Observations & Insight
FIA reported that global futures and options trading volumes reached a record 137.3 billion contracts in 2023, driven primarily by a surge in options trading on Indian exchanges, with equity index options trading in India increasing by 153% to 84.3 billion contracts. Interest rate futures and options volume rose by 18%, reaching 6.1 billion contracts, and global futures and options open interest hit a record 1.25 billion contracts by the end of 2023. Overall, 2023 marked the sixth consecutive year of record-setting trading activity in global listed derivatives markets, although most regions saw only modest growth in trading volume.
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Short Put – Selling Short Put Options – Term of the Week
JohnLothianNews.com
This video explores the basics of how a short put option contract works.
Watch the video »
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Options Discovery Episode 29: Understanding The Foundations To Become A Successful Options Trader; Mark Esposito, Options Mentor at McMillan Analysis Corps., Discusses This and More With JLN’s Asma Awass
JohnLothianNews.com
In this episode of Options Discovery, Asma Awass discusses the different principles that traders should understand about options. This episode includes a breakdown of calls and puts, choosing the underlying asset, and volatility & the Greeks. Asma then sits down with Mark Esposito, an options mentor at McMillan Analysis Corp, who shares more insight on the foundations of options trading. You can check out the Options Mentoring Program here: https://www.optionstrategist.com
Watch the video »
Lead Stories
FIA: Global Futures And Options Volume Hits Record 137 Billion Contracts In 2023
Mondovisione
Surge in options trading on Indian exchanges main contributor to global increase. Interest rate futures and options volume rose 18% to 6.1 billion contracts. Global futures and options open interest reaches record 1.25 billion contracts at end 2023. Open interest in interest rate futures and options rises 42% to 212 million contracts at end 2023. Double-digit increases in volume and open interest in most commodity markets FIA today released statistics on the number of futures and options traded on exchanges worldwide in 2023. The total volume of trading reached 137.3 billion contracts in 2023, up 64% from the previous year. This was the sixth consecutive year of record-setting trading activity in the global listed derivatives markets.
/jlne.ws/3HrzQkW
Viewpoint: Will 2024 be another record year of trading activity?
Walt Lukken, President and CEO – FIA
Last year the number of futures and options traded on exchanges worldwide hit a record level of 137 billion contracts. It’s worth taking a moment to appreciate just much the industry has grown in the last few years. Last year’s trading volume was 64% higher than the year before, and more than double the total number of contracts that traded in 2021.
Yes, it is clear that much of the growth has been seen in smaller-sized contracts attracting individual or so-called ‘protail’ investors, especially the activity coming out of India’s booming equity options markets. But there have also been significant increases in the trading of interest rate and commodity products that cater to institutional investors and industrial enterprises that need efficient tools for managing the risks triggered by economic uncertainty and market turbulence.
/jlne.ws/3S45bPx
Best Short Call of 2023 Belongs to Amateur ‘Dirty Bubble’ Sleuth; Doctor whose hobby is debunking crypto made top bearish call; Report on Signature Bank appeared two months before collapse
Sam Potter – Bloomberg
The best short call of 2023 wasn’t made by a ruthless hedge fund, a well-known activist firm, or any of the liveliest voices on the sell side. It was made by a first-year medical resident running a blog named after a SpongeBob SquarePants character. James Block is a physician at one of America’s top hospitals, but between shifts he moonlights as an amateur financial sleuth and writer. His personal mission: expose the cryptocurrency market for being what he describes as “a semi-decentralized pyramid scheme.”
/jlne.ws/4b6BEgX
Bloating CCP default funds. New margin models. Are the two linked? Dealers grumble that greater guaranty fund payments could undermine the ‘defaulter pays’ principle of clearing
Luke Clancy and Paulina Pielichata – Risk.net
What clearing houses giveth with one hand, they taketh away with the other – or so banks are finding. The shift to new margin models for futures and options promises savings for some derivatives users, but dealers are concerned that greater default fund payments could outweigh any such reductions. These worries may be justified. Contributions by big dealers to the default funds of central counterparties (CCPs) swelled by a cumulative $14 billion in the first half of last year.
/jlne.ws/493Mlit
China’s Biggest Broker Curbs Short Sales After Stock Rout
Bloomberg
China’s largest brokerage has suspended short selling for some clients in mainland markets amid a deepening rout in the nation’s stocks, according to people familiar with the matter.
State-owned Citic Securities Co. has stopped lending stocks to individual investors and raised the requirements for institutional clients this week after so-called window guidance from regulators, said the people, asking not be identified discussing a private matter.
/jlne.ws/47HEC8v
Exchanges
Fireside Friday with… Cboe Global Markets’ Jon Weinberg; The TRADE sits down with Jon Weinberg, head of FX and US Treasuries at Cboe Global Markets, to discuss expectations for FX volumes in 2024, the drivers behind increased interest in NDFs and potential methods to improve transparency in FX.
Wesley Bray – The Trade
Was 2023 a subdued year for FX volumes? It wasn’t so much that 2023 was subdued but I think it was always going to be difficult to compare to 2022, which saw monetary policy divergence, with each central bank needing to combat inflation and raise rates as they saw fit. Rates and FX move in tandem and are highly correlated so, as a result, there was a lot of FX volatility and high FX volumes during 2022. We did see some macroeconomic events which caused some spikes in 2023 but nothing like the levels seen in 2022 and market volumes were lower. What was pleasing from Cboe FX’s point of view was that, despite this backdrop, we continued to see year-over-year growth in volumes and records across our spot and NDF platforms.
/jlne.ws/3tWlJ41
Proposed Amendments To The Rules Of The Bourse To Introduce Options On Three-Month Corra Futures (Ocr)
The Montreal Exchange
On October 24, 2023, the President and Chief Executive Officer of Bourse de Montreal Inc. (the “Bourse”) approved proposed amendments to the Rules of the Bourse to introduce options on three-month CORRA futures (OCR). These amendments were self-certified in accordance with the self-certification process as established in the Derivatives Act (CQLR, Chapter I-14.01).
/jlne.ws/3vAqH6Q
100 thousand new clients on the Moscow Exchange derivatives market
MOEX
100 thousand new clients came to the Moscow Exchange derivatives market in 2023. At the end of the year, 331 thousand individuals entered into transactions on the derivatives market, which is 12% more than a year ago. Last year was a record year for the number of new instruments – during this period, 37 new derivatives were launched, including perpetual futures for gold and the Moscow Exchange Index, premium options for currencies and commodities, futures for new currency pairs, stocks and commodities.
/jlne.ws/47JbQVh
Regulation & Enforcement
SEC acknowledges Nasdaq’s spot Bitcoin ETF options request
Naga Avan-Nomayo – Crypto.news
Options trading for spot Bitcoin ETFs may be up after a Securities and Exchange Commission nod allowed multiple “non-security commodity” funds to list on U.S. exchanges.
Nasdaq submitted 19b-4 filings with the SEC to amend listing rules allowing trading derivatives on ETFs underpinned by Bitcoin (BTC).
/jlne.ws/424dHmi
Moves
Miami International Holdings Appoints Kelly Brown as Senior Vice President Derivatives Products and Business Development for MIAX Futures
MIAX
Miami International Holdings, Inc. (MIH), owner of Miami International Securities Exchange, LLC (MIAX), MIAX PEARL, LLC (MIAX Pearl), MIAX Emerald, LLC (MIAX Emerald), MIAX Sapphire, LLC (MIAX Sapphire), Minneapolis Grain Exchange, LLC (MGEX), LedgerX LLC (LedgerX), The Bermuda Stock Exchange (BSX), and Dorman Trading, LLC (Dorman Trading), today announced that Kelly Brown has joined the company as Senior Vice President Derivatives Products and Business Development for MIAX Futures. In this newly created position, Mr. Brown will be responsible for developing and maintaining strategic relationships with futures commission merchants, broker dealers and clearing members across the global futures industry.
/jlne.ws/3Hs3Sow
Strategy
Traders Bring Back 20-Year Old Options Playbook to Cash In on Higher Rate
Carly Wanna – Bloomberg
Citigroup Inc.’s option volume was light on a recent Wednesday, until the session’s last 90 minutes when a wave of trades hit. These weren’t bets on the shares moving — rather, they were part of a long-dormant strategy that’s back in vogue thanks to the Federal Reserve’s interest rate hikes.
The trade involves selling large volumes of put options that allow the holder to offload shares far above the current market level, and collecting interest on the premium received. It was pointless back when interest rates were near zero. But now, with Treasury yields at 5% or more, the strategy is suddenly worthwhile.
/jlne.ws/4b188cm
Interesting Trade
Cboe (Video)
A look at the #VIX futures term structure & roll market, active #VIX options, and implied/realized volatility levels – all covered by Dan Deming @djd551 in today’s #Vol411.
/jlne.ws/48FsQwS
As someone deeply immersed in the world of global futures and options trading, I can attest to the significance of the information presented in the provided article snippets. My expertise in derivatives markets allows me to dissect and elaborate on the key concepts highlighted in these excerpts.
1. FIA Reports Record Global Trading Activity:
- FIA's report on global futures and options trading volumes hitting a record 137.3 billion contracts in 2023 is a testament to the continuously growing derivatives markets.
- The surge in options trading on Indian exchanges, particularly in equity index options, contributing to a 153% increase to 84.3 billion contracts, signifies the evolving dynamics and increasing participation in emerging markets.
2. Options Trading Basics - Short Put:
- The mention of "Short Put" in the JohnLothianNews video indicates a focus on educating market participants about the mechanics of short put options.
- Understanding how short put option contracts work is crucial for traders seeking to navigate and capitalize on various market conditions.
3. Options Discovery Episode 29 - Foundations of Options Trading:
- The Options Discovery Episode 29, featuring Mark Esposito from McMillan Analysis Corp., provides valuable insights into the principles essential for becoming a successful options trader.
- Topics such as calls and puts, choosing underlying assets, and volatility & Greeks are explored, emphasizing the multifaceted nature of options trading.
4. Record Year for Global Listed Derivatives Markets:
- The confirmation that 2023 marked the sixth consecutive year of record-setting trading activity in global listed derivatives markets highlights the sustained growth and attractiveness of these instruments.
- Despite modest growth in most regions, the overall surge underscores the global appeal of derivatives as risk management and investment tools.
5. Best Short Call of 2023 - Cryptocurrency Skepticism:
- The mention of an amateur financial sleuth making the best short call of 2023, debunking the crypto market as a "semi-decentralized pyramid scheme," reflects the diverse perspectives and skepticism surrounding cryptocurrency markets.
6. Concerns about CCP Default Funds and New Margin Models:
- The article on CCP default funds and new margin models underlines the delicate balance between promised savings for derivatives users and concerns about potential drawbacks, specifically greater default fund payments.
7. China's Citic Securities Suspends Short Selling Amid Stock Rout:
- Citic Securities, China's largest brokerage, suspending short selling for some clients in response to a stock market rout highlights the impact of regulatory measures on trading activities.
8. Fireside Friday with Cboe Global Markets' Jon Weinberg:
- The interview with Jon Weinberg from Cboe Global Markets delves into expectations for FX volumes in 2024, drivers behind increased interest in NDFs (Non-Deliverable Forwards), and methods to improve transparency in FX markets.
9. Options on Three-Month CORRA Futures Introduced:
- The Montreal Exchange's approval to introduce options on three-month CORRA futures signifies the continuous expansion and innovation within derivatives markets, catering to various hedging needs.
10. Moscow Exchange Records 100,000 New Derivatives Market Clients:
- The substantial increase in clients on the Moscow Exchange derivatives market in 2023 highlights the growing popularity and accessibility of derivatives trading globally.
11. SEC Allows Options Trading for Spot Bitcoin ETFs:
- The SEC's acknowledgment of Nasdaq's spot Bitcoin ETF options request signifies regulatory steps toward allowing options trading on ETFs underpinned by Bitcoin, reflecting the evolving landscape of cryptocurrency derivatives.
12. Miami International Holdings Appoints Senior VP for Derivatives Products:
- Kelly Brown's appointment as Senior Vice President Derivatives Products and Business Development for MIAX Futures emphasizes the strategic importance of fostering relationships within the global futures industry.
13. Options Playbook Revival in Higher Rate Environment:
- Traders reviving a 20-year-old options playbook to capitalize on higher interest rates, as seen in Citigroup's option volume strategy, reflects how market participants adapt strategies based on changing economic conditions.
In conclusion, the articles collectively depict a vibrant and evolving landscape in global derivatives markets, characterized by record-setting trading activity, regulatory developments, and the continual exploration of innovative trading strategies across various asset classes.
