SOFR Call Option Open Interest Hits Record High on Fed Cut Bets

Investors are increasingly wagering on U.S. interest rates dropping to 3.50% by year-end, with SOFR call option open interest reaching 926,000 contracts.

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Terms & Concepts
  • Secured Overnight Financing Rate (SOFR): A benchmark interest rate for dollar-denominated loans and derivatives, reflecting the cost of borrowing cash overnight collateralized by Treasury securities.
  • Call Option: A financial contract giving the buyer the right, but not the obligation, to purchase an asset at a specified price within a certain time period.
  • Basis Point: A unit equal to one hundredth of a percentage point (0.01%), used to denote changes in interest rates or bond yields.