Eurodollar options traders are abandoning positions targeting another Fed rate increase this year, as the market-implied probability of a quarter-point hike in December plunges below 25 percent.

The latest Chicago Mercantile Exchange data, for trading on Thursday, show a sharp drop in open interest for options that are a pillar of a December 2017 eurodollar put-fly position, a trade that hinges on the market pricing in a hike that month.

The liquidation signals the reversal of a position that was built up in June.

Futures positioning is also half what it was at the peak...

 

As hope and hype of continued rate normalization has collapsed for next year...

As perhaps the market ealizes, one more hike and the Fed-Funds-to-2Y curve will invert once again...

In other words, The Fed has lost the market.