What Options Trading Says About Robinhood’s Big Day

Aug 5, 2021

Observations & Insight

FIA’s Walt Lukken has issued a written midyear update for 2021
John Lothian & JLN Staff

The subjects he covers in his update are: opening access to clearing venues globally, improving operational resilience, opening China’s markets, strengthening central clearing, advancing sustainability through derivatives markets and connecting our community.

Regarding the latter, about FIA conferences, Lukken writes: “Of course, virtual conferences do not compare to being face-to-face with your clients and team members, so we are preparing to resume in-person events in the coming weeks. This fall, we are bringing back IDX – the International Derivatives Expo – in London and Expo – the Futures & Options Expo – in Chicago. We’re working closely with our venues, vendors, and legal counsel to provide safe environments for reconnecting with the derivatives community. We can’t wait to reconnect with our members in-person.” —FIA

Lead Stories

What Options Trading Says About Robinhood’s Big Day
Avi Salzman – Barron’s
In the past year and a half, options trading has hit record highs as retail investors plow money into calls and puts. All-or-nothing “YOLO” options bets have become common on platforms like Robinhood Markets, which has opened the products to a new generation of traders.
Now, Robinhood (ticker: HOOD) itself is in the midst of an options frenzy, which may help cause the stock to be volatile for an extended period.

Robinhood Sinks After Wild Rally as Investors File to Sell Stock
Matt Turner – Bloomberg
Robinhood Markets Inc. tumbled after early investors filed to sell nearly 100 million Class A common shares less than a week after its initial public offering.
The trading platform’s stock dropped as much as 17% to $58.30, after investors proposed to sell up to 97.88 million of shares over time. None of the proceeds will be received by Robinhood, with the selling stockholders getting all of the funds from the sales, according to a filing with the U.S. Securities and Exchange Commission. The listed sellers are some of Robinhood’s biggest investors and together combine to hold more than one-third of the firm’s current outstanding shares.

Robinhood Stock Tumbles as Investors Seek Exit; Jim Cramer Says Options Market Key
TheStreet’s founder, Jim Cramer, says Robinhood traders need to focus on “busters” in the options markets as investors move to exit from last week’s IPO.
Martin Baccardax – The Street
Robinhood (HOOD) shares were marked sharply lower in pre-market trading Thursday as the online trading platform continues to whipsaw amid intense retail investor interest and last week’s disappointing Nasdaq IPO.

What’s Behind the ETF Feeding Frenzy of 2021?
Joel Weber and Eric Balchunas – Bloomberg
Exchange-traded funds have already broken their annual inflow record, and the summer isn’t even over yet. The pace has jumped from $2 billion a day to more than $4 billion, with over 1,800 ETFs taking in cash. What’s behind this wild flowmageddon into ETFs?


Cboe Global Markets Reports July 2021 Trading Volume
Cboe Global Markets, Inc.
Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, today reported July monthly trading volume statistics across its global business lines.
The data sheet “Cboe Global Markets Monthly Volume & RPC/Net Revenue Capture Report” contains an overview of certain July trading statistics and market share by business segment, volume in select index products, and RPC/net capture, which is reported on a one-month lag, across business lines.

Cboe IBHY Futures Set All-Time Monthly Volume Record, Surpassing $5 Billion Total Monthly Notional Value Traded for First Time; Nearly 40,000 contracts traded during July 2021, representing approximately $5.9 billion in notional value; July was the fourth consecutive record month, with total notional value in IBHY futures up 52 percent over the prior month; IBHY futures are designed to help provide broad exposure to the U.S. corporate bond market through an exchange-traded, centrally cleared vehicle
Cboe Global Markets, Inc
Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, today announced that trading volume in Cboe iBoxx iShares $ High Yield Corporate Bond Index (Ticker: IBHY) futures reached an all-time monthly high in July 2021 and surpassed $5 billion in total notional value traded for the first time. A total of 39,919 contracts were traded during the month, representing approximately $5.9 billion in notional value, up 52 percent over the prior month. The previous record was set in June 2021 with a total of 26,490 contracts traded, representing approximately $3.9 billion in notional value.

July 2021 monthly figures at Eurex; Growth in OTC Clearing and European interest rate derivatives volumes at Eurex in July
Eurex’s OTC Clearing business continued its strong year with notional outstanding in interest rate swaps (IRS) growing 26 percent – from 7,815 billion EUR to 9,856 billion EUR – and average daily cleared volumes in IRS jumping 31 percent from 13 billion EUR to 17 billion EUR. The overall figures for all products show notional outstanding volumes growing by 5 percent – from 19,488 billion EUR to 20,454 billion EUR – and average daily cleared volumes up 11 percent from 99 billion EUR to 110 billion EUR.

Miami International Holdings Reports July 2021 Trading Results, MIAX Exchange Group Sets New Market Share and Volume Records; SPIKES Futures Volume at Record Levels
Miami International Holdings, Inc. today reported July 2021 trading results for its U.S. exchange subsidiaries – MIAX , MIAX Pearl and MIAX Emerald (together, the MIAX Exchange Group™) and the Minneapolis Grain Exchange (MGEX).
The MIAX Exchange Group reported a number of new volume and market share records for multi-list options trading including a 16.70% single day market share record on July 2, 2021 and a monthly market share record of 15.53% in July 2021. In addition, MIAX Emerald reported a 6.92% single day market share record on July 29, 2021. The total U.S. multi-listed options market share of 15.53% in July 2021 was 412 basis points higher than the 11.41% market share in July 2020 and represented a 36.1% increase.

SGX reports FY2021 net profit of S$447 million
Singapore Exchange (SGX) today reported FY2021 adjusted net profit of S$446.9 million (S$482.1 million). Revenues of S$1,056.0 million (S$1,052.7 million) were comparable to record revenues set in FY2020, with underlying business revenue up 7% excluding the decline in treasury income, amidst a low interest rate environment.

SGX receives long-term Aa2 rating, the highest assigned to any exchange group by Moody’s
Singapore Exchange (SGX) today announced it has obtained first-time credit ratings from Moody’s Investors Service (Moody’s). Moody’s has assigned to SGX Aa2 long-term local and foreign currency issuer ratings with a stable outlook. The Aa2 rating is the highest credit rating assigned to any exchange group by Moody’s.

Canada’s TMX Group profit beats estimates on higher revenue, Boston options exchange earnings
Reuters Staff
TMX Group, the operator of the Toronto and Montreal exchanges, on Wednesday beat analyst estimates for second-quarter core profit, which rose from a year earlier due to increased revenue and an increase in the company’s share of earnings from the Boston Options Exchange (BOX).


Money Stuff: Robinhood Is More Fun With Options
Matt Levine – Bloomberg
Robinhood: options
We talked yesterday about the wild rally in Robinhood Markets Inc. stock, which was up 24% on Tuesday and then up another 50% yesterday. It closed yesterday at $70.39, well above the $38 price in its initial public offering a week ago. My analysis of the situation was basically to shrug and say “meme stocks, man,” but I did point to a couple of factors — buying the dip, diamond hands — that are often important to meme-stock rallies.

Opinion: How 10 of the world’s smartest investors can help you build your perfect portfolio
Andrew W. Lo and Stephen R. Foerster – MarketWatch
Is there a Perfect Portfolio for investors?
We posed this question to 10 of the most respected pioneers in the investment community. Six have Nobel Prizes in Economics: Harry Markowitz, the founder of Modern Portfolio Theory, the basis of the modern investment portfolio; his protégé William Sharpe, creator of the Capital Asset Pricing Model (CAPM) and the beta risk measure that changed how we think about risk and reward in the financial markets; Eugene Fama, who developed the Efficient Market Hypothesis; Myron Scholes and Robert Merton, two of the co-creators of the Black-Scholes/Merton option pricing model; and Robert Shiller, the behavioral economist whose work challenged the notion of market efficiency.


Investors Are Ignoring a Dangerous Crackdown on Press Freedom; From Hong Kong to the U.S., freedom of expression is under threat.
Iain Marlow, Isabella Steger – Bloomberg
Global press freedom is under spectacular pressure. More journalists than ever were in jail last year and the number of media workers killed rose by a third compared to 2019, with Asia accounting for nearly half of those murdered. With a crackdown on the world’s press comes a more challenging business landscape for investors. Restricted information flows can mask political and regulatory problems as well as potential fraud and corruption, raising the risks of doing business — particularly in more volatile emerging markets where good-quality information may already be scarce. ?

Team DASH Financial Technologies; ‘Together, We Are More Effective Than Apart’
Building a strong team culture means more than just empowering employees to excel at their jobs. For DASH Financial Technologies, a leading options trading and execution technology provider, supporting each other as colleagues is at the heart of everything they set out to accomplish – including at a charity bike ride like Wall Street Rides FAR.

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