| July 22, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
Volatility Insight of the Week: Aluminum Convexity (ALCO), as seen on CME Group's Volatility Index (CVOL), has reached a one-year high as options traders are positioned more heavily on the wings of the volatility curve. Learn more about CVOL here.
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Cboe Global Markets announced the launch of its redesigned S&P 500 Variance Futures (Ticker: VA), expected to begin trading on September 23, 2024, pending regulatory review. This new product aims to transition OTC variance swaps trading to an exchange-listed format, simplifying trading and settlement while providing the benefits of price discovery, central clearing, and increased liquidity. The VA futures will settle based on the annualized realized variance of the S&P 500 Index, calculated daily from the first trading day to the final settlement date. Addressing customer feedback, the redesigned futures improve upon Cboe's previous offerings with a straightforward methodology, quoting and trading in variance units with a $12 contract size. They align with standard S&P 500 Index (SPX) options expiration dates, enhancing flexibility for managing variance exposure and hedging. In the press release, Rob Hocking, Cboe's head of product innovation, highlighted the product's accessibility, capital efficiency, and user-friendliness, while Tim Brennan, head of capital markets at S&P Dow Jones Indices, emphasized the tool's utility in managing variance and risk within the highly liquid S&P 500 ecosystem. ~JJL
| | | | | | Lead Stories | | | Cboe to Offer Traders Another Way to Hedge S&P 500 Swings
David Marino - Bloomberg
Cboe Global Markets Inc. wants to give traders another way to hedge against volatility in the US stock markets. The exchange, which already has options and futures on its closely-watched volatility index (VIX), expects revamped Cboe S&P 500 Variance Futures to begin trading on Sept. 23, subject to regulatory review. The contracts will allow traders to hedge against realized volatility - calculated from the trading range each day - in the S&P 500 index, Cboe said Monday in a statement. That differs from the existing VIX contracts that reflect expected swings in the future.
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Gamma jitters from defined outcome funds; Tumbling equity markets could flip dealersâEUR⢠exposure to gamma from long to short, leading to hedging losses
Faye Kilburn - Risk.net
An unlikely corner of the structured products market may be building up risky exposure for options dealers.
Yield enhancing options funds came under scrutiny earlier this year after economists blamed their soaring popularity for suppressing the Cboe Volatility Index, Vix.
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Investors Remember 'Stocks Can Go Down Too' in Return to Hedging; VIX futures swing after Biden drops out of presidential race; The index hit its highest level since April on Friday
David Marino - Bloomberg
Hedging is back as investors fret over concerns about everything from the US presidential election to second-quarter earnings, economic growth and interest rates. The Cboe Volatility Index, a gauge of options prices, surged the most in more than a year last week as stocks sank with growing calls for Joseph Biden to quit the presidential race. Now that he's done so and thrown US politics into uncharted territory, futures on the gauge have slipped after earlier climbing as much as 1.8% in Asian trading. October contracts, which measure swings around the vote, rose even more and were still up by 1:19 p.m. in Hong Kong.
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Biden Exit Puts Trump Trade in Doubt as Election Gets Re-Set; Dollar slips, Treasury yields edge lower in wake of decision; US clean energy stocks, banks have potential to move at open
Liz Capo McCormick and Natalia Kniazhevich - Bloomberg
Investors have been amassing wagers on Donald TrumpâEURâ¢s return to the White House for weeks, trimming holdings of long-term US bonds and buying Bitcoin, among other things. Now, theyâEURâ¢re considering whether Joe BidenâEURâ¢s exit from the race boosts the odds of a Democrat victory âEUR" and how much they must recalibrate their bets.
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BlackRock forecasts active ETF assets will hit $4tn by 2030; More than 40% of global ETFs launched in H1 were active, compared with about a quarter in 2021
Alf Wilkinson - Financial Times
BlackRock forecasts that assets in actively managed exchange traded funds will quadruple from $900bn to $4tn by 2030.
The projection from the worldâEURâ¢s largest asset manager points to the rising investor demand for active management amid heightened market volatility as well as the appeal of the ETF wrapper.
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| | | | | | Exchanges | | | Cboe Confirms Spot Ethereum ETFs Will Start Trading on July 23
Hope C - CoinMarketCap
The Chicago Board Options Exchange (Cboe) has confirmed that several spot Ethereum exchange-traded funds (ETFs) will commence trading on Tuesday, July 23. Notices posted on Cboe's website on Friday announced the listing of multiple spot Ethereum ETFs. The ETFs set to begin trading include the 21Shares Core Ethereum ETF (CETH), Fidelity Ethereum Fund (FETH), Franklin Ethereum ETF (EZET), Invesco Galaxy Ethereum ETF (QETH), and VanEck Ethereum ETF (ETHV).
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Cboe Announces Planned Launch of New Cboe S&P 500 Variance Futures
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), the world's leading derivatives and securities exchange network, today announced plans to launch a newly redesigned Cboe S&P 500 Variance Futures contract (Ticker: VA), which is expected to begin trading on September 23, 2024, subject to regulatory review. The Cboe S&P 500 Variance Futures contracts will settle based on a calculation1 of the annualized realized variance of the S&P 500 Index. The realized variance will be calculated once each day from a series of values of the S&P 500 Index beginning with the closing index value on the first day a VA futures contract is listed for trading and ending with the special opening quotation (SOQ) of the S&P 500 Index on the final settlement date of that contract.
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OCC Stories: Zephaniah Manning on His Empowered Growth
OCC
Zephaniah Manning joined OCC's Human Resources team in 2022. In his OCC Story, he shares how he felt empowered to grow and develop thanks to his manager and our Chief Human Resources Officer (CHRO).
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| | | | | | Regulation & Enforcement | | | FIA Releases Best Practices for Automated Trading Risk Controls and System Safeguards
FIA
FIA, a leader for over 14 years in the development of best practices for mitigating the risks of electronic trading, has released its latest paper - Best Practices for Automated Trading Risk Controls and System Safeguards. This paper consolidates our previous work and covers best practices in pre-trade risk management, exchange volatility control mechanisms, post-trade analysis and exchange-based conformance testing, among other areas. These practices are designed to help ensure that markets operate safely, regardless of the technology used. The tools developed through the collaboration of market participants and exchanges to manage the risks related to automated trading have proven highly effective in limiting market disruptions and protecting markets. "As we reviewed our previous work in connection with the production of this paper, we were pleased to find that, as trading technologies have evolved over time, the risk mitigation tools used by market participants and exchanges continue to keep our markets operating effectively. Although the paper builds on more than a decade of work in this area, the practices it outlines are well suited to both existing technologies and evolving ones, such as Artificial Intelligence," said Walt Lukken, President and CEO of FIA.
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| | | | | | Moves | | | Cboe poaches ETF listings director from LSE; Follows Stanley and Eslami departures from LSE
Lauren Gibbons - ETF Stream
Cboe has hired Hetal Patel as director of ETF listings after her departure from the London Stock Exchange (LSE) in May.
Patel will be responsible for pitching listing opportunities to asset managers, managing relationships with members of the ETF ecosystem and working with market participants to improve trading.
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| | | | | | Education | | | What is a gamma squeeze in options trading?
Rachel Christian - Business Insider
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money.
A gamma squeeze is a fascinating phenomenon in options trading, showcasing how derivative markets can make stock prices soar or plummet. They have been a key factor in the run-ups in retailer GameStop and chipmaker Nvidia, helping propel those stocks to massive gains. Gamma squeezes are complex and risky events, though not that common.
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