Options Markets Brace for Election Volatility; Super Tuesday Hedging Shows Up in Volatility Curves

Jan 22, 2020

Observations & Insight

Cboe Wraps Up Tech Migration, Expands In Products And In Europe
Suzanne Cosgrove – John Lothian News
With its multi year technology migration finally wrapped up, Cboe Global Markets is returning its focus in 2020 to the expansion of proprietary products and geographies, Cboe Chairman, President and CEO Ed Tilly told a gathering of journalists Tuesday. Cboe began its technology changeover after its acquisition of Bats Global Markets, completed in February 2017, and logged the final piece of its technology overhaul on October 7, 2019. with the migration of Cboe Options Exchange, the largest U.S. options exchange.

Lead Stories

Options Markets Brace for Election Volatility
Options markets are bracing for big swings in stock prices around the U.S. presidential election.
Traders are picking up options that would pay out after the Iowa Democratic caucuses on Feb. 3, betting on volatility, according to Wells Fargo Securities. That’s based on options tied to the S&P 500 expiring on Feb. 5. Traders have also paid up for options on the Cboe Volatility Index, or VIX, expiring that month, which would profit if market turbulence jumped through February.

****JB: Also see the Markets Insider story, The 2020 election’s outcome is now the most-cited risk to markets among fund managers, replacing the US-China trade war.

Super Tuesday Hedging Shows Up in Volatility Curves
Bloomberg (VIDEO)
Amy Wu, RBC Capital Markets equity derivatives strategist and Bloomberg’s Luke Kawa talk about why alarm bells are sounding in volatility markets. They appear on “Bloomberg Markets: The Close.”

While Virus Whacked Stocks, Bulls Showed Up in China Options
Joanna Ossinger – Bloomberg
Some investors may have been taking advantage of Tuesday’s sell-off in Asian stocks to position for a rebound.
While the iShares China Large-Cap ETF tumbled the most in almost two years on news that the coronavirus out of China has spread, Susquehanna Financial Group LLP spotted buyers of bullish options. Four of the five most-traded contracts on the U.S.-listed exchange-traded fund were calls, data compiled by Bloomberg show.

****JB: Also see The Wall Street Journal’s story, Investors Rattled by China’s Coronavirus Look to Past Epidemics for Clues.

Exchanges and Clearing

Cboe Publishes Vision for Equity Market Structure Reform
Cboe today unveiled “Cboe’s Vision: Equity Market Structure Reform,” which proposes recommendations to U.S. equity market structure that it believes would further strengthen markets and enhance the overall trading environment for long-term investors without potentially causing harm to today’s well-functioning markets. The proposal extends from Cboe’s active pursuit of defining fair and transparent markets that benefit all participants, and reflects the company’s long-standing commitment to strategic and proactive leadership in market structure advocacy.

TradeStation Securities Awarded “Best for Active Trading” and for the Eighth Consecutive Year “#1 Platform Technology” in StockBrokers.com 2020 Online Broker Review
Press Release – Markets Insider
TradeStation Securities, Inc. (“TradeStation”), a Monex Group company and award-winning* broker-dealer and futures commission merchant, today announced top accolades from StockBrokers.com’s 2020 Online Broker Review. TradeStation won the title of “Best for Active Trading” and for the eighth year in a row “#1 Platform Technology”. TradeStation also received the following “Best in Class” distinctions:


Cboe Receives Final Regulatory Approval for Cboe Market Close
PR Newswire
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced it has received final approval from the U.S. Securities and Exchange Commission (SEC) to introduce Cboe Market Close (CMC) on the company’s BZX Exchange. CMC is a new end-of-day match process for non-Cboe listed securities, and is planned for launch in early 2020.

Drop Copies And Risk Management In Pre- And Post-trade Solutions
Ahmed Heikal – Vela blog
Whether a broker is executing a client’s orders, offering direct market access (DMA) or providing sponsored market access (SMA), it is constantly taking on risk. The priority is to ensure that those risks are always visible and never build up. But given the sheer speed and volume of order and trade messages that brokers are in one way or another involved in, managing the risk in real time is a formidable technological challenge, not to mention a costly one.


JP Morgan FX options global head departs for senior role at Digital Vega
Hayley McDowell – The Trade
JP Morgan’s long-serving global head of FX options has departed after 25 years with the US bank to join FX options e-trading platform provider Digital Vega. Rob Wemyss has been appointed head of business development and non-executive director, tasked with supporting product development and the firm’s expansion strategy. He has worked as global head of FX options at JP Morgan since 2015, having led the business for Europe, the Middle East and Africa prior to that. Digital Vega’s flagship multi-dealer Medusa platform looks to help institutional clients navigate the shift in over the counter (OTC) and derivatives markets to more electronic trading models.

*****You can find a link to the Digital Vega press release here.~MR

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