November 18, 2025
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10:11Now PlayingComprehensive cross-platform coverage of the U.S. market close on Bloomberg Television, Bloomberg Radio, and YouTube with Romaine Bostick, Scarlet Fu, Carol Massar and Tim Stenovec.
Investors are hedging against the Federal Reserve lowering borrowing costs next month even as the odds of another interest-rate cut have come down to a coin flip.
Traders are looking to cash-in on the potential of a quarter-point rate cut by piling into December options linked to the Secured Overnight Financing Rate, which closely tracks the federal funds rate. The bets come as a deluge of economic data starts to trickle in after the government’s longest shutdown in history.
Some central bank officials have recently expressed doubt about the need for another reduction this year after cutting rates in September and October. Fresh labor and inflation readings could make the case for more monetary easing.
Open interest, or the amount of new positions held by traders, continued to rise Monday in options that expire two days after the Fed’s rate announcement on Dec. 10, making the trades an ideal hedge for policy decisions. The most active December SOFR option in recent weeks is the 96.50 strike, where around 863,000 of open interest currently lies. The level equates to a yield of 3.5%, or 38 basis points below the current fed effective rate.
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