The recent shutdown in December 2025 caused a significant impact on the market, particularly in the Straddle options contract. As reported, the Straddle was close to 15+ during the shutdown, with the Dec SOFR still around 96.25 (96.265). However, since then, there has been a drastic collapse of the Straddle, with the price plummeting to near 4 1/2 BP’s, resulting in a near 75% loss of value.

The Straddle is a financial instrument that involves buying both a call and put option on an underlying asset, such as a stock or commodity, with the same strike price and expiration date. The purpose of the Straddle is to profit from large price movements in the underlying asset, either up or down. However, as the recent market events have shown, the Straddle can be a risky investment, especially when the underlying asset experiences a sudden and significant price change.

The collapse of the SOFR Straddle can be attributed to several factors. Firstly, the shutdown in December 2025 caused a sudden and unexpected decrease in the price of the underlying asset, which led to a rapid increase in the value of the put option. As a result, the Straddle became overvalued, and the price began to plummet. Secondly, the delay in unemployment benefits pushed back the expected date of the next payment, which further contributed to the collapse of the Straddle.

The near 75% loss of value in the Straddle is a significant setback for investors who had invested in this instrument. It highlights the importance of conducting thorough research and analysis before making any investment decisions. Additionally, it underscores the need to diversify one’s portfolio to minimize risk and protect against unexpected market events.