Move over Tesla, there’s a new options monster in town

Feb 15, 2024

Observations & Insight

Term of the Week – Right to Buy or an Obligation to Sell
JohnLothianNews.com

Perhaps the most fundamental explanation of an option contract.

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Lead Stories

Move over Tesla, there’s a new options monster in town
Robin Wigglesworth – Financial Times
Explosive investor interest in artificial intelligence has catapulted Nvidia into the echelons of trillion-dollar companies and helped it end Tesla’s long reign as the most actively traded US options name.
The rolling five-day average notional value of options tied to Nvidia has soared above $100bn this year, according to numbers compiled for FT Alphaville by Asym500, a derivatives consulting firm.
/jlne.ws/3wk8vik

As investors flee China, options traders pile into longshot bets pegged to rebound hopes
Filip De Mott – Markets Insider
As China’s stock market mayhem pushes foreigners out the door, a different type of trader is stepping up.
The volume of options that target US-listed exchange traded funds that track Chinese markets have swung up, Bloomberg reported. For instance, call option volumes on the iShares China Large-Cap ETF, or FXI, hit their highest in over a year.
/jlne.ws/3SJMAsi

Opportunities in local and global volatility markets
Eurex
Since 2020, market participants have had to deal with a complex volatility landscape. To make sense of how market conditions might evolve in 2024, and how investors can position effectively for this, Eurex spoke to Davide Silvestrini, Managing Director, Head of EMEA Equity Derivatives Strategy at JP Morgan.
/jlne.ws/3SIjfi3

US investors in emerging markets switch to ETFs that exclude China
Sun Yu – Financial Times
Emerging markets investors in the US are snapping up exchange traded funds with no exposure to China and dumping those focused on the world’s second-largest economy, where a weakening growth outlook has left stocks lagging behind other markets.
The net capital inflow into eight US-listed emerging markets ETFs that exclude China more than tripled to $5.3bn last year from a year earlier, according to a Financial Times analysis of ETF.com data. That came as 55 China-focused ETFs suffered combined net outflows of $802mn in 2023, compared with inflows of $7.5bn in the previous year.
/jlne.ws/3SWHQRo

Bond ETFs get a boost after retail sales for January post big drop
Joy Wiltermuth – MarketWatch
It’s been another bumpy week in the bond market as volatile economic data keeps investors on their toes.
Yields in the Treasury marked edged lower Thursday for a second straight day, but were still only modestly off the highest levels of the year. The pullback was attributed to a slide in January retail sales that helped offset earlier shocks from resilient inflation data.
/jlne.ws/48jnR3G

Exchanges

Enhance Your Trading Experience with Cboe’s Analytics and Order Execution Tools
Adam Inzirillo – Cboe
I hope your 2024 is off to a fantastic start. I’m excited to launch a new newsletter to share more about all that Cboe Data and Access Solutions has to offer and how you can leverage these solutions to enhance your trading experience.
Options trading continued to grow in popularity in 2023, with total volume across Cboe’s four exchanges reaching 3.7 billion contracts, the fourth consecutive record-breaking year. With increased trading comes a need for increased analytics—and who better to provide it than the world’s leading options exchange? Our Global Options Analytics service, powered by Cboe Hanweck, now includes all major exchanges across Europe, options on listed equities and futures, and tick-level, up-to-the-millisecond pricing.
/jlne.ws/48l0KGj

EU clearing rules are a quiet win for London
Laura Noonan – Financial Times
Peter is taking a well deserved break this week — along with half the rest of the UK it seems — so you’ve got me, and this week I’m going to be digging into the EU’s new clearing rules.
While Brexit continues to take up a disproportionate amount of time for UK financial regulators, it has long since faded from the international scene. Major meetings of global financial policymakers can go by with just a passing reference to the topic.
/jlne.ws/48eMVsF

Technology

Blue Ocean ATS Migrates to MEMX Technology to Support Growth
Shanny Basar – MarketsMedia
Blue Ocean Technologies is migrating its technology to a platform provided by MEMX, the US equities and options exchange operator, as the venue providing overnight trading of US stocks looks to extend its operating hours, grow volume and expand further in Asia Pacific.
Brian Hyndman, president, and chief executive of Blue Ocean Technologies, said volumes increased every month in 2023 and more people signed up to receive market data. In June last year Blue Ocean said it crossed a landmark of 1 billion shares traded since the start of 2023.
/jlne.ws/3whaYtL

Strategy

Market Crash Got You Down? Try These Three Bearish Option Trades
Gavin McMaster – Barchart via The Globe and Mail
With the market taking a turn for the worse yesterday, we’re going to look at how to find bearish options trade ideas using the Bear Put Spread Screener.
A bear put spread is a vertical spread that aims to profit from a stock declining in price. It has a bearish directional bias as hinted in the name. Unlike the bear call spread, it suffers from time decay so traders need to be correct on the direction of the underlying and also the timing.
A bear put spread is created through buying an out-of-the-money put and selling a further out-of-the-money put.
/jlne.ws/3T0AwEn

The VIX May Be Ready To Explode Higher
SeekingAlpha
Volatility may be due to expand starting next week as the equity market loses some of that stickiness around the 5,000 level on the S&P 500. Additionally, it appears that option flows, for now, are more supportive of the VIX holding at or above 14, as the volatility dispersion trade takes a back seat to unfavorable seasonality as the earnings season winds down and with Nvidia (NVDA) due to report results next week.
/jlne.ws/49gfwiN

Outlier Risk In Very High POP Trades
tastylive (Video)
It’s not always easy to take the measure of a market, whether you’ve been trading for a day or a decade. On this segment we look under the hood—options probabilities, volatility, trading strategies, futures, you name it—so your trading mechanics are built to manage more winners.
/jlne.ws/49Uokef

VIX Ends Streak
Cboe (Video)
/jlne.ws/49wqcJC

Events

Cboe Global Markets to Present at the Bank of America 2024 Financial Services Conference on February 21
Cboe Global Markets, Inc.
Cboe Global Markets, Inc. (Cboe: CBOE), the world’s leading derivatives and securities exchange network, announced today that Fredric Tomczyk, Chief Executive Officer, Jill Griebenow, Executive Vice President, Chief Financial Officer and Chris Isaacson, Executive Vice President, Chief Operating Officer, will present at the Bank of America 2024 Financial Services Conference in Miami, Florida on Wednesday, February 21 at 8:50 a.m. ET.
/jlne.ws/4bRidcr

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