China to Launch First Options Open to Foreign Investors

Jun 1, 2021

Observations & Insight

CBOE veteran trader and former CBOE board of directors representative William R. Power has passed away. He also served as a member of the MGEX board of directors and was an adviser to the NYSE at one time. Remarkably, he cycled across Iowa 23 times in the Register’s Annual Great Bicycle Ride Across Iowa. Condolences to his family and friends. — Elegy Cremation & Memorial Services

Lead Stories

China to Launch First Options Open to Foreign Investors
Liu Caiping and Luo Meihan – Caixin
China is set to launch its first batch of yuan-denominated options open to trading by overseas investors, as the country accelerates the domestic derivatives market’s opening-up to meet foreign investors’ demand for hedging tools.
The China Securities Regulatory Commission (CSRC) has approved trading of crude oil options on the Shanghai International Energy Exchange (INE), and palm oil options on the Dalian Commodity Exchange (DCE), the securities regulator announced (link in Chinese) on Friday. Both products will be open to overseas investors, with palm oil options set to begin trading on June 18 and crude oil options to follow on June 21, according to the announcement.

World stocks hit another record, oil up in big data week
Simon Jessop – Reuters
Global stocks hit a record high again on Tuesday and oil rose, as markets shrugged off concerns about rising inflation and looked ahead to U.S. data later in the week that should offer a major clue to the health of the world’s biggest economy.
Risk markets have eked out gains in recent weeks as traders balance optimism that some key markets are reopening after pandemic lockdowns with concern that rising inflation could prompt central banks to rein in stimulus programmes.

The Wall Street Players Who Worry Inflation Heralds Wild Markets
Paul J. Davies – WSJ
Some investors are preparing for wild swings in financial markets, worried that inflation, and the Federal Reserve’s pledge to let it rise, will lead to a more volatile world.
The reason: The economic policies aiming to create inflation now are the opposite of the ones that kept markets relatively stable for decades.

China Is Digging Deep Into Its Currency Toolkit to Manage Yuan
Tian Chen and Sofia Horta e Costa – Bloomberg
Central bank took its first concrete action in months Monday; Potential measures may involve derivatives, capital outflows
As China’s central bank pulls back from direct intervention in its currency market, officials are reverting to old tools to manage the yuan. The People’s Bank of China on Monday said the country’s lenders will need to hold more foreign currencies in reserve, a move that will reduce the supply of the dollar onshore. Officials have pulled on multiple levers to influence the yuan since October, when China cut the cost of shorting the currency to zero and removed a key factor used by banks to calculate the daily reference rate. The government has also relaxed capital curbs to allow more outflows and asked financial institutions to limit their offshore financing.

FX option traders buying gamma – that matters
ReutersThe FX options market is buying gamma, which should send a warning to FX traders ahead of this week’s plethora of key data .
Gamma is the rate of change for an option’s delta based on a single-point move in the delta’s price. It’s highest in short-dated expiry options with strikes near to current spot. But why does this matter?

Exchanges and Clearing

Trading Overview in May 2021; Japan Exchange Group released Trading Overview in May 2021.
Cash Equity Market – In May 2021, the daily average trading value for the TSE 1st Section (domestic common stocks) was JPY 3.2802 trillion, the daily average trading value for the ETF market was JPY 276.5 billion.
Derivatives Market – In May 2021, total derivatives trading volume was 25,253,063 contracts.; In May 2021, total derivatives trading value was JPY 176 trillion.

Regulation & Enforcement

US regulation on cryptocurrencies could be coming; A rundown of the most important global business stories you need to know for the coming day, from the newsroom of the Financial Times.
US eyes crypto regulation amid concern that a lack of oversight could harm savers and investors American retailers are rushing to secure inventory ahead of the year end holiday season, US financial authorities are preparing to take a more active role in regulating the $1.5tn cryptocurrency market, and Russia released $500m in credit to Belarus as western countries target Minsk with sanctions. Plus, the FT’s Unhedged columnist Robert Armstrong explains why he thinks bitcoin might be better thought of as an equity call option than a currency.

*****JJL I might bet my bottom dollar and my top bitcoin on this happening.


OCC Names Former State Street, Nomura Executive David Ye as Chief Risk Officer
OCC Press Release
OCC, the world’s largest equity derivatives clearing organization, today announced the hire of David Ye as Chief Risk Officer and a member of OCC’s Management Committee. With over 20 years of leadership experience in financial and operational risk management, including executive positions at State Street Global Markets and Nomura Holding Americas, Ye will be responsible for implementing OCC’s risk management strategy.”We are very pleased to welcome David to OCC’s risk leadership team,” said John Davidson, OCC Chief Executive Officer.


The New York Office Market Is Coming Back. Here’s the Stock to Bet On.
Steven M. Sears – Barron’s
The New York City office real estate market, deeply wounded by the Covid-19 pandemic, has suddenly become an intriguing investment opportunity.
Goldman Sachs, widely watched by other companies as a bellwether of best practices, is beckoning employees back to the office, and many other companies are now expressing similar sentiments, now that the Covid-19 vaccines seem to be ending the pandemic. All of this likely bodes well for Gotham’s office leasing market, especially if remote work becomes the exception rather than the norm it has been over the past year.

Stocks to buy and those to avoid as U.S. economy runs faster than the Indy 500
Barbara Kollmeyer – MarketWatch
Welcome to the month of June and a week that may wake investors from any early summer slumber, as it ends with a fresh update on U.S. jobs.
Stock futures are climbing after the long weekend, and as investors look past Friday’s data showing the Federal Reserve’s preferred measure of inflation surging to a rate not seen in 13 years.

Bitcoin (BTC USD) Cryptocurrency Price Volatility Drops in Bull Signal to Some
Joanna Ossinger – Bloomberg
A lull in Bitcoin’s wild swings in recent days has been taken by some as a tentative sign the fragile digital currency could recover.
The world’s largest cryptocurrency was little changed at $36,425 as of 6:45 a.m. in New York on Tuesday, following two straight sessions of gains.

Here’s how traders use call options to increase their Bitcoin holdings
Learn how pro traders use covered call strategies as a low-risk method to increase their Bitcoin holdings.
Marcel Pechman – Cointelegraph
Crypto traders are drawn to the market by its bombastic growth and lucrative opportunities to make a profit. However, not every investor is seeking volatility or using degenerate leverage levels to gamble at derivatives exchanges.
In fact, stablecoins usually comprise half of the total value locked (TVL) on most decentralized finance (DeFi) applications that focus on yields.

How relevant is the $900M open interest on Bitcoin options above $100K?MARKET ANALYSIS
Bitcoin (BTC) is fast approaching its worst monthly performance in a decade, but some investors are using this as an opportunity to buy ultra-bullish long-term derivatives. There are currently over $900 million in call (buy) options aiming at $100,000 and higher, but what exactly are those investors seeking?

No fear: Betting against a volatile stock market makes a comeback
Saqib Iqbal Ahmed – The Sydney Morning Herald
Some investors are revisiting a popular trade that has largely been out of favour since last year’s market tumble: betting against stock market turbulence.
Assets in the ProShares Short VIX Short-Term Futures ETF , a popular vehicle for betting against stock market gyrations, have nearly doubled over the last six months to $US562 million ($726 million).


TWIFO 251: Tracking Commodity Volatility (podcast)
Options Insider
This Week In Futures Options | May 28, 2021 | This Week in Futures Options
Host: Mark Longo, the Options Insider Media Group
CME Hot Seat: Derek Sammann, CME Group
On this episode, Mark and Derek discuss:
The Movers and Shakers This Week in Futures Options
CME Group Implied Volatility Indexes (Cvol)
Feeder Cattle
And Much More

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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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