Cboe Blogs

Wednesday I conducted a webinar for Interactive Brokers discussing ratio spreads.  During the presentation I was asked about initiating 1 x 2 and what expirations and strike combinations would result in a credit.  Another stipulation was that the trade would buy one at-the-money option and sell two out-of-the-money options.  I wasn’t asked for a call or put spread, so I did both with each expiration.  With so many moving parts to that question I responded that I would investigate[...]

VIX threatened to close the week with a 9 handle, but managed to stay out of single digit territory.  Spot VIX was down over 16% and the standard September futures contract which goes off the board on the open Wednesday was down 16% as well.  There’s still a premium of 0.95 between spot and September VIX, but the gap that has persisted until recently is closing.  October, which will take over as the front month, remains at a premium of about 1.75.  Friday was fairly quiet,[...]

Small cap stocks had a great week last week with the Russell 2000 (RUT) rising 2.25% which the large cap focused Russell 1000 (RUI) was up about 1.6%.  For the year RUI still has just over a 6% lead on RUT. Small cap volatility as measured by the CBOE Russell 2000 Volatility Index (RVX) has spent most of 2017 at a historically high premium relative to large cap volatility, best depicted by VIX.  The chart below shows RVX basically crashing to the lowest levels seen in 2017 last week. [...]

Henry Schwartz, President of Trade Alert led a panel discussion on Sourcing Liquidity in Index Options today at RMC in Europe.  The panelists were: Kristin Boyd, Director, Credit Suisse William Ellington, Managing Partner, X-Change Financial Access LLC Stacey Gilbert, Head of Derivatives Strategy, Susquehanna Sander van Zelm, Head of Institutional Trading, Optiver Henry started things off giving an overview of the US options industry.  He noted that indexes (specifically[...]

Nick Cherney, Head of Exchange Traded Products at Janus Henderson and Pete Clarke, Global Head of Equity Derivatives Strategy at UBS split duties for a session titled Design and Trading of US and European Volatility Related ETPs at RMC today. Cherney kicked things off giving a history of VIX related ETPs and demonstrating the tremendous growth of these markets.  He also noted the VSTOXX futures market is growing, but that the size of that market is much smaller than the VIX futures market. [...]

The first session on the final day at RMC was a panel discussion titled, Panel on Long and Relative Value Volatility Trading and Tail Risk.  The panel was moderated by Paul Leech from JP Morgan and panelists, who represented all major regions of the globe, were David Dredge CIO Convex Strategies at City Financial Investment Company Oleg Lugovkin, Portfolio Manager, Argentiere Capital Chris Rodarte, Portfolio Manager, Pine River Capital Management Pierre de Saab, Partner and[...]

The Evolving Dynamics of VIX Futures was one of the most anticipated presentations today at RMC Europe and Alex Orus from Principalium Capital and Erkki Slide from Independent View met all expectations.  Slide noted the current low volatility environment and attributed a combination of the current equity market environment, low individual stock specific volatility, low correlations among S&P 500 constituents, and the trade-off between variance risk premium and tail risk as being factors[...]

In one of the final sessions today at CBOE RMC Europe Riddhi Prasad from Deutsche Bank and Arne Staal of Standard Life Investments delivered a talk titled Designer Dispersion: Identifying Optimized Risk Premium.   The pair discussed dispersion trades for extracting risk adjusted value which is separate from the volatility risk premium.  They also discussed what drives performance in different volatility regimes.  By ‘designer dispersion’ they are referring to using optimized[...]

Kokou Agbo-Bloua from Societe Generale and Natasha Sibley of Henderson Global Investors shared duties in a discussion titled How to Hedge Cross-Asset Portfolios with Risk Transfer this afternoon at CBOE RMC Europe.  They explored how the hedging needs from different investors such as pension funds, asset managers, and insurance companies are drivers of the supply and demand of market correlations.  These hedging needs may result in various trading opportunities.  Natasha showed how[...]

Philip Stafford from the Financial Times moderated a panel on Market Structure for Equity, Equity-Related Options and Volatility Products and FX today at RMC Europe.  The panelists were: Bryan Christian, SVP, Head of US Sales, Bats Global Markets, CBOE Holdings Eric Frait, Vice President, Business Analysis, CBOE/CFE, CBOE Holdings Mark Hemsley, CEO, Bats Europe, CBOE Holdings Paul Millward, Head of FX Product Strategy, CBOE Holdings A topic of interest in Europe is the pending[...]

On September 12 CBOE Holdings, Inc. announced plans to expand its suite of product offerings tied to S&P Dow Jones Indices with the planned launch of options on the 10 S&P Select Sector Indices that comprise the S&P 500 Index, a key benchmark of the U.S. equities market.   Options will be available on 10 sectors that comprise the S&P 500, pending regulatory approval.   The new options are expected to hold particular market appeal for European investors[...]

Abhinandan Deb from Bank of America Merrill Lynch led a discussion with Roni Israelov from AQR and Neale Jackson from 36 South Capital Advisors to kick off the afternoon session at RMC today.  This was a unique session in that the panelists compared and contrasted either harvesting risk premium or hedging risk with volatility which was appropriately titled Volatility: Harvest Premia or Hedge Risk? An opening statement from Roni was that we are here learning about not losing money or manage risk[...]

Maneesh Deshpande from Barclays discussed The Current Volatility Environment today at CBOE RMC Europe.  In a wide-ranging talk, he covered the current low volatility regime, how VIX related ETPs may be impacting the derivatives markets and addressed the common question, “How low can VIX go?”.  He started out addressing the question, “Why is VIX low?”.  He noted that realized volatility has been very low, but this is common during market rallies.  He also[...]

Chris Concannon, President and COO of CBOE Holdings offered a company update at CBOE’s Risk Management Conference today in London.  He started off noting that it has been just over a year since the CBOE-Bats deal was announced and six months since the close of the deal.  Significant progress has been made in the integration of the two companies.  Specific for European traders, Chris noted that liquidity and volume is strong for SPX options as well as VIX options and futures[...]

Jack Hansen, Chief Investment Officer from Parametric in Minneapolis lead a panel discussion titled Implementing Volatility Strategies within Institutional Portfolios to close out the first day of CBOE’s Risk Management Conference.  The panel consisted of Mohamed Ellouze, Senior Multi-Asset Strategist, Universities Superannuation Scheme (USS) Simon Guyard, Portfolio Manager, Air Canada John St. Hill, Deputy CIO, NEST The panel discussion jumped from topic to topic and time[...]