Bitcoin’s Options Market Has Overtaken Its Futures Market in a Sign of Growing Sophistication

Nov 15, 2023

Observations & Insight

Cboe Global Markets has proposed an amendment to the OPRA Plan to the SEC, aiming to enhance market data quality and availability for all OPRA Members. This amendment focuses on expanding the distribution of proprietary data and fostering innovation in market data competition. Specifically, Cboe wrote that it believes these changes will widen access to U.S. options market data, aligning with Regulation NMS principles. The changes also aim to increase transparency by broadening market data distribution channels, aiding investors in monitoring U.S. options exchange activity and making more informed trading decisions. Cboe also said it views these amendments as clarifications to the existing OPRA Plan, particularly addressing the “Equivalent Access Provision” in Section 5.2(c)(iii). This provision concerns the dissemination of proprietary information to members and others with equivalent access to consolidated options information, ensuring that the dissemination is not more timely than the information provided to the OPRA System. ~JJL

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Options Discovery Episode 24: Intro to Marker Makers in the Options Industry; Eric Cott, Former Advisor in Education at the OIC, Discusses Market Makers and More With JLN’s Asma Awass.
JohnLothianNews.com

In this episode of Options Discovery, Asma Awass discusses market makers in the options industry. This episode includes a breakdown of bid-ask spread trading, as well as some of the benefits and risks for market makers. Asma then sits down with Eric Cott, developer of the options education advisor program at the OIC, to discuss market makers in the options industry in more depth. Eric Cott is also the founder of Cott Consulting LLC. You can visit his website here: https://cottconsulting.com/services.

Watch the video »

Lead Stories

Bitcoin’s Options Market Has Overtaken Its Futures Market in a Sign of Growing Sophistication
Omkar Godbole – CoinDesk
The crypto market has come back to life this year, with bitcoin (BTC) doubling in value, supposedly on the back of haven demand, spot ETF excitement in the U.S. and dovish Federal Reserve expectations.
While most activity was initially concentrated in bitcoin’s spot and futures markets, options tied to the cryptocurrency, which offer a cheap way to bet on a price rise or drop, have become more prominent.
/jlne.ws/3QFM5hV

Oil Market Faces 21-Million-Barrel Options Risk From WTI at $80
Devika Krishna Kumar and Alex Longley – Bloomberg
A second bumper oil options expiry in less than a month could inject volatility into crude prices Wednesday.
There are about 21 million barrels worth of December $80 calls for US benchmark West Texas Intermediate that are due to expire later today. US crude futures are trading close to $78 a barrel, but a day of solid gains could move prices closer to a level at which some contracts that are currently worthless would expire with value.
/jlne.ws/47wA9WC

China Caps OTC Derivatives in Setback to Hedge Funds, Brokerages; Regulators limit swaps, options businesses at current levels; Move is said to curb quant hedge funds’ popular DMA products
Bloomberg News
Chinese regulators have told securities firms to stop expanding their over-the-counter derivatives operations involving individual stocks, limiting a profitable business for the brokerage industry and dealing another setback to hedge funds that deploy long-short strategies. Regulators last week told multiple major brokerages to cap OTC businesses including total return swaps and options at the current levels, according to people with knowledge of the matter. Similar restrictions were imposed on lending of shares for short selling, as well as some proprietary trading activities, the people said, asking not to be identified as the so-called window guidance was private. Contracts only linked to stock indices or exchange-traded funds were exempted, they added.
/jlne.ws/3R094px

Proprietary Trading Firms Plan FX Expansion
Editorial Staff – Traders Magazine
Proprietary trading firms are planning to expand FX trading and increase investment budgets in 2024, according to the latest Acuiti Proprietary Trading Management Insight Report.mThis quarter’s report found that 45% of firms that trade FX were planning to significantly increase exposures in the asset class in 2024. Firms were also planning growth in equity options.
/jlne.ws/47xJY6z

Hedge Funds Copy Citadel Fee Model in Fight for Asia Talent
Bei Hu and Nishant Kumar – Bloomberg
Several hedge funds in Asia are starting to mimic global giants like Citadel and Millennium Management by charging clients additional fees to cover costs ranging from employee compensation to life insurance in a bid to lure top talent.
Nine Masts Capital Ltd. recently introduced the so-called expense pass-through model, while Southern Ridges Capital Pte embraced it last year. Pinpoint Asset Management Ltd. has created three new share classes using this structure, according to people familiar with the matter, and newsletters seen by Bloomberg News.
/jlne.ws/3R0Kp3V

China Caps OTC Derivatives in Setback to Hedge Funds, Brokerages
Bloomberg via Yahoo Finance
Chinese regulators have told securities firms to stop expanding their over-the-counter derivatives operations involving individual stocks, limiting a profitable business for the brokerage industry and dealing another setback to hedge funds that deploy long-short strategies.
/jlne.ws/3uo0c3P

Exchanges

Cboe Japan Completes Successful Technology Migration
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE) a leading provider of global market infrastructure and tradable products, has successfully completed the migration of Cboe Japan to its advanced technology platform on Monday November 13, 2023. Formerly known as Chi-X Japan, Cboe Japan was acquired by Cboe Global Markets in July 2021 and rebranded as such in February 2022.
“Following Cboe’s acquisition of Chi-X, our dedicated focus has been on delivering measurable enhancements to the Japanese market, made possible only by Cboe, while building a foundation for future growth.” said Chris Isaacson, Executive Vice President and Chief Operating Officer, Cboe Global Markets.
/jlne.ws/46eR7aX

How Index Options Offer Potential Tax Savings In The Options Trading World
Cboe Global Markets, Inc.
Cboe Global Markets’ (BATS:CBOE) Index options have witnessed a remarkable transformation over the years, with them now being accessible to both institutional and retail traders. These derivative instruments allow you to speculate on the market’s direction, hedge against downside risks and generate income. While they offer a plethora of benefits, there’s one particular advantage that stands out – 60/40 tax treatment. In this article, we’ll delve into the world of index options, shedding light on this unique tax benefit and exploring what you need to know before you embark on your index options trading journey.
/jlne.ws/47gmQtG

****** Cboe pouring gas on a hot options market with tax advice for options trading.~JJL

Strategy

This Hot Market May Not Last. Why Options Look Better Than Stocks.
Steven M. Sears – Barron’s
Options premiums are so inexpensive right now that they’re making options look like a better way to play the market.
/jlne.ws/46gyyTJ

What to Make of the VIX’s Recent Losing Streak
Also, how the SPX tends to react to such streaks from Wall Street’s “fear gauge”
Rocky White – Schaeffer’s Investment Research
The Cboe Market Volatility Index (VIX) recently fell eight days in a row, which is a rare occurrence. The VIX is the market’s expectation of volatility over the next 30 days for the S&P 500 Index (SPX). It’s often referred to as a “fear gauge” because it typically moves in the opposite direction as the market. This week, I’m looking at how the VIX and how the market typically perform after these streaks.
/jlne.ws/3sCbl0C

Cooling Off
Cboe (Video)
In #Vol411, Joe Tigay @JoeTigay lets us know that the market seems to have had a notable run up and that it had a big day following the better-than-expected inflation data, we’re getting some warnings today about some retailers’ pessimism about the holiday season and more.
/jlne.ws/3ubbSqC

Events

The FIA is holding its Asia Derivatives Conference this year at The St. Regis Singapore from November 28-30, and one of the highlights of the conference is “The Great Debate – Man vs Machine.” Industry experts will tackle the question: Will technology redefine labor-intensive roles, or will machines replace mankind altogether? At the end of the debate, vote YES or NO on the motion: “This house believes that Machine will replace Man in the future.” You can explore the program and register for the conference here. ~SR

Miscellaneous

A Taylor Swift song is the best investment advice for 2024, Goldman Sachs says
Matthew Fox – Markets Insider
Investors would do well to channel their inner Taylor Swift and stay in the stock market next year, according to a Wednesday note from Goldman Sachs.
“At this time next year, portfolio managers will look back and realize the best investment strategy for 2024 was to follow Taylor Swift’s advice in the song from her 1989 album: ‘All You Had To Do Was Stay’ – invested,” chief US equity strategist David Kostin wrote.
/jlne.ws/3QEwaAs

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