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The Spread: Hangin’ In There

Matt Raebel

Matt Raebel

Editor

This week on The Spread: Worldwide traded options volumes rise, Will Acworth notes the impact of the closing of the trading floors on the options markets, and more.

Produced by Mike Forrester.


Transcript

Hello and welcome to The Spread. Things are still looking pretty bleak the world over; the coronavirus pandemic has caused over 160,000 deaths worldwide, and from the looks of things it feels like this quarantine is going to last roughly until generation Z starts getting their first grey hairs. It’s not all bad though – I finally got a proper tripod to film this at home (shoutout to John), and this morning I found twenty dollars. In times like this, it’s all about the little things. While volatility in the options market has settled down somewhat compared to March, the equity markets continue to swing like a merry-go-round attached to a rubber band, so trading volume in the equity options world is still way higher than usual, especially for April. The FIA reported that global options volume reached 4.99 billion in the first quarter, up 40 percent from the same period last year. The total number of contracts traded on derivatives exchanges worldwide rose to 11.41 billion, an all-time quarterly record and an increase of 43.2 percent over the first quarter of 2019. And just for fun, equity index futures and options had the greatest rate of growth among the nine categories of contracts tracked by the FIA. More than 4.57 billion equity index futures and options contracts changed hands in the first quarter, up 61.9 percent from March 2019. All I have to say about that is…cha-ching! Meanwhile, the crypto world has continued its love affair with its own take on options, as the crypto trading giant Binance added options trading on bitcoin for their mobile app users, to the applause of literally dozens. As JLN’s Thom Thompson pointed out, their definition of “options trading” is a bit different from what you might think of when you hear the term, because “Binance itself writes all of the options, and customers can only go long calls or puts.” Personally, I’m okay with it – I love it when someone does half the work for me. And finally, Will Acworth of the FIA wrote in MarketVoice about the impact of the closing of the trading floors on options trading volume. He quotes a blog post from James Chu, a former options trader who now works for the NYSE in their research department. Chu estimated that 10.5 percent of average daily volume was executed through those floors during the first half of the month. By March 20, that had dropped to 5.7 percent, and by month end it had dropped to zero. Food for thought. Thanks for tuning in – we’ll see you next week!

 

Sources

Coronavirus Death Toll in Europe Likely Far Higher Than First Reported
Jason Douglas in London and Giovanni Legorano – WSJ
https://on.wsj.com/3ctZuUq

Binance launches bitcoin options trading on mobile apps
Yogita Khatri – The Block
https://bit.ly/3evCc2r

U.S. options markets resilient despite dislocations, NYSE analysis shows
Will Acworth – FIA.org
https://bit.ly/2Kfgke0

Q1 global futures and options volume jumps 43.2% to record 11.41 billion contracts
FIA.org
https://bit.ly/3et6cMo

U.S. options markets resilient despite dislocations, NYSE analysis shows
Will Acworth – MarketVoice
https://bit.ly/2Kfgke0

 

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