Traders Are Piling Into Hawkish Fed Bets, But They’re for 2023; Bitcoin Options Volume on Deribit Already 25% of 2020 Total

Jan 13, 2021

$24,451/$300,000 (8.2%)
Larry Arnowitz and Mark Spanbroek

Lead Stories

Traders Are Piling Into Hawkish Fed Bets, But They’re for 2023
Stephen Spratt – Bloomberg
The past week has seen a surge in option bets which pay off as more Federal Reserve hikes are priced in, though all of them are targeted at rates two or three years from now.
Given the Fed’s mantra of lower rates for longer, traders don’t expect hikes this year and are unwilling to pay up for expensive options with long-dated expiries. The solution: a rush into so-called mid-curve options with short-term expiries but are priced off rates a couple of years out.

Bitcoin Options Volume on Deribit Already 25% of 2020 Total
Zack Voell – Coindesk
Deribit traders have already recorded 25% of last year’s entire bitcoin options volume. After a record-setting $2 billion traded Monday, total volume for bitcoin options on Deribit in the past two weeks reached $14.5 billion Tuesday morning. In 2020, all bitcoin options trading on Deribit totaled just less than $57 billion. Contributing to its wild growth in the past month, the Panama-based exchange now offers traders sky-high bets of bitcoin reaching $100,000, $200,000 or even $300,000 by December. At the end of December 2020, Deribit investor and Three Arrows Capital CEO Su Zu predicted in 2021, “Options markets volume to become over 50% of all crypto derivatives markets.” Perpetual cryptocurrency futures markets reported over $190 billion in the past 24 hours, according to CoinGecko.

Bitcoin’s wild ride leaves traditional money managers queasy
Eva Szalay – Financial Times
A strong jolt of volatility in cryptocurrencies has dulled hopes that large pension funds and traditional investors will pile into bitcoin anytime soon as a pick-up in institutional interest remains dominated by speculators.
Bitcoin, the most actively-traded cryptocurrency, has endured its worst bout of tumult since the global market ructions in March. At one point on Monday, it traded $10,000 below the peak of almost $42,000 it reached just days earlier before recovering to roughly $35,000.

2021 Will Be Better Than 2020 But Far More Volatile
Tyler Cowen – Bloomberg
If you had expected 2021 to be a relief from the horrors of 2020, sorry: So far it’s looking worse. Covid indicators, including deaths, are reaching new highs. The vaccine rollout has been badly botched. A violent insurrection, cheered on by the president, reached the inner sanctum of the Capitol.

Exchanges and Clearing

Options Trading Boosts U.S. Exchanges
Shanny Basar – Traders Magazine
Record levels of retail participation in the U.S. markets last year was one of the factors that boosted options trading volumes on US exchanges in 2020. Nasdaq said in statement yesterday that 2020 was the first year it led all exchanges in total volume traded for equity options across all categories, including proprietary single-exchange-listed options products. The exchange said it processed 365 million trades and 2.58 billion contracts. “These record numbers, combined with handling more than 8.88 trillion messages, made 2020 the most active year of options trading since options were introduced as tradeable products in 1973, and marked a 52% volume increase over 2019,” added Nasdaq.

Green Light for LSE-Refinitiv Deal Heralds Data-Driven Future
Viren Vaghela and Aoife White – Bloomberg
London Stock Exchange Group Plc cleared the last major hurdle to its purchase of Refinitiv, clinching a transformational deal for the 300-year-old London bourse.
The $27 billion transaction gained approval from European Union regulators Wednesday, giving it global scale as firms vie to meet surging demand for data and analytics in increasingly computerized financial markets. The news is also a boost for one of London’s flagship financial companies as the post-Brexit era disrupts the sector’s role on the world stage.

Euronext resolves technical glitch in index derivatives trading
Reuters Staff
Stock exchange operator Euronext said on Monday it had resolved a technical issue that affected index derivatives trading.

Euronext updates on the contemplated acquisition of the Borsa Italiana Group
Euronext today acknowledges that the European Commission has conditionally approved, under the EU Merger Regulation, London Stock Exchange Group’s (LSEG) proposed acquisition of Refinitiv. This approval further improves the certainty of execution of Euronext’s contemplated acquisition of the Borsa Italiana Group (the “Transaction”) by satisfying one of the major conditions for the completion of the Transaction. The European Commission’s decision follows the approval of the Transaction by LSEG shareholders on 3 November 2020, by the German Federal Cartel Office on 11 November 2020, by Euronext’s shareholders on 20 November 2020, and the foreign direct investment clearance of the Transaction by the Italian Council of Ministers received on 11 December 2020.

Reduction of Block Trade Minimum Quantity Threshold Levels for the Random Length Lumber Futures and Options on Random Length Futures Contracts
CME Group
Effective Sunday, February 7, 2021 for trade date Monday, February 8, 2021, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will reduce the block trade minimum quantity threshold levels of the Random Length Lumber Futures and Options on Random Length Futures contracts as noted the table below.

Regulation & Enforcement

Biden Poised to Pick Wall Street Critic Gary Gensler to Lead SEC
Saleha Mohsin, Jennifer Epstein, Robert Schmidt, and Benjamin Bain – Bloomberg
Gary Gensler is President-elect Joe Biden’s likely pick to lead the Securities and Exchange Commission, according to two people familiar with the matter, a move that would put a former regulator who is known for sparring with financial executives atop Wall Street’s main overseer.


SGX appoints Herry Cho as new Head of Sustainability and Sustainable Finance
Singapore Exchange (SGX) today announced that it has appointed Ms Herry Cho to a newly created position of Managing Director, Head of Sustainability and Sustainable Finance reporting to SGX’s CEO Mr Loh Boon Chye, with effect from 8 February 2021. Ms Cho’s appointment is the latest milestone in SGX’s multi-pronged expansion of its sustainability efforts, which are housed under the recently launched SGX FIRST (Future in Reshaping Sustainability Together) platform.


Charting a decisive 2021 breakout: U.S. benchmarks clear 20-day volatility bands
Michael Ashbaugh – MarketWatch
Technically speaking, the major U.S. benchmarks have asserted a near-term holding pattern, pulling in modestly from all-time highs.
Still, the slight downturn punctuates previously aggressive January breakouts amid a still comfortably bullish bigger-picture backdrop.


2020 Annual Trends in Futures and Options Trading
Description: This webinar will highlight the main trends in trading activity in 2020 in the global exchange-traded derivatives markets, with category and regional breakdowns as well as exchange and contract rankings.
Presenter: Will Acworth, Senior Vice President of Publications, Data & Research, FIA
Time: Jan 27, 2021 10:30 AM in Eastern Time (US and Canada)


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