The Long and Short of Futures Options: Futures Options Trends, Surprises and Volatility

10/27/16 • 67 min

Coming to you from the Futures Industry Conference in Chicago, Mark is joined by Nick Howard, founder of QuikStrike and Derek Samman, CME Group Senior Managing Director and Global Head of Commodities Options and Products.

They discuss:

The great year that CME has been having in 2016
This outsize growth was fueled by options
What trends are we seeing in futures options?
Are retail traders becoming more active in futures options?
The trend towards trading on microevents
The short-duration expiration options. Will there be daily expiration options?
Crude! Puts are still very expensive
Natural gas options business grew 40% year-over-year
Soybeans driven by volatility and volatility skew
72% of ag options are trading electronically
Managing options flow outside of seasonal patterns
Metals! It's been an interesting year.
Gold call bias...the rent is cheap
Don't forget the less sexy metals
What can we look forward to from CME in the next year?

They discuss:

The great year that CME has been having in 2016
This outsize growth was fueled by options
What trends are we seeing in futures options?
Are retail traders becoming more active in futures options?
The trend towards trading on microevents
The short-duration expiration options. Will there be daily expiration options?
Crude! Puts are still very expensive
Natural gas options business grew 40% year-over-year
Soybeans driven by volatility and volatility skew
72% of ag options are trading electronically
Managing options flow outside of seasonal patterns
Metals! It's been an interesting year.
Gold call bias...the rent is cheap
Don't forget the less sexy metals
What can we look forward to from CME in the next year?

Previous Episode

The Long and Short of Futures Options: Election Volatility and the Rise of Weeklies

On this episode, Mark is joined by Blu Putnam, Chief Economist, CME Group and Tim McCourt, Global Head of Equity Products, CME Group.

They discuss:

What are some potential drivers of market volatility?
Paper: Equity Volatility in 2016 and Beyond
Paper: Calm Before the Volatility Storm in Equities?
What are some potential drivers of volatility in the near future?
Earnings season
The election
The Fed?
What impact, if any, will these have on the broad equity markets?
Rise of the Weeklies
Why launch a Wednesday weekly? What additional value does this product bring to customers?

Listener questions: Discussing what you want to know

Question from Vegs - I am seeing lots of big fat options OI tied to the big ES 2200 strike. Does this mean big traders are betting that the S&P will rally past 2200? Can all of this open interest have the net effect of forcing the S&P to that strike at expiration? Do you view this open interest solely coming from pros or are retail reflected there as well?
Question from TCal - I am a somewhat new oil options trader primarily in WTI. Over the last few months I have noticed that the majority of volume trades in the front month. This is particularly true in active weeks such as during the OPEC meeting. I have had success buying weekly options going into these events. But in these same active periods I have not seen the surge of activity in the weekly WTI that I expected. This is surprising given the similar interest in weeklies in most other option products. Is this a function of the large institutional presence in WTI options? Perhaps there is a nuance of the product that I am missing that is not conducive to weeklies? I would appreciate your insight into this. Thank you for producing so much great free programming on your network.

Next Episode

Futures Options: Exploring Post-Election Volatility

In this episode, we feature Blu Putnam, Chief Economist, CME Group.

He discusses:

Looking back at pre- and post-election volatility environments: A Tale of Two Volatility Regimes.
Was the ferocity of the selloff in the overnight session surprising?
Were there any interesting quirks or trends in CME options and futures volume that day/night?
An overview for volatility going forward
Nine Challenges Facing Markets Post-U.S. Election

Listener Mail: Listener questions and comments

Options#QuestionOfTheWeek: Commodities are capturing a lot of attention and generating a lot of volatility. What's your option of choice?

$GLD / Comex Gold
$USO / $WTI
$TLT / ED / 10YR
EUR/USD, GPB/USD
Question from Alan McKay: I am starting my undergrad next year and I am thinking about majoring in economics with a concentration in derivatives. Any suggestions for programs?
Question from Invern3ss: I have a theory regarding why WTI Weekly options don’t trade as much as the monthlies. Could it be because the vast majority of customers are using the product to hedge existing long positions by purchasing puts. So a weekly would not be suited to their needs since it would just waste too much money through decay. Thanks for your great network. Please keep the shows coming. I’m a proud listener, newsletter subscriber, website reader and app user.