‘Cheap’ Options, Sharp Price Moves Fuel Crypto (BTC) Derivatives Boom

Mar 22, 2023

Lead Stories

‘Cheap’ Options, Sharp Price Moves Fuel Crypto (BTC) Derivatives Boom
Muyao Shen and Vildana Hajric – Bloomberg
The forces that have re-awakened crypto prices have aroused activity in the digital-assets derivatives market too.
Open interest in Bitcoin options has skyrocketed, with the number of contracts rising to an all-time high in recent days, according to data from derivatives exchange Deribit. Looked at another way, there’s also been an “astonishing increase” in Bitcoin open interest as measured in Bitcoin itself, according to Coinglass data compiled by Noelle Acheson, author of the “Crypto Is Macro Now” newsletter.
/jlne.ws/3n6GJ45

Toys or Tools, Zero-Day Options Start Changing the Trading Game
Lu Wang – Bloomberg
David Reidy’s sure-fire options trade netted a steady 5% per year for half a decade — until last summer when gains began to peter out all of a sudden.
Reidy, who has been trading S&P 500 derivatives for 10 years, thinks he knows the proximate cause: The new boom on Wall Street in options that have zero days to expiration, known as 0DTE.
/jlne.ws/40kw18M

Commodity Traders Warn Blockbuster Profits Probably Won’t Be Repeated
Devika Krishna Kumar, Archie Hunter and
Grant Smith – Bloomberg
Top commodity traders have been reporting record profits for last year after cashing in on the fallout from Russia’s war in Ukraine and the global energy crisis. Now they’re starting to warn the blockbuster numbers probably won’t be repeated.
The war upended supply chains for crucial raw materials such as oil, gas and grains, driving up prices and fueling volatility that traders crave. That helped companies including Trafigura Group, Mercuria Energy Group Ltd. and Glencore Plc to book record profits last year.
/jlne.ws/3lCGFJ5

Meme stock GameStop surges 35% after it posted a surprise profit for the first time in 2 years
Huileng Tan – Business Insider
Shares of GameStop, a meme stock popularized on Reddit’s WallStreetBets forum, surged about 35% on Wednesday after the video game retailer posted its first quarterly profit in two years.
/jlne.ws/3LJaBxL

Bets on Wall Street ‘fear gauge’ could rattle U.S. stocks after Wednesday Fed decision
Joseph Adinolfi – MarketWatch
A large slug of option contracts tied to the Cboe Volatility Index are set to expire on Wednesday, which could potentially amplify stock-market volatility after the Federal Reserve releases its latest decision on interest rates, several analysts said.
Better known as “the Vix,” or Wall Street’s “fear gauge,” the Vix VIX, -4.91% attempts to reflect how volatile option traders expect the S&P 500 index to be over the coming month.
/jlne.ws/3TCWko8

Column: Funds continue record corn sell-off, turn bearish for first time since 2020
Karen Braun – Reuters
Speculators have drastically shifted their stance in Chicago-traded corn within the last month, selling much more heavily than expected and finally establishing a net short position last week.
The U.S. Commodity Futures Trading Commission on Tuesday afternoon published its Commitments of Traders (CoT) report for the week ended March 14. CoT data has been on delayed release for over a month, but it will be current on Friday if CFTC makes its regularly scheduled publication.
/jlne.ws/3lC46lW

Exchanges

Eurex is the first European exchange to launch Bitcoin index futures
Eurex
Launch of futures on FTSE Bitcoin Index in USD and EUR; Trusted access to cryptocurrencies in a regulated market with Eurex; Robust index methodology and governance framework of FTSE Russell; Rigorous digital asset exchange vetting process from Digital Asset Research (DAR). Eurex is the first exchange in Europe to offer Bitcoin index futures. Start of trading is scheduled for 17 April 2023. The leading European derivatives exchange has developed the new contract in partnership with FTSE Russell, a leading global index provider, and Digital Asset Research (DAR), its provider of institutional-grade digital asset data.
/jlne.ws/42tMsRU

Commodity profits hit record in 2022, say trading house finance chiefs; Companies set high-water mark unlikely to be repeated in 2023
Leslie Hook, David Sheppard and Harry Dempsey – Financial Times
The finance heads of the world’s largest commodity trading houses said 2022 was a record year for profits, setting a high-water mark for the industry that is unlikely to be repeated in 2023. Trafigura, Vitol, Gunvor, Mercuria and CCI told the FT Commodities Global Summit profitability would probably be lower this year as commodity markets have returned closer to normal levels of volatility.
/jlne.ws/40amEJ4

Strategy

CME Group and Cboe Global Stock Could Benefit From Bank Sector Struggles
Carleton English – Barron’s
Recent market volatility has been especially harsh on bank stocks. Exchanges, however, are one corner of the financial sector that typically fares well in times of uncertainty—and they likely will continue to do so.
That is Piper Sandler managing director Richard Repetto’s takeaway from the recent Futures Industry Association (FIA) conference, where he met with 15 global exchange and trading companies’ management teams. Generally speaking, Repetto expects that trading volumes across asset classes will remain elevated for some time. With interest rates dominating headlines, products geared toward hedging those risks will see more persistent demand, he says.
/jlne.ws/42BklQW

Don’t trade the immediate Fed trend
Alexandra Scaggs – Financial Times
Ahead of the Federal Reserve statement and presser today comes a beautifully-timed paper from the Centre for Economic Policy Research’s VoxEU:
Market volatility is three times higher during press conferences held by current Chair Jay Powell than those held by his predecessors, and they tend to reverse the market’s initial reactions to the Committee statements…
This reversal in direction is systematically linked to the words used in Chair Powell’s
speeches.
/jlne.ws/409Dl7a

Banks Awaiting Fed Announcement
Cboe (Video)
JoeTigay @JoeTigay updates us on $VIX and takes a look at #InterestRates, the #Fed, and #banks. #Vol411
/jlne.ws/40pjUag

Education

Here are 5 ways that trading in 0DTE stock options is changing how the market works
Joseph Adinolfi – MarketWatch
Since the beginning of 2022, an option-trading strategy that first found favor among retail traders and denizens of Reddit’s “Wall Street Bets” forum has caught on among Wall Street professionals with important consequences for the U.S. stock market.
Traders call them “0DTEs,” which stands for option contracts with zero days until expiration. Typically, they are weekly option contracts with less than 24 hours until they expire. Over the past 18 months, the Cboe and CME have increased the frequency of weekly option expirations tied to the S&P 500 and other equity indexes, as well as index-tracking exchange traded funds like the SPDR S&P 500 Trust.
/jlne.ws/3Z4Nd0J

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