Ghost of Halloween Brexit Haunts Sterling Options Market Bets; Volatility Future Gap an Opportunity for Macro Risk Advisors

Nov 1, 2019

Observations & Insight

If you trade bitcoin options – or participate in any other kind of trading for that matter – on BitMEX, you might want to update your security preferences. In a user update sent out recently, BitMEX accidentally revealed the email addresses of all of its users, potentially exposing them to phishing attacks.~MR

Lead Stories

Ghost of Halloween Brexit Haunts Sterling Options Market Bets
Vassilis Karamanis – Bloomberg
Traders preparing for a Halloween shock in currency markets after the last Brexit deadline placed bets worth billions of pounds in options, most of which are set to expire worthless on Friday.
Sterling is holding its ground above $1.29 after the European Union gave the U.K. another three-month extension to the previous Oct. 31 exit date. That leaves many options maturing Friday as out of the money, including a notional value of over 10 billion pounds ($13 billion) that the currency would slump below $1.28 or climb above $1.30.

Volatility Future Gap an Opportunity for Macro Risk Advisors
Joanna Ossinger – Bloomberg
The divergence between short and long-term volatility is creating an opportunity for investors, according to some market participants.
The Cboe Volatility Index, or VIX, closed at a three-month low Wednesday, part of a trend of lower price swings across asset classes. It was at 12.35 as of 10:05 a.m. Friday in New York versus its year-to-date average of about 15.9. At the same time, futures on the gauge remain at elevated levels as investors factor in U.S.-China tensions, an uncertain economic outlook and a presidential election involving candidates with extremely divergent views.

Pound Complacency Will End With Bang If 2017 Vote Is Any Guide
Vassilis Karamanis – Bloomberg
Pound traders looking forward to quiet before the U.K.’s December election could be in for a rude awakening.
A gauge of swings in the currency over the next two months is hovering near six-week lows, following a delay to Brexit and signs that a Conservative Party victory could help to stabilize British politics. Yet if the 2017 snap election is anything to go by, a surge in the polls by the Tories’ opponents could still knock the currency off course and drive volatility back up.

Schroders: Sustainable Investment Sceptics Decline
Sustainable investment cynics have fallen by almost 50% in three years, as climate change has now become the main focus of shareholder engagement, Schroders Institutional Investor Study 2019 has found. The proportion of investors globally who do not believe in sustainable investment has fallen from 20% in 2017 to 11% this year. This decline was most striking in Latin America with sceptics falling from 29% in 2017 to 12%.

Trading is Stressful, and Traders Need an Outlet
Jim Iuorio – OpenMarkets
The first time I walked onto a trading floor I was a new employee of Goldman Sachs on July 6, 1987. The sheer mass of people, the sense of excitement and the deafening sounds I will remember my entire life. A couple of things became clear to me that day: I knew that this was an environment of intense pressure both physically and mentally, and I knew it was something I was going to make a career of.

FLASH FRIDAY: Bernstein’s New Frontiers
James Ramage – Trader’s Magazine
As long as times keep changing, the idea of reinvention will always be in style. One has to adapt to stay competitive in a cutthroat world. This is true for pop stars, politicians and yes, even brokerages. The traders at 42-year-old Sanford C. Bernstein have grasped this. And as the securities industry has changed to remain competitive, so have they. For decades, Bernstein’s trading division shared the stage with its more famous sibling, investment research. And the trading desk profited from a relationship that directed customer order flow its way as payment for research’s prized services.

Billions Worth of Sterling Bets to Expire Worthless After Brexit Deadline Passes
Vassilis Karamanis and Charlotte Ryan – Bloomberg
Traders preparing for a Halloween shock in currency markets after the last Brexit deadline placed bets worth billions of pounds in options, most of which expired worthless on Friday. Sterling is holding its ground above $1.29 after the European Union gave the U.K. another three-month extension to the previous Oct. 31 exit date. That left many options maturing Friday out of the money, including a notional value of over 10 billion pounds ($13 billion) that the currency would slump below $1.28 or climb above $1.30.

Earnings Season Report: This Week 3 Has Been Better for Options Owners.
Earnings season starts two weeks after quarter-end, at either mid-January, April, July or October, and runs for six weeks. Currently, we are wrapping up week three of the October earnings season. ORATS watches the implied earnings move in a stock versus the actual move. Options prices imply an ‘earn move’, either up or down, in the price of a stock that can be quantified. Comparing the implied moves to the actual moves shows how options owners are faring and can point to patterns as we progress through earnings season.

OCC October Cleared Volume Down 20.5 Percent
OCC, the world’s largest equity derivatives clearing organization, announced today that total cleared contract volume in October reached 451,300,066 contracts, a 20.5 percent decrease compared to last October. OCC’s year-to-date average daily cleared contract volume is 19,728,721, down 4.7 percent compared to 2018’s record-breaking pace.

Exchanges and Clearing

Exchange operator Cboe profit beats estimates as trading volumes surge
Abhishek Manikandan – Reuters
Cboe Global Markets Inc (CBOE.Z) beat analysts’ estimates for third-quarter profit on Friday, driven by higher trading volume in its proprietary products.
Options trading volumes rose about 15% from a year earlier, while futures trading volumes increased nearly 17%.

****JB: The Cboe press release can be found here

CME Group Special Executive Report
CME Group
Price Reporting Agencies which publish price assessments used by New York Mercantile Exchange, Inc. (“NYMEX”) and Commodity Exchange, Inc. (“COMEX”) (collectively, the “Exchanges”) as underlying reference prices for certain commodity products have provided details of their publication schedules for the upcoming Thanksgiving Day holiday period, as summarized in the table below.

Regulation & Enforcement

Disciplinary Action: SG Americas Securities, LLC
During the periods from September 2016 through December 2018, SG Americas Securities, LLC violated NYSE Rule 132 by submitting trades with inaccurate account type identifiers for comparison and/or settlement, and NYSE Rule 3110 by failing to Implement adequate supervisory systems and controls related to the submission of account type identifiers. Consent to a censure and 5100,000 fine.

Performance Bond Requirements: Agriculture, Energy, Equity, and FX Margins – Effective November 1, 2019
CME Group
As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following products listed in the advisory at the link below. The rates will be effective after the close of business on 11/01/2019.


Hivemind Named FIA Innovator of the Year
FIA announced today that Hivemind, a data science startup based in the U.K. has been named the FIA Innovator of the Year. Hivemind was selected by a panel of independent judges after a live pitch competition at FIA Expo 2019. The company will receive marketing support, cash and other resources worth more than $20,000. Hivemind was one of 20 companies participating in the annual FIA Innovators Pavilion, an award-winning showcase for fintech startups that takes place during the FIA Expo, the largest trade show of the year for professionals in the listed and cleared derivatives markets.

Update – CME Reference Data API Enhancements
CME Group
Effective Sunday, November 17 (trade date Monday, November 18), in response to customer requests the following CME Reference Data API Updates will be implemented: These enhancements include the following new attributes as well as TAS, TAM and BTIC relationship enrichments.


CBOE Europe head Mark Hemsley to retire
Philip Stafford – Financial Times
Mark Hemsley, one of the best-known trading executives in London, is to retire as president of CBOE Europe, the region’s largest share trading venue.
Mr Hemsley, 57, is due to step down in February next year after 11 years with the company. CBOE has appointed David Howson, CBOE Europe’s chief operating officer, to the role, it said in a statement on Friday.


What Parents Need to Know Before Borrowing Money to Pay for College
Cheryl Winokur Munk – WSJ
Wth college costs burgeoning, parents often consider taking on debt to help their children cover tuition. It could be a smart move. But it could also have a devastating financial impact, so parents should understand the pros and cons of each option. Here’s a look at the choices out there and what parents need to consider before signing on.

What Consumers Need to Know as ACA Open Enrollment Starts
Stephanie Armour – WSJ
Millions of people are expected to buy or maintain health care under the Affordable Care Act’s seventh open enrollment season that starts Friday. Here’s what consumers need to know. Where do I get coverage? People who don’t get coverage on the job or through another federal program can begin signing up on the federal exchange,, for coverage beginning in 2020. The enrollment season runs through Dec. 15. Open enrollment has already begun in some states that have opted not to use the federal exchange, and in some of these states the sign-up window will also extend beyond the federal Dec. 15 deadline.

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