Three-month SOFR futures (SR3) settle to the compounded average of daily SOFR over a quarterly reference period, with a $2,500 value per basis point per contract. One-month contracts (SR1) settle to the simple average over a calendar month at $41.67 per basis point.
Prices are quoted as 100 minus the rate, so buying is a bet that rates fall. Contracts are listed years out and traded as a strip, which lets a trader price the entire expected path of policy and hedge floating-rate exposure precisely.
They matter far beyond futures traders: the SOFR strip is where the market's forecast of the Fed path is actually observable, and it is the input to most quoted swap and loan pricing.
Example: SR3 for a quarter twelve months out trades at 96.25, implying 3.75%. If the market re-prices to 4.00% the contract falls to 96.00, a 25-basis-point move worth 25 x $25 = $625 per contract.
Related: eurodollar-futures, fed-funds-futures, strip-trade, federal-funds-rate, pro-rata-matching