Cboe Blogs

Following a decline in the S&P 500® Index of 6.9% in October and a drop of 9.2% in December, more investors appear to be exploring income-producing strategies that have the potential for relatively strong risk-adjusted returns amid increased market volatility. To help investors with that process, Cboe offers 10 benchmark indexes designed to measure the hypothetical returns of strategies that use S&P 500 (SPX(SM)) options, with daily data histories beginning in mid-1986. HIGHER OPTIONS[...]

Since 1983, Cboe has offered stock index options. In 2018, several new all-time records for volume and open interest were reported as investors faced heightened volatility. Index options have the potential to generate more income for options sellers who receive options premiums, help manage exposure and protect a portfolio from damaging huge drawdowns. RECORD VOLUME AND OPEN INTEREST FOR CBOE’S S&P 500 OPTIONS In 2018, the average daily volume (ADV) for S&P 500® options (SPXTM and[...]

Stock market gyrations this December have been attributed to the dominance of systematic trading driven by algorithms. While electronic trading may cause dramatic price swings in the market, there’s a meaningful behavioral element as well. Investors and traders are faced with sudden potential losses in their equity positions and a need to assess risk tolerances going into 2019. The “January effect”? The “January effect” hypothesizes a price increase in securities during[...]

On December 20, Cboe’s daily Put-Call Ratio for its entire options volume rose to 1.82, reaching its highest level in more than 23 years. Analysts and investors often follow and cite put/call ratios in conjunction with attempts to gain insights on possible changes in investors’ bullish or bearish sentiments. Recent news stories in Barron’s and in Bloomberg have highlighted comments on the possible impact of high put/call ratios. DATES WITH HIGH AND LOW PUT/CALL RATIOS The table[...]

This week’s sell-off in the U.S. stock market contributed to making this December’s price performance one of the worse in many years.  The Russell 2000 Index (RUT), the benchmark for the U.S. small-cap performance, outperformed other U.S. equity indexes on the way up in early 2018 and has underperformed during the tail end of the year. The RUT is down more than 10 percent in the month of December. Several factors contributed to the index decline, including rising U.S. interest rates[...]

While many investors are concerned that benchmark indexes for major investment classes are down year-to date, it appears more investors are using S&P 500 options to manage risk and enhance income On December 18, open interest for Cboe’s S&P 500 (SPX and SPXW) options surpassed 20 million for the first time in its history of more than 35 years and hit a new all-time record high of 20,101,598 contracts. The Cboe S&P 500 95-10 Collar Index (CLLSM), an index that tracks the[...]

More than 140 financial professionals, including top traders, strategists and researchers attended the fourth Annual Cboe Risk Management Conference (RMC) Asia on December 3 and 4 in Hong Kong.  Topics related to the management of risk and return in investment portfolios were discussed by 12 speakers at RMC Asia, including Tim Edwards, Tim Weithers and Cboe Chairman and CEO Ed Tilly. Day One: Options/Volatility Fundamentals: Synthetic Option Strategies, Volatility Trading, and Futures and[...]

More than 150 financial professionals, including top traders, strategists and researchers attended the inaugural Cboe Risk Management Conference (RMC) in Tel Aviv, Israel on November 6. A variety of topics related to the management of risk and return in investment portfolios were discussed by 17 speakers at RMC Israel, including the three speakers pictured below: Sheldon Natenberg (left), Andy Lowenthal (center), and David Blitzer (right). A sampling of comments and topics covered by the 17 speakers[...]

Both volatility and trading activity increased in the S&P 500® index options market over the past month as investors evaluated proposed tariffs, trade negotiations, deficits, valuations, rising interest rates and the November 6 U.S. elections.   NEW MONTHLY VOLUME RECORD FOR S&P 500 OPTIONS In October 2018, S&P 500 options set a new all-time record with 41.4 million contracts traded, the highest trading volume in a single month for S&P 500 options.   VOLATILITY[...]

New records recently were set for volume and open interest for Cboe’s large-sized options on MSCI Emerging Markets Index (MXEF) - One-day volume on September 28 - 9,007 (including 3,203 puts and 5,804 calls) Average daily volume per month in September – 848 Open interest on September 28 – 18,774 MXEF OPTIONS AND MANAGING GLOBAL EQUITY EXPOSURE Cboe’s options on the MSCI Emerging Markets Index (MXEF) are for investors who wish to manage global equity exposure.[...]

A prescient Barron’s article appearing on Jan. 20,2018,  “Unseen Dangers in Small-Cap Stock Rally”  claimed that Small-caps “as a group, less profitable, more heavily in debt, and more exposed to the threat of rising interest rates than many investors may realize.” may offer a plausible explanation for the recent pullback in the U.S. Small-cap benchmark, Russell 2000 Index. September Struggles: After making 23 new record highs the U.S. Small-cap benchmark,[...]

On Monday, October 1, Cboe plans to further expand the Russell 2000 Index (RUT) options marketplace by adding their listing to its BZX Options exchange. Options on the RUT currently are listed on Cboe Global Markets’ Options Exchanges (Cboe and C2), where market participants enjoy the advantages of trading RUT on a hybrid basis between Cboe’s electronic and open outcry markets. The additional BZX listing will expand the trading choices and capabilities of customers and liquidity providers. BZX[...]

For the first time ever, on Tuesday, September 18, the Cboe SKEW Index (SKEW) closed above 150 for four straight trading days. A recent headline in Bloomberg stated a “Surge in Black-Swan Hedging Casts Shadow Over U.S. Stock Rally,” and noted the Cboe SKEW Index near all-time high underscores hedging demand. The story suggested, ”Elevated levels could also reflect lack of demand for calls” ….‘This has everything to do with trade risk in my view,’ said Dennis[...]

Gary Delany, Director of European Marketing and Education for The Options Industry Council (OIC), Friday presented the findings of a study from late 2017/early 2018 at the Cboe Risk Management Conference (RMC) Europe that looked at European use of U.S. options products, both multi-listed options, as well as proprietary options.  Key findings from the study include: European order flow accounts for an estimated 9% of trading, similar to 2013. Investments in U.S. equities are at record[...]

Winding up the 7th Annual Cboe European Risk Management Conference (RMC) on Friday, September 14, was a discussion of “Variance Utility Cases and Uses,” moderated by Michael Mollet, Head of Product Development at Cboe Global Markets. Joining Mollet was Adel Benharrats, Portfolio Manager at Argentiere Capital, Markos Petrocheilos, Senior Equity Derivatives Trader, BNP Paribas, and Chris Rodarte, Lead Portfolio Manager at Pine River Capital Management. The[...]