(Bloomberg). — It seemed like the dust had settled after a turbulent day in the U.S. interest rate markets. The options market was lit up on Thursday night with trades anticipating multiple moves by the Federal Reserve at 75 basis points this year.

While bond bears are in control, the prospect that the Fed’s six remaining policy meetings will deliver multiple jumbo rate hikes remains a minority view. The open interest in Uber-bearish options structures is minimal. This refers to the amount of positions traders have in contracts. These structures have the potential of driving short-term interest rates dramatically higher while searching for market equilibrium.  

The combined premium on Thursday’s late eurodollar trades amounted to almost $4 million. Look for that number to grow — and to push short-term rates higher — if the Fed’s tune becomes more hawkish in the lead-up to its May 4 decision.

Trades were executed at 5:22 p.m. New York Time. They involved options on September 2022 Eurodollar Futures. These options are a proxy to U.S. short term interest rates, listed by CME Group Inc. (NASDAQ). Open interest increased Thursday, CME preliminary statistics show. This suggests that trades created new positions and not altered existing ones. 

These structures provide protection against market pricing by allowing for an additional 125 basis point of hikes, on top of the already price in place for September’s policy meeting. Early Friday in New York, the swaps market was forecasting a policy rate 200 basis points higher than the current level of 0.33% — near the middle of the Fed’s 0.25%-0.50% range. These options are due to expire on Sept. 21, the rate decision.

Put options come with strike prices of around 96.00. That’s equivalent to four 75 basis-point moves during the four following gatherings. 

Deep-out-the money plays are able to disrupt markets by requiring dealers to sell eurodollar futures. And there’s a wrinkle. Traders are migrating from CME’s eurodollar futures — whose settlement rate is being phased out — to its futures on the Secured Overnight Financing Rate, or SOFR. The eurodollar futures market is less active, making it vulnerable to big price swings.

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