Cboe Global Markets to Suspend Open Outcry Trading on Chicago Trading Floor as Precautionary Measure

Mar 13, 2020

Observations & Insight

The Spread: Crash and Burn

This week on The Spread: the coronavirus causes crashes not seen since 2008, derivatives trading hits record volumes for major exchanges, Robinhood has yet another outage, and the OCC adds two clearing-side veterans to its board of directors.

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Lead Stories

Cboe Global Markets to Suspend Open Outcry Trading on Chicago Trading Floor as Precautionary Measure
Cboe (press release)
Cboe Global Markets, Inc., one of the world’s largest exchange holding companies, today announced that it will temporarily close its Cboe Options Exchange (C1) trading floor at the close of business on Friday, March 13, 2020 as a precautionary measure to prevent the potential spread of the novel coronavirus (COVID-19). Trading on C1 will continue to be available in an electronic-only trading mode until further notice.

Pioneer of Wall Street Fear Gauge Says It’s Now Worse Than 2008
Yakob Peterseil – Bloomberg
Thursday’s harrowing sell-off in U.S. stocks sent investors reaching all the way back to the financial crisis and Black Monday for historical parallels.
But the academic who inspired the creation of Wall Street’s fear gauge — the Cboe Volatility Index — says what markets are now grappling with is worse than the credit meltdown a decade ago in some key ways.
That’s because no one really knows how much damage the spreading coronavirus will ultimately inflict.

The VIX Fear Gauge Is Soaring. It’s Unlikely to Come Down Anytime Soon.
Nicholas Jasinski – Barron’s
The stock market’s so-called fear gauge is hitting peaks it hasn’t seen since the global financial crisis, and staying there for longer than it has since 2009. The Cboe Volatility Index, or VIX, spiked to 75 on Thursday—implying a huge range of possible moves for the S&P 500 over the next month. The VIX has closed above 50 for four days straight.

VIX Shocks Like This Have Perfect Record of Signaling a Bounce
Vildana Hajric – Bloomberg
The historic pummeling in stocks on Thursday sent volatility skyrocketing in a way that has always preceded stock rebounds. The Cboe Volatility Index, also known as the VIX, closed at the fourth-highest level ever recorded. The gauge has never hit such an extreme point without the S&P 500 “immediately and sharply” bouncing by more than 10% over the next day or two, according to Nicholas Colas, co-founder of DataTrek Research.

The Pain Is Far From Over for India’s Rupee, Options Market Shows
Kartik Goyal – Bloomberg
India’s rupee has been among the most battered currencies in Asia this month, and the options market is signaling that its troubles are far from over. The currency is staring at a record low following a 2.8% slump so far in March, as foreign investors flee Indian assets on concern that rising local and global coronavirus cases will inflict more pain on an already struggling economy.

As Bad as 2008? The Market’s Fear Index Is Starting to Think So
Barry Ritholtz – Bloomberg Opinion
How afraid should be you [sic] amid the coronavirus outbreak, at least as far as the stock market goes? One of the best ways to gauge how much fear is in the market is the CBOE Volatility Index, better known as the VIX. The VIX, sometimes referred to as the fear index, is derived from the price of S&P 500 index options; it provides a more or less objective measure of real-time sentiment and market stress — and it as it [sic] highest since the 2008-09 financial crisis.

*****At time of writing the VIX is at 71.81 basis points. Yikes.~MR

Bitcoin options volume surged during Thursday’s price slide
Celia Wan – The Block
“All BTC safe haven storylines have been proven inaccurate.” So says Marius Jansen, COO of crypto derivatives exchange Deribit. In a text to The Block, Jansen wrote that “[w]e have clearly seen the risk-off impact on BTC and the rest of the market as all assets have been massively sold.” His comments came amid a significant fall in the price of digital assets, including bitcoin, which fell below $6,000 Thursday. At press time, the price of bitcoin is hovering around $5,690, a decline of more than 27%, according to data from Coinbase.

Investors Can Hedge Long-Term Risk With New 2-Year Bitcoin Derivatives
Paddy Baker – Coindesk
Quedex, a Gibraltar-regulated derivatives exchange, recently launched a bitcoin contract with the longest expiration date in crypto. The CEO of Quedex Bitcoin Derivatives Exchange, Wiktor Gromniak, told CoinDesk the firm had experienced a surge in investor interest in its new BTCUSD contract, which expires in December 2021 and only became tradable last Friday. Quedex volumes surged past a record $5 million on Saturday, beating the previous all-time high of $2 million reached in February, according to the exchange.

The VIX Fear Gauge Is Soaring. It’s Unlikely to Come Down Anytime Soon.
Nicholas Jasinski – Barron’s
The stock market’s so-called fear gauge is hitting peaks it hasn’t seen since the global financial crisis, and staying there for longer than it has since 2009. The Cboe Volatility Index, or VIX, spiked to 75 on Thursday—implying a huge range of possible moves for the S&P 500 over the next month. The VIX has closed above 50 for four days straight.

OKEx Attended CryptoCompare Digital Asset Summit in London and Hosted a VIP Networking Drink
PR Newswire (press release)
OKEx (www.okex.com), the world’s largest cryptocurrency spot and derivatives exchange, traveled to London Blockchain Week 2020, and attended the CryptoCompare Digital Asset Summit, Europe’s leading digital asset conference focusing on bridging the gap between the digital asset ecosystem and traditional finance, on 10 Mar 2020. Lennix Lai, Financial Markets Director of OKEx, participated in an inspiring panel discussion and clarified the role of digital asset derivatives and sophisticated financial instruments.


COVID-19 market turmoil tests NYSE’s shutdown circuit-breakers
Jake Bright – Tech Crunch
For the second time this week trading on the New York Stock Exchange halted for 15 minutes this morning when a market drop triggered the exchange’s internal circuit breaker, shortly after 9:30am. The control, part of the NYSE’s automatic provisions to pause trading, has been put to the test since markets first began realizing the extent of the economic damage a worsening COVID-19 outbreak could cause in the U.S.

Extraordinary Revision of the Price Limit
Considering recent market conditions, the price limit range for Futures and Options as bellow shall be revised from the trade date ending on March 18, 2020 to the trade date ending on May 29, 2020.

Dalian Commodity Exchange Solicits Public Opinions On LPG Futures & Options Contracts And Relevant Rules
Mondovisione (press release)
Dalian Commodity Exchange (DCE) issues a notice on March 9 to solicit public opinions on liquefied petroleum gas (LPG) futures and options contracts and relevant rules, accelerating the pace of listing the long-waited LPG futures and options. According to the notice, DCE now solicits public opinions on the “LPG Futures Contract of Dalian Commodity Exchange (Exposure Draft)”, the “Detailed Rules of LPG Futures of Dalian Commodity Exchange (Exposure Draft)” and the “LPG Options Contract of Dalian Commodity Exchange (Exposure Draft) and the Drafting Instruction”, etc. The deadline is March 13, 2020.

Informational Circular IC-2020-05
BOX Options Exchange
BOX Exchange LLC (“BOX”) maintains robust business continuity and disaster recovery policies and procedures which address cases of pandemic outbreaks. Accordingly, BOX is closely monitoring the evolving novel coronavirus (COVID-19) situation and is prepared to respond appropriately. At this time there is no impact on normal operations.

*****Amid so many closings, BOX appears to be keeping its trading floor open – so far. ~SR


Virtu’s Optionality? Some Good News…
Alphacution blog
One intangible cost of being the sole US publicly-traded market making firm is the required level of financial and operational transparency – and the investor relations burden – that comes with that status. In this case, that cost may be unusually high because of the relative opacity of the competitors in this sector – what Alphacution typically refers to as the structural alpha zone of its asset management ecosystem map – coupled with the unparalleled use of technology and extraordinary magnitude of wealth generated by that small group of players.


When Markets Are Wild, Embrace Liquidity
Steve Sosnick – Barron’s
Liquidity is a fickle companion. Seemingly ubiquitous under most circumstances, it has a way of becoming scarce when most needed. The recent wild gyrations in markets—including in stocks and options—have caused many traders to reassess their assumptions about liquidity. In the current environment, traders and investors should attempt to be liquidity providers, not consumers, and use strategies common to market makers.

Stock Plays Protecting You From Coronavirus Bear Are Working
Matt Krantz – Investor’s Business Daily
The S&P 500 correction is stress-testing tools designed to hold up in times like these. And while most are doing what they’re supposed to, investors are finding “protection” is relative. Investors worried about market shocks can choose from a variety of ETFs built to cut downside. But despite similar objectives, their results are all over the board. It’s a reminder of how important it is to know what an ETF is supposed to do before counting on it.


How to Get Rich Trading Options
Tim Garlick – Traders Magazine
Options are a financial instrument that you can use for a number of different purposes: as protection against expected moves in an underlying instrument such as a stock; as a way to use leverage to control more of a stock than you want to buy outright; as a way to use your existing investments to earn additional cash; and many other uses. But, can you get rich trading options? The answer, unequivocally, is yes, you can get rich trading options. If you’re like most people reading this article, this is probably the answer you were hoping for.

*****This one’s for all the new, inexperienced traders out there.~MR


How We Can Rise to the Coronavirus Challenge
Monica Schoch-Spana – Bloomberg
An unfamiliar, invisible threat like the novel coronavirus can make people feel helpless and turn inward just when they most need to reach outward, both helping and leaning on others. Here are concrete ways you can help your family, co-workers, and neighbors.

Investors stockpiled a record $137 billion of cash in just 5 days as coronavirus fears sent them fleeing from risk
Ben Winck – Markets Insider
Investors piled record amounts of capital into cash this week as the bull market’s 11-year run petered out.
Inflows to cash-like assets totaled a record $137 billion through the five days ended March 11, Bloomberg reported Friday, citing Bank of America and EPFR Global data. An all-time high $14 billion was channeled into government bonds, while investors dumped $3 billion into gold.

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Past Options Newsletters

The Spread – July 30, 2021

The Spread – July 30, 2021

Earnings season in full bloom; Options lead year-to-date derivatives volume; Robinhood’s IPO; John gets real with Get Real VR: Conflicting factors underpin volatility; Cboe cleared for fall European competition; and the Cboe Options Institute’s Kevin Davitt talks about vega in this week’s “Term of the Week.”

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