Observations & Insight
The Spread: Home, Sweet Home
This week on The Spread, Cboe and the CME Group announce new “mini” products, LedgerX announces a new volatility index for bitcoin, and more.
Larry Israel of Exchange Analytics Inc. announced that Joe Adamczyk has bought the firm. Adamczyk for the last five years was at Options Clearing Corporation, mostly in the chief compliance officer role overseeing OCC’s compliance risk management and governance. He has also worked at the CME Group, among other firms. Congratulations to Larry on a great run and good luck to Joe taking over the firm. We wish you well!
The FIA released its first half 2020 data on futures and options volume trends, including: Global futures and options trading grew by 32% to a record-setting 21.9 billion contracts in the first half of 2020 compared to 2019. In the second quarter, the total number of traded contracts was 10.46 billion, down 8.4% from the record-breaking 11.41 billion contracts traded in Q1 2020, but up 21.8% from the second quarter of 2019. Second quarter volume was higher than any other quarter in the history of the industry aside from the first quarter of 2020. Open interest did not track the change in trading activity, however. Total open interest at the end of June was 915 million contracts, up 3.4% from June 2019. For more FIA statistics, you can go here.
FIA Releases First Half 2020 Data On Futures And Options Volume Trends
Global futures and options trading grew by 32% to record-setting 21.9 billion contracts in the first half of 2020 compared to 2019, according to figures released today by FIA.
In the second quarter, the total number of traded contracts was 10.46 billion, down 8.4% from the record-breaking 11.41 billion contracts traded in Q1 2020, but up 21.8% from the second quarter of 2019. In fact, the second quarter volume was higher than any other quarter in the history of the industry aside from the first quarter of 2020.
Bear Emerges From Thai Equity Options as Put-Call Ratio Jumps
Anuchit Nguyen and Abhishek Vishnoi – Bloomberg
Thai stocks’ most expensive valuation in Southeast Asia has fueled a surge in bearish sentiment through option trading.
The number of outstanding SET 50 Index bearish options relative to bullish contracts jumped to the highest level since 2015, with the ratio between the two reaching 2.3 last week, data compiled by Bloomberg show. The last time options activity reached such levels, the benchmark SET index fell more than 20% — the equivalent of sliding into a so-called bear market — over the next 10 months to mid-January 2016.
For Some Stocks, Bad News Is Now Good News
Karen Langley – WSJ
The new coronavirus has upended expectations for the riskiness of individual stocks, a shift that has stoked major indexes’ recovery but that many investors now warn leaves the market vulnerable to reversals.
Shares of many technology and pharmaceutical companies have looked like safety plays during the pandemic. Other stocks that have long been considered defensive bets during a downturn, such as those of real-estate and utility companies, have suffered steep losses.
Hedge funds stick to the sidelines on oil
John Kemp – Reuters
Hedge fund position-taking in crude and products remains desultory as uncertainty about the future direction of prices and the course of the coronavirus pandemic compounds the normal summer-time trading slowdown. Hedge funds and other money managers purchased the equivalent of 24 million barrels of futures and options in the six most important oil futures and options contracts in the week ending on July 14.
Options Traders Bet on Tighter Trading Ranges as Earnings Loom
Gregory Calderone – Bloomberg
Rising volatility with U.S. stocks near record highs has created opportunities for options investors. “Fear of Missing Out” trades have been accelerating over the past few weeks, Susquehanna derivatives strategists Chris Murphy and Chris Jacobson said in recent notes to clients. The strategy plays on expectations for shares to trade in a range and uses the sale of downside puts to finance the purchase of call spreads.
Exchanges and Clearing
Effective July 20, 2020 through July 24, 2020, MIAX Options and MIAX Emerald 2X Opening and Intraday Valid and Priority Quote Spread Relief in All Symbols
Issue Symbol: All Symbols
Multiplier: 2X Reason: In maintenance of a fair and orderly market.
Time: Opening and Intraday
Subject Summary: Please be advised, effective July 20, 2020 through July 24, 2020, the MIAX Regulation Department has granted 2 times opening and intraday quote parameter relief for all symbols on MIAX Options and MIAX Emerald.
Product Modification Summary: Amendments to the Options on the South African Rand/US Dollar (ZAR/USD) Futures and the Options on the Russian Ruble/US Dollar (RUB/USD) Futures Contracts – Effective August 17, 2020
Product Modification Summary: Expansion of the Strike Price Listing Schedule of the Options on Bitcoin Futures Contract – Effective August 3, 2020
Regulation & Enforcement
Lawmakers grill Robinhood following 20-year-old trader’s suicide
Ryan W. Neal – American Banker
The brokerage app provider Robinhood should improve its consumer protections, congressional lawmakers say, following the suicide of Alex Kearns, a 20-year-old investor who had a negative balance of $730,000 on his account. In a letter addressed to Robinhood co-founders Vladimir Tenev and Baiju Bhatt, lawmakers press the company on how it determines which users can access risky investment strategies like options trading.