing and are now giving it away for a bad risk/reward scenario with regard to current Fed funds pricing.?Interestingly enough out of the gate this morning at 08:29:39 paper bought the?SFRU4?95.125/95.1875/95.25 call fly paying .375 on 10k?f=9510.25.?Fast market at 08:45:01 purchased the?SFRU4?95.0625/95.1875/95.3125 call fly paying 2.0 on 2k f=9510.5.?Paper seems to hate the?SFRU4 95.1875 strike.?With all this said, CC and yours truly sees a higher likelihood of 3, (.25) basis point cuts on the 3 remaining meetings for the year on 9/18, 11/7, and 12/18 respectively.?There are plenty of outlets that agree with this sentiment as we have seen the SFRU4 95.00/94.9375 p/s being often quoted. (.75/1.0, ref: 9510.75) and the SFRU4 95.00/94.9375 put 1 x 2, at the time of this writing, Drax paid .25 for the 1 to sell the 2 and bid.?This same structure traded on the screen too.?CC would recommend looking at a wider put 1 x 2 in the SFRU4 95.00/94.875 put 1x2.?(.50/.75 vs. 9510.75).?To make things simpler work to pay .625 synth on the SFRU4 95.00/94.9375/94.875 put fly and look for an inline payroll # on Friday and nice sell off in U4 futures. (.50/.75 ref: 9513.0 @10:30 EST)?We’ve also seen a seller in the SFRZ4 95.50 puts cov. 95.77, 24% delta paper selling 25k @ 6.5.?This has put a little pressure on downside Vol in Z4 prior to JOLTS. After Jolts, Vol has firmed up a bit.?OI indicates this is closing risk and an exit by the client. Update @ 10:00 a.m. EST.?JOLTS is a disaster.?Stock market and whites rally now betting on a .50 basis cut and the stock market loves bad job #’s because now they assume the Fed will give them what they want.?Lower rates and .50 point cut, a larger printing press, and favorable monetary and fiscal policy from a Fed that is never audited.?

Discussion thoughts on SOFR block trades vs pit execution. Arguments given for conformity between the two. Thoughts?

Check out the updated list of Constitution Capital's trade ideas! We send out trade ideas regularly in our mid-day SOFR Brief. Send us a message if you'd like to be added to the email list. If you'd like to check any of these markets live, reach out to Andrew Moore, Jeffrey Schuh, Brady Arenson, or Jack-Layden Mott on Bloomberg. As always, futures and options are risky investments. Remember to trade them only at your own risk.