Options on Secured Overnight Financing Rate (SOFR) futures became available for trading Monday, and 10 contracts changed hands—five lots of a straddle, in which a put and a call with the same strike are bought, anticipating an increase in volatility.
The trade involved the 98.625 strike in December 2020 options on three-month SOFR futures, according to open-interest data released by CME Group Inc., which lists the contracts. The straddles were traded at a price of 37 ticks, according to several traders familiar with the transactions who asked not to be identified because they aren't authorized to speak publicly.
The SOFR is a reference rate administered by the Federal Reserve Bank of New York that's intended to replace the scandal-plagued London Interbank Offered Rate (LIBOR), which is under threat of extinction.
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