| September 01, 2023 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Editor's Note: In observance of the Labor Day holiday in the United States there will be no JLN Options on Monday, September 4. We'll be back on Tuesday. Have a great weekend!
| | | | | | Lead Stories | | | Short-term investors in SPY and QQQ warned of options risks; Surge in use of zero-day-to-expiry instruments creates disconnect from fundamental value
Emma Boyde - Financial Times
The surge in options trading linked to the US stock market in recent years is driving more volatile pricing activity and creating potential risks for short-term investors in some of the world's largest ETFs, analysts warn. A rapid increase in the use of very short-term options, known as "zero-day-to-expiry" (0DTE) contracts, linked to the S&P 500 index and the world's largest tracker fund, the $402bn SPDR S&P 500 ETF (SPY), is driving price movements in ways that have raised concerns among academics and even highly experienced market participants.
/jlne.ws/45P36fC
Options: don't be a hero - steer clear of zeroes; Ultra-short contracts, already popular in the US, are now in Europe
Lex Populi - Financial Times
An investing tool that has become hugely popular in the US in recent years this week landed on European shores. The imports are "zero-day-to-expiry" options. These combine two elements with potentially explosive consequences: day trading and derivatives. Eurex, a derivatives exchange run by Deutsche Börse has launched one-day options tied to the widely-followed Euro Stoxx 50 equity index. The product will appeal to institutions and sophisticated private investors, it predicts.
/jlne.ws/3Z21qgL
***** A hero ain't nothing but a sandwich. Actually that is the name of a movie. ~JJL
No More SPIKEs Could Hurt Traders
Thomas Westwater - tastylive
Just three and a half years after launching, the SPIKES Indexâa VIX-style copycatâwill stop trading, leaving the Chicago Board of Options Exchange (CBOE) as the sole provider of a market "fear gauge."
Miami International Holdings Inc., otherwise known as MIAX, unveiled the SPIKE Index in February 2019, offering the only product to counter the CBOE's stranglehold on a volatility product that tracks against the S&P 500 index.
/jlne.ws/3sDyDD3
Volatility trading picking up traction as the market pegs it as a future core strategy; A recent Acuiti report found that 75% of prop trading firms surveyed saw volatility trading strategies out-perform other markets in 2022.
Claudia Preece - The Trade
Following a recent period of high volatility, strategies have begun to alter accordingly and market onlookers continue to predict a growth in volatility trading as the market increasingly turns its attention to the area. A recent report from Acuiti published in July confirmed that volatility trading is gearing up for significant growth, with the sector "moving from a niche asset class to a core strategy for many firms seeking to diversify their strategies".
/jlne.ws/3PjmbkG
Options Traders Lift Wagers on $100 Oil as Market Gets Tighter
Alex Longley and Devika Krishna Kumar - Bloomberg
Oil options traders are showing growing faith the market's recent tightness can last, bolstering wagers that prices will rally up toward $100.
Open interest on $100 calls over the next 12 months has risen from about 80,000 contracts in the middle of July to 120,000 today. Calls at $90 and $100 are the two most held strikes over the next 12 months and there has also been a smattering of cheap wagers on even higher prices as far out as 2025.
/jlne.ws/44BIfLQ
| | | | | | Exchanges | | | Cboe FX volume drops +6% in August
Abdelaziz Fathi - FinanceFeeds
The exchange's institutional FX trading venue saw its average daily trading volume amounting to $41 billion in August 2023, down 6.6 percent month-over-month from $43.9 billion the previous month. On a year-over-year basis, the ADV numbers released by Cboe FX, formerly Hotspot, illustrated stronger performance, rising by 11 percent when weighed against $37 billion a year earlier.?
/jlne.ws/3qVlhl2
In August, a record activity of participants was recorded on the derivatives market
MOEX
The volume of trading on the derivatives market of the Moscow Exchange in August 2023 amounted to 9 trillion rubles. This is the highest value since February 2022. Transactions with futures and options were also concluded by a record number of clients in the entire history of the futures market - 149 thousand, of which 68% accounted for individuals.
/jlne.ws/3PnfYUE
Trading Overview in August 2023; Japan Exchange Group released Trading Overview in August 2023
JPX
Cash Equity Market - In August 2023, the daily average trading value for the Prime Market (domestic common stocks) was JPY 3.7961 trillion; The daily average trading value for the ETF market was JPY 215.8 billion.
Derivatives Market - In August 2023, total derivatives trading volume was 32,891,367 contracts; In August 2023, total derivatives trading value was JPY 246 trillion; In August 2023, trading volume for the night session and the ratio of the night session were 12,204,052 contracts and 37.1%.
/jlne.ws/3EjWrOT
NYSE Options: FLEX Timer Change
NYSE
Beginning Friday, September 1, 2023, pursuant to American Rule 900G(b)(5) and Arca Rule 5.30- O(b)(14), the Request Response Time (RRT) for FLEX option trading on the Floor will be adjusted to a reasonable amount of time - of no less than three seconds and no longer than five minutes - as determined by the Trading Official on an order-by-order basis.
/jlne.ws/3P2I4mQ
NYSE Arca Options: September 2023 Pricing Changes
NYSE
On September 1, 2023, pending effectiveness of a regulatory filing, NYSE Arca Options will introduce new Customer Take Fee Discount Tiers.
/jlne.ws/3qY3Tw4
NYSE American Options: Reduction of the Time Required to List Options on Certain Securities Following an IPO
NYSE
Effective September 1, 2023, pursuant to Commentary .01(4)(a) of NYSE American Rule 915, the Exchange will implement changes to reduce the time required to begin listing and trading options on certain covered securities following their Initial Public Offering ("IPO").
/jlne.ws/3OSANWM
| | | | | | Regulation & Enforcement | | | Private Equity, Hedge Funds Sue SEC to Fend Off Oversight
Paul Kiernan - WSJ
A coalition representing the biggest private-equity and hedge funds sued the Securities and Exchange Commission on Friday to block new regulations aimed at giving investors more transparency and better terms from asset managers.
The lawsuit, filed in a conservative federal appeals court, argues that the SEC overstepped its legal authority in finalizing the regulations last week. Plaintiffs include the Managed Funds Association, American Investment Council and National Venture Capital Association.
/jlne.ws/45Q1kLd
Jon Corzine's Critics Want Him Banned From Futures Trading
Lydia Beyoud and Miles Weiss - Bloomberg
Jon S. Corzine's critics are making a renewed effort to halt the comeback attempt of the former head of MF Global Holdings more than a decade after the derivatives brokerage imploded and about $1 billion in customer money went missing. Three prominent executives in the futures industry are asking the US Commodity Futures Trading Commission to take another close look at Corzine and his young New York-based hedge fund, JDC-JSC. They claim the former New Jersey governor and US senator no longer qualifies for an exemption that allows him and the fund to trade a small amount of futures. His 2017 settlement with the regulator left him that room, but a subsequent rule change could eliminate it, they said.
/jlne.ws/3Lt7KID
| | | | | | Strategy | | | VIX Trade Tied to Futures
Cboe (Video)
In #Vol411, Dan Deming @Djd551 covers the $VIX futures roll market (futures across the term structure all now trading below 20), an interesting trade in VIX #options tied to futures and $SPX implied volatility.
/jlne.ws/47PCBZc
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
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| | | Jeff Bergstrom
Editor
| | | Asma Awass
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