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The Spread: The Futures of Vol Trading

Matt Raebel

Matt Raebel

Editor


This week on The Spread, Cboe launches Mini VIX Futures while the CME announces a volatility product of its own, the OCC foots the bill, and more.


Produced by Mike Forrester.


Transcript:

Welcome to The Spread, I’m Matt Raebel. Lots of stuff happened late last week while we were filming the last episode, so it’s time to catch up on a few things. Cboe officially launched Mini VIX Futures, which are one-tenth the size of regular VIX futures, on August 10. According to a Cboe rep, they’ve traded over one hundred thousand contracts in the first week. Mini derivatives products have been getting more popular because they offer investors greater flexibility and precision when it comes to positioning during times of increased volatility; since Cboe decided to launch them in the middle of an election year with an ongoing pandemic and record options trading volumes, I’d say they picked a good time to give options traders more tools to play with. The CME seems to have the same idea; this week, it announced plans to launch the trading of futures on the Nasdaq-100 volatility index, also called the VOLQ. If approved by regulators, the contracts are planned to launch October 5. Miami International Holdings, the holding company of the MIAX Exchange Group, announced plans for a merger with MGEX this week. MIAX has been doing a lot of mergers and rolling out new products the past few years, so it’s a no-brainer that MGEX would find the deal attractive. Speaking of MIAX, according to the data MIAX published from July, last month the exchange group’s ADV was more than 3 million equity options contracts. For comparison, the CME’s ADV last month for equity options was 2 million, and Cboe’s was 8.9 million. All things considered, what with reports like this from MIAX, not to mention the OCC, the CME, and Cboe, it’s a good time to be an options trader, at least in the U.S. Eurex also disclosed its July volumes late last week. Despite the fact that derivatives trading volumes have been doing well in the U.S., over in Europe, Eurex saw a decrease in traded derivatives last month, especially equity derivatives. The release cited “ongoing uncertainty” as a reason for lower volumes, and who can blame ‘em? The way this year has gone, I’m uncertain as to whether I’m going to wake up tomorrow to find that everything’s normal, or that the sky has gone purple and I’ve somehow transformed into a giant cockroach! Hopefully we all get to resume some semblance of normalcy soon. In the meantime, the OCC is fronting some of its own money to help make things a little easier for market participants, according to a letter it sent August 3rd saying that it wants to increase its amount of “skin in the game.” By that, the OCC means it wants to increase the capital it contributes to cover for defaults from member organizations. The OCC is asking the SEC for a sixty two million dollar minimum, both to address the needs of its member organizations and to appeal for recognition from European regulators. SEC approval of the plan is still pending, but something tells me the OCC probably has the scratch lying around to cover a fund like that. That’s gonna do it for The Spread this week. Remember to check out John Lothian News dot com for more news, insight, and interviews – until next week, stay safe and happy trading.

Sources:

Cboe Futures Exchange to List Mini VIX Futures Beginning August 10
PR Newswire (press release)
https://prn.to/30B3vDs

10 Key Features of the VIX Index and New Mini VIX Futures (VXM)
Matt Moran – Cboe blog
https://bit.ly/3fOUHOF

CME Group to Launch Futures on Nasdaq-100 Volatility Index (VOLQ)
CME Group (press release)
https://bit.ly/31TFiYw

Miami International Holdings and MGEX Announce Plan of Merger; MGEX to Join MIAX Exchange Group
PR Newswire (press release)
https://prn.to/3kM2XD2

Miami International Holdings Reports July 2020 Trading Results for MIAX  Exchange Group; July Market Share up Approximately 19% over 2019
MIAX Exchange Group
https://bit.ly/2F5k2HP

CME Group Reports July 2020 Monthly Market Statistics
CME Group
https://bit.ly/3aofTdn

Cboe Global Markets Reports July 2020 Trading Volume
Cboe
https://bit.ly/30TXcev

July monthly figures at Eurex and EEX
Eurex
https://bit.ly/3gAF0fi

OCC boosts funding for “skin in the game”
Will Acworth – FIA.org
https://bit.ly/2DTeu2i

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