The Spread: Plenty of Options

Suzanne Cosgrove

Suzanne Cosgrove

Editor

 

 

This week on The Spread – record-high options trading volumes, new products from Intercontinental Exchange and HKEX, and more.

 

Transcript:

Welcome to The Spread, I’m Matt Raebel. The election is over, and though the results will be contested by the sitting president, the markets seem to be reacting with cautious optimism. Word also got around Sunday that the pharmaceuticals company Pfizer has made a breakthrough on its vaccine for coronavirus; hopefully I’ll be able to uncross my fingers soon. They’re starting to feel a bit stiff. According to volume reports by Cboe, the CME Group, the OCC, Nasdaq, and others, October options trading and clearing volumes were through the roof – which is too bad; with winter around the corner, they’re gonna have to patch up that hole in the ceiling. Cboe’s ADV in VIX options and Mini-SPX options were both up 35 percent in October from September 2020. Despite October 2020 having one less trading day than October 2019, the exchange had yet another record-high month, and it looks like demand for mini derivatives is still high. The OCC had one of its best Octobers ever this year; total cleared volume for October was up over 41 percent from October 2019, and average daily cleared options contract volume was up more than 46 percent, according to the OCC’s press release. Keeping the trend going, the cryptocurrency derivatives trading platform Deribit also saw record-high options trading volumes in October – mostly in call options. Seems a lot of traders are expecting bitcoin to pay for their mortgages by betting on options with 36 thousand dollar strike prices. A big chunk of that came from a record number of trades between October 29th and 30th – about 47,000 bitcoins worth of volume was traded within that 24-hour period – like Black Friday, but for bitcoin. The Hong Kong Exchange is launching futures and options on the Hang Seng TECH index; futures will launch on November 23, and options will launch January 18, subject to regulatory approval, making them the first exchange-traded derivatives to track the index. ICE announced Monday that the exchange has launched Credit Default Swap Index Options to give its customers in the CDS markets more tools to hedge with; sounds like Christmas came early for them. I also covered a Cboe webinar from mid-October about protecting yourself from market downturns using VIX products. The speakers were Edward Szado, chair of the Department of Finance and associate professor at Providence College, and Joshua Lisser, senior vice president and head of the index strategies team at AllianceBernstein. Check that and the rest of our stuff out at John Lothian News dot com. That’s it for The Spread this week. Stay safe and happy trading.

 

Sources:

Stocks hit record highs, crude prices jump, on vaccine progress
Stephen Culp – Reuters
https://bit.ly/2GMhEqw

Cboe Global Markets Reports October 2020 Trading Volume
Cboe
https://jlne.ws/3l0suId

CME Group Reports October 2020 Monthly Market Statistics
PR Newswire
https://prn.to/2GJV5md

Nasdaq October 2020 Volumes
Nasdaq
https://jlne.ws/2HVhkXb

OCC October 2020 Total Volume Up 41.1 Percent from a Year Ago
OCC
https://jlne.ws/387hRQj

Deribit Sees Record Bitcoin Options Volume as Activity in $36K Calls Surge
Omkar Godbole – Coindesk
https://jlne.ws/3kSz1oh

HKEX to launch futures and options on Hang Seng TECH index
Annabel Smith – Traders Magazine
https://bit.ly/35djfPF

Intercontinental Exchange Launches Clearing for CDS Options
Traders Magazine
https://bit.ly/2Ugnjbf

Covering Your Downside – Shielding Against Market Downturns
Matt Raebel – John Lothian News
https://jlne.ws/3mLTNXl

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Today’s Newsletter

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Past The Spread Episodes

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

The Spread – July 9, 2021

Chicago, a data destination; SEC, Robinhood and payment for order flow; John Lothian weighs in with his take; Retail trading continues to percolate; and Cboe’s Kevin Davitt explains the differences between equity and index options in the “Term of the Week.”

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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