Observations & Insight
We are expanding our Term of the Week video program that has been part of The Spread video series. Instead of just options-related terms, we are expanding to include futures terms as well as compliance and legal terms. We are looking for contributors for this program, people or firms willing to shoot short videos on a particular subject that we will publish as part of the series. Exchange Analytics has agreed to provide some compliance and legal related terms. We welcome law firms, brokerages, exchange firms, clearinghouses, technology firms and others to consider contributing to the series. It is great exposure and you can use the videos on your own website as well.
We will also soon be making an official announcement about a new video program called “Futures Discovery” that will mirror Options Discovery in form and function. We have a student already selected from Roosevelt University’s honors program for quantitative finance that is supported by donations from the Chicago Board of Trade Clearing Corporation Foundation. We are just finalizing the initial sponsors for the series. If you are interested in sponsoring, or learning more, contact me at johnlothian@johnlothian.com.
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Cboe’s Henry Schwartz Details State of Options Markets for JLN at OIC and More
JohnLothianNews.com
John Lothian News interviewed Henry Schwartz, senior director and head of product intelligence at Cboe Global Markets, at the 2023 Options Industry Conference in Nashville, TN, about the popularity of ODTE, Cboe’s 50th anniversary, the new trading floor, and the possible impact of AI on the options market.
Lead Stories
Cboe to List Stocks Like NYSE, Nasdaq Exchanges
Tanaz Meghjani and Katherine Doherty – Bloomberg
Cboe Global Markets Inc. will allow companies to list on its exchanges in the US and globally for the first time, entering a market dominated by the New York Stock Exchange and Nasdaq.
Through its new Cboe Global Listings business, the world’s largest options exchange will enable companies to list in the US, a move that follows an expansion into exchange-traded funds in 2017 and a similar company-listings foray in Canada through a 2022 acquisition. All Cboe-listed stocks in the US and Canada can also be made available for trading in the Netherlands and the UK and, later, Australia, with a further corporate listing expansion planned for the three countries early next year, Chicago-based Cboe said in a statement Friday.
/jlne.ws/45HU4So
Wall Street’s ‘Fear Gauge’ Hits Lowest Level Since 2021
Hannah Miao – WSJ
The stock market’s measure of volatility is falling to levels not seen since in nearly two years.
/jlne.ws/3IQejDy
Options boom powers banks’ rates trading profits
Christopher Whittall – IFR
Extreme volatility in government bond markets has sparked a regional banking crisis and battered investors from macro hedge funds to UK pension schemes. It’s also proven hugely profitable for bank trading desks specialising in a complex breed of derivatives linked to interest rate moves.
The top 25 banks made US$2.7bn trading interest rate options and so-called non-linear rates in the first quarter, according to data provider Vali Analytics, more than double their haul a year earlier.
/jlne.ws/3NaYxpo
When Markets Melt Down, These Traders Cash In
Scott Patterson – WSJ
As investors fretted about the possibility that the White House and Republican lawmakers would fail to raise the debt ceiling, one $20 billion firm wasn’t concerned about the potential stock-market mayhem.
That’s because Miami-based Universa Investments reaps huge rewards in market crashes. It made billions in 2008 when the market collapsed during the global financial crisis, as well as in the 2020 crash sparked by the Covid-19 pandemic.
/jlne.ws/3WL8YDg
Hedge Funds Are Recruiting Talent With Big Signing Bonuses, Paid Sabbaticals
Danielle Balbi – Bloomberg
Paid sabbaticals and $120 million payouts are part of a growing array of expensive tools the world’s biggest hedge funds are deploying to hire and retain traders. They show how a limited pool of talent and surging demand for steady returns in a volatile market are prompting firms to pull out all the stops to attract the best — with clients footing the bill.
/jlne.ws/3qtPeYD
Options boom powers banks’ rates trading profits
Christopher Whittall – IFR
Extreme volatility in government bond markets has sparked a regional banking crisis and battered investors from macro hedge funds to UK pension schemes. It’s also proven hugely profitable for bank trading desks specialising in a complex breed of derivatives linked to interest rate moves.
The top 25 banks made US$2.7bn trading interest rate options and so-called non-linear rates in the first quarter, according to data provider Vali Analytics, more than double their haul a year earlier.
/jlne.ws/3NaYxpo
Exchanges
OCC Clears 949.1M Contracts in May 2023, Third Highest Month on Record
OCC
OCC, the world’s largest equity derivatives clearing organization, announced today that year-to-date average daily volume through May 2023 was 44.5 million contracts, up 6.6 percent compared to year-to-date average daily volume through May 2022. Total volume was 949.1 million contracts, up 9.5 percent compared to May 2022 and the third highest month in OCC’s history.
/jlne.ws/45LBgl6
Cboe Launches New Global Listing Offering for Companies and ETFs of the Purpose-Driven Innovation Economy
Cboe
Cboe leverages its existing network of stock exchanges in five markets around the world to facilitate access to capital and liquidity across the globe Cboe Global Listings focuses on growth companies and asset managers committed to innovation with a global impact
/jlne.ws/43GtfMq
CME Group Reports May 2023 Monthly Market Statistics
CME Group
Highest-ever May ADV of 25M contracts; Double-digit volume increases in interest rates, energy, agricultural and metals, as well as many individual products. SOFR futures and options continue ADV growth. CME Group, the world’s leading derivatives marketplace, today reported its May 2023 market statistics, showing average daily volume (ADV) increased 3% to 25 million contracts during the month, the highest May ADV in company history.
/jlne.ws/42fYFIp
Equity Trader Alert #2023 – 24 U.S. Market Holiday – Juneteenth National Independence Day
Nasdaq
U.S. Equities and Options Nasdaq U.S. equities and options markets will be closed on Monday, June 19, 2023, in observance of the Juneteenth Holiday
/jlne.ws/3WLxILw
Regulation & Enforcement
U.S. Commodities Agency May Change Risk Rules to Consider Crypto
Jesse Hamilton – CoinDesk
The U.S. Commodity Futures Trading Commission (CFTC) has proposed an overhaul of its rules for risk management, and Commissioner Christy Goldsmith Romero said the changes should insist firms prepare themselves for crypto volatility and the risks from holding customers’ digital assets. The CFTC issued a proposal Thursday to invite comments on possible changes to the agency’s risk management program, and Romero said in a statement that “technologies like digital assets, artificial intelligence, and cloud services, also have emerged as areas that can carry significant risk.”
/jlne.ws/3ISEVUw
Technology
AI Is Going to Change Investing. Here’s How It Could Play Out.
Andy Serwer – Barron’s
A few days after Black Monday, Oct. 19, 1987, as a young, somewhat tech-knowledgeable reporter at Fortune, I was summoned by the magazine’s board of editors to explain why the market had fallen 22%. I was to spell out to members of this hoary group (some of whom were smoking pipes) what program trading was and how it contributed to the market crash.
I dutifully relayed what my pal, George Fellows Jr., then on the options desk at Drexel Burnham Lambert, described to me: that program trading entailed having a computer algorithm buy or sell baskets of stocks, sometimes arbitraging against an index. I remember the editors shaking their heads in dismay and disbelief—like the bankers in Mary Poppins.
/jlne.ws/3oLlAOe
Strategy
Opinion: The S&P 500 finally shows positive signs — unless it’s just another head-fake
Lawrence G. McMillan – MarketWatch
The stock market, as measured by the S&P 500 Index SPX, 1.55%, has been trying to break out over 4200 since last August. This past week, with the debt-ceiling negotiations taking on a positive tone, it appeared that SPX was finally going to accomplish the task. It traded up to 4231 on May 30th, but then reversed direction. The index closed at 4221 on June 1 and needs to close above 4210 for two consecutive days in order to confirm an upside breakout.
/jlne.ws/3N7KQrc
Analyzing Expiry Date Options Trading
Phil Mackintosh – Nasdaq
U.S. markets have seen consistent growth in options trading over the past couple of decades. Contracts traded have increased in part because of new options being listed – with more choices for investors. We recently focused on why looking simply at contracts traded is misleading – as the most active options have a delta below 50%. Today we look at the impact of new expiry dates on trading volumes. Data shows that options typically trade more the closer they get to expiry, but we find the proportion of trading that happens on expiry date has remained pretty constant.
/jlne.ws/3MQSTaH
VIX Call Butterfly
Cboe (Video)
In #Vol411, Dan Deming @Djd551 provides updates on the $VIX futures roll market, a large #VIX #options trade and context around the SPX 30-day ATM straddle’s implied vol of 11.5.
/jlne.ws/3WOL2yJ
Miscellaneous
It’s Not Just AI. 5 Trends That Will Change How You Invest.
Andrew Welsch – Barron’s
In the future we’ll be thirsty, and artificial intelligence will do our jobs, but we’ll all be svelte.
These are some of the insights that Barron’s gleaned from investment specialists and financial advisors when we asked them about the economic, demographic, and technological changes that investors should brace for in the years to come. “The next 10 years won’t look like the last 10 years,” says Alan L. Bazaar, CEO of Hollow Brook Wealth Management.
/jlne.ws/3N7EjwO
