Options on Secured Overnight Financing Rate (SOFR) futuresbecame available for trading Monday, and 10 contracts changedhands—five lots of a straddle, in which a put and a call with thesame strike are bought, anticipating an increase in volatility.

The trade involved the 98.625 strike in December 2020 options onthree-month SOFR futures, according to open-interest data releasedby CME Group Inc., which lists the contracts. The straddles weretraded at a price of 37 ticks, according to several tradersfamiliar with the transactions who asked not to be identifiedbecause they aren't authorized to speak publicly.

The SOFR is a reference rate administered by the Federal ReserveBank of New York that's intended to replace the scandal-plaguedLondon Interbank Offered Rate (LIBOR), which is under threat ofextinction.


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SOFR futures were rolled out in 2018 by CME, whose eurodollarfutures contract—with settlement based on LIBOR—remains itsmost-traded product. CME has proposed that in the event that Liborbecomes unavailable, existing eurodollar futures and optionscontracts will be settled based on SOFR.

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