Despite the decreasing probability of a rate cut by the Federal Reserve, traders remain actively positioning themselves for hedging.

Despite the likelihood of another interest rate cut being reduced to fifty-fifty, investors are still hedging their bets in case the Federal Reserve cuts rates next month. Traders are flocking to December options linked to the secured overnight financing rate, hoping to profit from a potential 25 basis point rate cut. The trend of SOFR is closely related to the federal funds rate. As traders make their bets, a series of economic data is being released after the longest government shutdown in US history. After rate cuts in September and October, some Fed officials have expressed doubts about the need for another rate cut this year. The latest employment and inflation data could provide reasons for further easing. On Monday, open interest in options expiring two days after the December 10 Federal Reserve rate decision announcement continued to rise. These options are an ideal choice for hedging policy decisions. The most active December SOFR option in recent weeks has a strike price of 96.50, with around 863,000 open contracts. This level corresponds to a yield of 3.5%, 38 basis points lower than the current effective federal funds rate.