Options - USD
The ULC is surging amid today's belly led selloff. ULC wedges and skew were active. Participants mull the implication of MRAC's SOFR First on 11/8/21.
MRAC has set November 8th as the date for switching interdealer trading conventions from LIBOR to the SOFR for USD non-linear derivatives.
Gamma is lower as rates saw a small bull steepening today. CFS is active with 2x3 and wedges trading as well as a strangle. Barclays vega outlook.
The strong underlying curve flattening has produced a commensurate right to left move as the ULC is firming while right side tails are lower.
Higher rates/higher vol theme saw robust evidence today as gamma and intermediates were better bid, especially 2y10y.
The lower left saw more flows today while 3m10y LIBOR/SOFR dealt at flat. 2y10y, 3m5y saw skew trading. Barclays sees bearish leanings on the SDR.
30y riskies and strangle/straddles saw a burst of activity today. 3m gamma notably lagged versus 1m expiries today. JPM likes buying 3y10y vs. 6m10y.
Sources find a pre-year end deadline for SOFR First for non-linear aggressive and difficult to attain. Deutsche favors a 6m30y payer.
Amid lower realizeds, gamma is unchanged to a touch lower while intermediate expiries are a tad better supported. Vol steepener switches trade.
The retracement back to lower yields combined with lower realizeds help to soften in gamma points as well as the ULC. Vega sees some selling pressures