Add to that the most liquid interest rate options market in the world, where 83 expiries are listed at any given time ranging from one week to four years. Uniquely, this gives a user the ability to target interest rates risks anywhere on the curve, be it next week, next quarter, next year, five years from now or anywhere in between. This extensive, multi-year term structure is foundational to the utility and success of the SOFR futures ecosystem. The second, third and fourth order benefits of which lie in the near-limitless linear and non-linear spread combinations a user can deploy to trade up, down and across the curve and across related markets.

In this guide, we outline the extensive line-up of exchange-listed trading combinations available on CME Globex.

Intra-commodity or intra-market spreads are exchange-listed spreads that allow a user to trade combinations of contract months within a given futures product (e.g. SR3U4 vs. SR3Z4). 

Before proceeding, let’s briefly underscore the importance of the words “exchange-listed.” A user can certainly leg into any desired spread, buying one leg and then selling the other in separate transactions. But that approach is inefficient and risks slippage (i.e. the market moves before you can complete the trade). Exchange-listed spreads, by comparison, can be executed in a single transaction. And therein lies another gem of the SOFR futures market – with 39 consecutive quarterlies listed, we can offer an extensive selection of exchange-listed spreads, allowing participants to execute a desired strategy in a single transaction.

Perhaps the most common of all the intra-commodity spreads is the calendar spread (Globex Strategy code: SP). Often used to roll a position forward or express a view on the relationship between two contract months, a calendar spread involves buying (selling) a futures contract in one month while simultaneously selling (buying) the same product in a different month. 

For SOFR futures, the exchange lists many hundreds of calendar spread combinations, allowing traders to seamlessly express a view on the shape of any portion of the forward curve.

Learn more about calendar spreads:

• Educational module
• Technicals (Client Wiki)

Traders wanting to express a more nuanced view on a specific portion of the SOFR term structure can deploy the butterfly spread (Globex strategy code: BF). Butterflies (flies) are three-legged spreads (1:2:1) composed of near and deferred expirations on one side, and twice the quantity of the middle expiration – colloquially known as the “whipping post,” or the month expected to underperform the other two months.

Buying a butterfly buys leg1, sells 2 * leg2, buys leg3
Selling a butterfly sells leg1, buys 2 * leg2, sells leg3

Instrument symbol = SR3:BF Z4–H5–M5
Leg1 = +1 SR3Z4
Leg2 = -2 SR3H5
Leg3 = +1 SR3M5

Learn more about butterflies:

• Technicals (Client Wiki)

A double butterfly (Globex strategy code: DF) is composed of two different butterfly spreads with the nearest butterfly expiration bought (sold) and the furthest butterfly expiration sold (bought). The spacing of expirations in both butterfly spreads needs to be identical, i.e. both need to be “three-month” butterflies. This causes the actual construction of the double fly to look like this:

Buying of double butterfly buys leg1, sells three of leg2, buys three of leg3, sells leg4
Selling of double butterfly sells leg1, buys three of leg2, sells three of leg3, buys leg4

Example: Instrument symbol = SR3:DF Z4-H5-M5-U5
Leg1 = +1 SR3Z4
Leg2 = -3 SR3H5
Leg3 = +3 SR3M5
Leg4 = -1 SR3U5

Learn more about double butterflies:

• Technicals (Client Wiki)

A condor (Globex strategy code: CF) is similar to a butterfly, but has four sequential expiry legs instead, being long the first and last leg and short the middle two or vice versa. 

Buying a condor buys leg1, sells leg2, sells leg3, buys leg4
Selling a condor sells leg1, buys leg2, buys leg3, sells leg4

Learn more about condors

• Technicals (Client Wiki)

Among the most widely used SOFR intramarket spreads, packs and bundles (Globex strategy code: AB) allow users to trade strips of consecutive contracts in a single transaction, often to create a “synthetic” term investment or to hedge OTC swaps.

A pack comprises four consecutive quarterly contracts. A pack combination may comprise any sequence of four quarterlies along the term structure of futures delivery months listed for trading. By far the most popular packs, however, are those defined by their respective yearly color codes: e.g., futures for the nearest four forward-starting quarterly delivery months are known as the white pack; the fifth through eighth nearest quarterlies are called the red pack; and so on for greens, blues, golds and beyond.

While packs are limited to four consecutive quarterly contracts – covering one year of risk – bundles allow for multiple sets of four consecutive quarterly contracts to be traded in a single order.

For example, a trader could buy a two-year bundle, which includes the first eight quarterly SOFR futures contracts. If they choose to sell a three-year bundle, it would include the first 12 quarterly expirations.

Notice the basis point value (BPV) continues to rise as you add more quarterly expirations in a bundle, but it remains at $100 per pack. This is because a pack only contains four SOFR contracts.

Learn more about SOFR packs and bundles:

• Whitepaper
• Educational module
• Webinar
• Technicals (Client Wiki)

SOFR pack spreads (Globex strategy code: SB) are similar to two-legged calendar spreads, but each leg is a pack instead of an individual contract. SOFR pack spreads can be utilized to express a view on different blocks of the yield curve.

For example, a trader could establish a viewpoint on a shifting relationship in the front four quarters of the curve (white pack) vs. the consecutive quarters two years in the future (red pack). By selling (or buying) the white pack and then buying (or selling) the red pack, traders can easily build a position along the curve without worrying about legging risk when entering the position.

Learn more about pack spreads:

• Technicals (Client Wiki)

Launched on July 29, 2024, pack butterflies (Globex strategy code: BB) mirror the pricing mechanism of butterflies, with each leg being a SOFR pack. With legs covering periods of one year or more, pack flies offer a new way to express a view on the relative performance of different areas of the SOFR curve.

Pack flies have implied functionality turned on, meaning that it can borrow from the deeply liquid SOFR outright order book to populate synthetic bids and offers for the pack flies.

Learn more about pack flies:

• Technicals (Client Wiki)

Inter-commodity spreads (ICS) are also exchange-listed spreads, but they allow a user to trade the differential between two related, but different futures products.

Uniquely, the diverse STIR product suite at CME Group allows for the listing of several valuable ICS vs. SOFR, including:

• Three-Month SOFR vs. 13-Week T-Bills
• Three-Month SOFR vs. Three-Month ESTR
• Three-Month SOFR vs. One-Month SOFR
• One-Month SOFR vs. 30-Day Fed Funds

Learn more about SOFR inter-commodity spreads:

• Product Overview
• Technicals (Client Wiki)

With ADV exceeding 1.6 million contracts and open interest regularly above 40 million, SOFR options represent an extremely liquid way for participants to manage SOFR price risk. SOFR options positions can also help provide robust capital efficiencies vs. USD swaps and futures positions. 

The flagship contracts are standard quarterly and serial Three-Month SOFR options, which consist of 16 quarterlies with the four nearest serials. For additional precision, mid-curve and weekly mid-curve options provide more choice for participants. Mid-curve options include five quarterlies along with the four nearest serials, while weekly mid-curve options are listed for two consecutive weeks (so long as they don’t conflict with quarterly or serial expirations).

Monthly options on Three-Month SOFR futures, the newest addition to the suite, round out the offering. These short-dated options allow participants to trade one- or two-month options on any one-year or two-year quarterly futures contract not covered by serial, or quarterly on mid-curve offering, allowing for greater precision when dialing in or out of SOFR positions beyond the quarterly contracts.

Monthly SOFR options FAQ

Uniquely, SOFR options liquidity can be sourced via Globex, open outcry and bilaterally via blocks.

Globex supports a vast array of user-defined options strategies, including:

• And many more custom, multi-legged user-defined strategies (UDS)

A full list of Globex-supported strategies and combinations can be found here.