Here we see a diagram from the CME showing their offering of sofa options.

The long diagonal at the bottom shows the standard options with each option expiry date matching the future's contract date.

The lines above show the mid curve options each with an underlying, which is 1, 2, 3, 4, or five years ahead of the option expiry date.

It is worth us considering why we don't see mid curve options elsewhere.

That is a separation of expiry and underlying dates.

What is different about interest rates, which has led to these options being offered? The answer comes from considering how the yield curve tends to move, because central banks tend to guide the market in their thinking on future interest rate decisions.

The short end of the futures curve can be quite static with low volatility in the front contracts, the higher volatility in the futures curve tends to be further out where there is more uncertainty about the medium term destination of rates.

Option traders want to trade options on futures that move, hence a desire to have longer dated futures as the underlying, however many traders want short expiry dates so that the outcome of the option trade is known soon.

The compromise that allows for this is the mid curve, an option with a short expiry date into a relatively volatile forward starting futures contract.

It is interesting to compare this to foreign exchange and equity options in those markets.

There is no equivalent of a central bank setting, the short end of the futures curve.

All futures will tend to be volatile as the spot market moves up and down.

Therefore, equity and foreign exchange markets have not developed an equivalent of the mid curve.