Options traders make gargantuan VIX options bet; FINRA gently reminds members to exercise “reasonable diligence” – The Spread

Suzanne Cosgrove

Suzanne Cosgrove





Welcome to The Spread, I’m Matt Raebel.

It’s been a relatively quiet year compared with last year, but some traders seem to think that’s going to change this summer. Options traders made a $40 million bet last week that the VIX will break 25 points and climb as high as 40 by July. A block trade of 200,000 options of the VIX July twenty-five to forty call spread traded over the course of two hours on April 8, taking up about a third of VIX options trading volume for the day. It’s not clear if these trades were made by one person or several, but it implies that some think the current calm in the market ain’t gonna last. 

FINRA sent out a notice this week reminding its member organizations to exercise “reasonable diligence” regarding options account approval, supervision and margin requirements. Naturally, this was a reference to the growing popularity of self-directed retail traders, and I think it was aimed at one FINRA member in particular. It’s as if they were saying, “We’re not naming names,” but their eyes were pointed directly at Robinhood.

Miami International Holdings, the parent holding company of MIAX, and Vesica Technologies announced a partnership this week. Vesica is a trading analytics startup, and it looks as though the big get of the new relationship for MIAX is Vesica’s SHIFT platform, which provides information on daily market movements, volatility and other useful data. SHIFT will be made available for options traders on MIAX Options dot com.

Shares for Barclays tanked ten percent on Wednesday due to what’s called a “fat finger” error. No, that’s not another name for the gesture you give someone who cuts you off in traffic – it’s an easily made human error that can have huge consequences. They call it a “fat finger” mistake because theoretically it can happen when someone hits the wrong key on a keyboard. 

Although these errors are sometimes corrected when such orders are cancelled in a timely fashion, Barclays’ market capitalization tanked by about 3.2 billion pounds, or 4.4 billion dollars, Wednesday when two trades totaling about 48,000 shares were entered at a price of 168.40 pence, sending the stock into a volatility auction. 

Since we’re already talking about Europe, EuroCCP is reportedly incorporating equity derivatives into its cash equities and ETF business to help launch Cboe Europe Derivatives, which is Cboe’s new pan-European derivatives trading business. Reminds me of the Beatles’ coming to America being referred to the “British Invasion” of the 1960s, though I doubt they’ll call Cboe’s ongoing expansion into Europe the “Chicago Invasion” or something like that – it doesn’t quite have the same cultural connotations. 

EuroCCP made several changes to its senior staff as it positions itself as  a multi-asset clearinghouse. Arnoud Siegmann, chief risk officer at EuroCCP since 2008, is the new chief operating officer; Jonathan Tran, who joined EuroCCP in 2018, will take over for Siegmann as the new chief risk officer, and Ed Hughes, who came to EuroCCP in 2019, has been appointed the firm’s new chief technology officer. Time will tell how things turn out given all the economic changes in Europe these days, but it seems like Cboe’s new venture is in good hands.

We’ve got a lot of new content on John Lothian News dot com. John’s been busy interviewing Brendan Bradley, author of “ESG Investing For Dummies,” and Cove Markets Founder Scott Knudsen. Knudsen’s the newest interviewee in our “Path to Electronic Trading” series, and John published a stand-alone interview with Knudsen as well.

Check out John Lothian News dot com for these videos and more, and follow us on Twitter, LinkedIn, and Facebook at the links below this video. That’s gonna do it for The Spread this week – until next time, stay safe and happy trading.




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Big $40 million options trade bets on near-term stock market tumble
Reuters Staff

Giant VIX Options Trades Bet That Stock-Market Calm Won’t Last
Elena Popina and Edward Bolingbroke – Bloomberg

FINRA Reminds Members About Options Account Approval, Supervision and Margin Requirements

MIAX and Vesica Advance Strategic Partnership
Press Release

Fat Finger Briefly Trims $4 Billion Off Barclays’ Market Cap
Joe Easton and Jan-Patrick Barnert – Bloomberg

Cboe reshuffles EuroCCP senior team post-acquisition
Hayley McDowell – The Trade

Scott Knudsen – From Open Outcry To Electronic Trading To Trading The Goat
John Lothian – JLN

Brendan Bradley Is No ESG Investing Dummy and He Has A Book To Prove It
John Lothian – JLN

Scott Knudsen – The Path To Electronic Trading Led To A Best Execution Platform For Bitcoin
John Lothian – JLN


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The Spread – July 23, 2021

The Spread – July 23, 2021

Volatility makes a return appearance as the Delta variant jangles nerves; Treasury bond yields perk up; July options expire; John Lothian chats with Cboe’s Ed Tilly about a World of Opportunity; UBS and SEC reach a settlement; FIA Tech expands; and the Options Institute’s Kevin Davitt explains why contract size matters in the “Term of the Week.”

The Spread – July 16, 2021

The Spread – July 16, 2021

Options traders torn between higher Inflation and steady Fed policy; June market share up at MIAX; John Lothian talks about a World of Opportunity; SEC charges binary options shop with fraud; Moscow Exchange set to offer quarterly options on U.S. stock index futures; and the Options Institute’s Kevin Davitt talks about implied volatility in the “Term of the Week.”

The Spread – July 9, 2021

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The Spread – July 2, 2021

The Spread – July 2, 2021

Finra socks Robinhood with its biggest-ever fine; Cboe acquires Chi-X Asia Pacific; OCC reports another volume gain; NIO takes its cue from options; John Lothian weighs in with his take; Looking for volatility; and Jermal Chandler explains hedging in the options “Term of the Week.”

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