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 follows:
- Andy Lowenthal, EVP and Co-Head Markets Division, Cboe Global Markets, delivered welcome remarks and provided an update on developments at Cboe Global Markets. He noted that: “For three decades, Cboe RMC has delivered a premier financial industry conference for institutional users of equity derivatives and volatility products across the globe. We are excited to expand the reach of our global RMC series into Tel Aviv, a region where we are seeing a growing customer base and an increasing demand for education around these products and strategies.”
- David M. Blitzer, Managing Director and Chairman of the Index Committee, S&P Dow Jones Indices (“S&P DJI”) delivered the Keynote Speech, “The Economic Climate Heats Up.”
Points made by Mr. Blitzer included: (1) Central banks are shifting from stimulus to restraint, while fiscal and trade policies are driven by populist politics in the U.S. and parts of Europe, (2) The U.S. is enjoying faster growth but faces long-term risks, (3) Europe and England are approaching the Brexit deadline, (4) Japan must nurture its nascent recovery, and (4) China may decide how open its markets will be.
- Author Sheldon Natenberg delivered a presentation on “Options and Volatility Pricing and Trading.”
- Matt Moran, Head of Global Benchmark Indexes Advancement, Cboe Global Markets, delivered a presentation on “Options-Based Performance,” and design and performance of options-based strategy indexes. Links to white papers and information on more than 30 options-based benchmark indexes are at www.cboe.com/benchmarks.
- Samuel Vazquez, Ph.D., Senior Research Manager, Capital Fund Management (CFM), delivered a presentation on “Volatility Futures Structure and Trading.”
- Natasha Jhunjhunwala, Executive Director, Equity Derivatives Structuring, at Goldman Sachs in London, delivered a presentation on “Considerations for Constructing Short Volatility Strategies,” in which she discussed (1) Equity volatility risk premia strategies across regions, (2) Passive versus active approaches, and (3) Managing drawdowns in times of market stress.
- Oyetola Oyeleye, Quantitative Researcher, Fulcrum Asset Management, delivered a presentation on “Managing Multi-Asset Short Volatility Portfolios,” in which he discussed: (1) Optimal delta-hedging in short volatility strategies, (2) A look at theory and empirical study across asset classes, and (3) Buffering as an effective way to reduce costs.
- Mark Richardson, Portfolio Manager, Janus Henderson, delivered a presentation on “A Framework For Options-Based View Expression,” in which he discussed: (1) Options market implied probability distributions, (2) Investors view distributions, and (3) Combining the two for a resultant trading strategy.
- Emmanuel Naim, Managing Director, Head of Americas Equity Structuring at JP Morgan, delivered a presentation on “Managing Downside Equity Risk,” in which he discussed (1) Main approaches to hedging, (2) Tail risk hedging and why this matters for long-term investors, and (3) New developments and integration of momentum strategies within a hedging framework.
- A panel of experts discussed “The Future of Equity Derivative Markets” and how market dynamics have changed since February, and strategies for navigating volatility. The panel was moderated by Eric Frait, SVP, Options Advancement and Strategy, Cboe Global Markets, with three panelists:
- William J. Ellington, Managing Partner, X-Change Financial Access LLC
- Uri Geller, Co-Founder and CIO, Granite M.S.A. Ltd.
- Wilrik Sinia, Portfolio Manager, Mint Tower Capital Management
Points made during the panel discussion included:
- There has been a huge divergence between volatility in U.S. and in Europe;
- A panelist provided a comparison of the volatility spikes in February 2018 (extreme) and October 2018 (more orderly);
- In recent months we are seeing more cross-asset trading and more diversity in the instruments;
- S&P products often have dream liquidity, but some of the older indexes for other countries are fading away in terms of liquidity;
- Weeklys options can be very helpful and flexible when there is an upcoming event; short-term use of weekly options often is driven by events and announcements;
- The volatility regime is changing;
- Signals we look at include historical and implied volatilities, and premium levels;
- Possible inflation and the Italian budget situation are factors that are of great concern;
- Some customers discuss factors such as the trade situation and interest rates.
- A panel of experts discussed “Digital Assets and the Future of Finance” moderated by John Tornatore, Director, Global Client Services, Cboe Global Markets. The three panelists were:
- Xen Baynham-Herd, Head of Strategy & Markets, Blockchain
- Lucas Friss, Head of Business Development, London, Cumberland
- Ilan Sterk, Vice President Trading, Hexa Group/Orbs
Cboe Futures Exchange, LLC (CFE) launched trading in Cboe Bitcoin futures on December 10, 2017, under the ticker symbol XBT. www.cboe.com/XBT.
Discussion points included:
- The volatility of cryptocurrencies can be appealing to traders but off-putting to tech people;
- While bitcoin is perceived as being very volatile, during the last month equities had more volatility than bitcoin;
- There are considerations in deciding whether to invest in a crypto fund or to invest directly in spot crypto;
- A few firms have the capability to (efficiently) engage in cryptocurrency arbitrage among worldwide exchanges;
- There is some crypto market fragmentation, and the displayed spot crypto liquidity on screens might not be as good as it appears;
- Cboe Futures Exchange implemented a new fee schedule;
- If and when bitcoin volatility spikes, there is potential for higher volume in bitcoin futures;
- There are some barriers to more crypto growth – custody and regulatory; there are no widely accepted worldwide regulations (for non-exchange traded products);
- Millions of people own cryptocurrencies, which are a decentralized asset class, and there is potential for new investment by millions of consumers in the future.
CONCLUSION AND THANK YOU
The conference ended with a cocktail reception. Cboe was pleased to host this event, which allowed the user community in the region to meet and discuss their various outlooks and uses of the Cboe’s proprietary product line. Cboe appreciates the enthusiasm and participation of the community and looks forward to more educational events in the coming years.
Cboe especially thanks the conference sponsors: Israel Interactive Trading, X-FA and WEX.
More information about Cboe RMC Tel Aviv is available at www.cboermctelaviv.com, including the full agenda and speakers’ biographies. Videos from Cboe RMC Tel Aviv will be uploaded to the Cboe Video Hub at www.cboe.com/video in the next month.
To learn more about ways in which index options and volatility products can be used in portfolio management, please visit these links –