Traders’ ‘Massive’ Options Play Contrasts With Fed Hike Talk

Traders in US interest-rate options have piled into positions that would profit from the Federal Reserve cutting rates sooner and more aggressively than investors currently expect, a bet that contrasts with the latest signals from some policymakers who have also raised the possibility of hikes.

As trading resumed Tuesday after the long Presidents’ Day weekend, there was heavy buying of call options on futures on the Secured Overnight Financing Rate — an overnight interest rate tied to the Fed’s short-term benchmark — as well as options on Treasury note and bond futures, market data shows. The options would profit from a rally.