A Single Options Trade Pushes Libor Replacement to New Milestone

The benchmark index that’s replacing Libor passed another milestone, thanks to a single trade.

The trading volume of options on Secured Overnight Financing Rate surpassed its eurodollar equivalents for the first time after a so-called conversion trade that was responsible for much of the activity pushed volumes over 800,000 contracts. The trade in July options involved buying both put and call spreads, a neutral trade that doesn’t involve a bet on the market’s direction.

While the daily volume was boosted by that one-off trade, broadly activity in SOFR options has been picking up in recent weeks, helped by uncertainty ...