Sourcing Liquidity in Index Options - Cboe...Sourcing Liquidity in Index Options Henry Schwartz,...
Transcript of Sourcing Liquidity in Index Options - Cboe...Sourcing Liquidity in Index Options Henry Schwartz,...
![Page 1: Sourcing Liquidity in Index Options - Cboe...Sourcing Liquidity in Index Options Henry Schwartz, President, Trade Alert, LLC Kristin Boyd, Director, Credit Suisse William J. Ellington,](https://reader033.fdocuments.us/reader033/viewer/2022050521/5fa5118f703ee84fd16718dd/html5/thumbnails/1.jpg)
Sourcing Liquidity inIndex Options
Henry Schwartz, President, Trade Alert, LLC
Kristin Boyd, Director, Credit Suisse
William J. Ellington, Managing Partner, X-Change Financial Access LLC
Stacey Gilbert, Head of Derivatives Strategy, Susquehanna
Sander van Zelm, Head of Institutional Trading, Optiver
![Page 2: Sourcing Liquidity in Index Options - Cboe...Sourcing Liquidity in Index Options Henry Schwartz, President, Trade Alert, LLC Kristin Boyd, Director, Credit Suisse William J. Ellington,](https://reader033.fdocuments.us/reader033/viewer/2022050521/5fa5118f703ee84fd16718dd/html5/thumbnails/2.jpg)
Source: OCC, Trade Alert (2017 forecast)
![Page 3: Sourcing Liquidity in Index Options - Cboe...Sourcing Liquidity in Index Options Henry Schwartz, President, Trade Alert, LLC Kristin Boyd, Director, Credit Suisse William J. Ellington,](https://reader033.fdocuments.us/reader033/viewer/2022050521/5fa5118f703ee84fd16718dd/html5/thumbnails/3.jpg)
Source: Trade Alert (2017 forecast)
Modern Era
1.4B1.8B
2.0B 2.0B 2.1B 2.0B 2.0B 2.2B 2.1B 1.9B 1.9B
260M
290M243M 285M
338M323M 387M
422M 416M437M 467M0.6B
1.1B1.0B
1.2B
1.7B
1.4B1.4B
1.5B 1.5B 1.6B 1.5B
0.0B
0.5B
1.0B
1.5B
2.0B
2.5B
3.0B
3.5B
4.0B
4.5B
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017est
ETF
INDEX
EQUITY
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Index Options
Source: Trade Alert, Aug 2017
SPX51%
VIX44%
RUT3%
NDX1%
XSP1%
DJX0%
OEX0%XAU
0%
XDE0%MXEF
0%
Average Daily Option Volume
SPX51%
VIX45%
RUT2%
NDX0%
XSP1%
DJX1%
OEX0%
XAU0%XDE
0%
MXEF0%
Average Daily Open Interest
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Index Options
Source: Trade Alert, Aug 2017
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Qtr
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Qtr
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Qtr
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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Co
ntr
acts
Average Daily VolumeSPX and VIX
.SPX .VIX Linear (.SPX) Linear (.VIX)
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Listing Growth
Source: Trade Alert, 28 Feb 2017
3273
4396
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
January-09 January-10 January-11 January-12 January-13 January-14 January-15 January-16 January-17
Un
der
lyin
g Li
stin
gs
Co
ntr
acts
Lis
ted
EQUITY
INDEX
ETF
LISTINGS
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Source: Trade Alert
0%
10%
20%
30%
40%
50%
60%
January-10 January-11 January-12 January-13 January-14 January-15 January-16 January-17
% T
ota
l Mar
ket
Vo
lum
e
Nonstandard Expirations
%WKLY
%QTRLY
%MONTHEND
60 per. Mov. Avg. (%WKLY)
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Source: Trade Alert
0%
20%
40%
60%
80%
100%
120%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Option Volume by Expiry BucketAug 2017 YTD
PCT SPX-CUMUL MKT-CUMUL
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Source: Trade Alert
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Feb
Mar
Ap
r
May Jun
Jul
Au
g
Sep
Oct
No
v
Dec Jan
Feb
Mar
Ap
r
May Jun
Jul
Au
g
Sep
Oct
No
v
Dec Jan
Feb
Mar
Ap
r
May Jun
Jul
Au
g
Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3
2015 2016 2017
CBOE Extended Trading Hours Option Volume
.VIX
.SPXPM
.SPXOne Day Record11/9/2016 108,015
![Page 10: Sourcing Liquidity in Index Options - Cboe...Sourcing Liquidity in Index Options Henry Schwartz, President, Trade Alert, LLC Kristin Boyd, Director, Credit Suisse William J. Ellington,](https://reader033.fdocuments.us/reader033/viewer/2022050521/5fa5118f703ee84fd16718dd/html5/thumbnails/10.jpg)
Source: Trade Alert, Aug2017 YTD
0
50000
100000
150000
200000
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3 AM 4 AM 5 AM 6 AM 7 AM 8 AM 9 AM
CBOE ETH Volume by HourMarket Hours 0300-0915 (EST)
.SPX
.VIX
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626
138
-107
-200
0
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400
600
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13F Filers Reporting OptionsREPEAT NEW DEAD
Institutional Users
Source: SEC, Trade Alert
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Product Concentration
Source: Trade Alert, 2017
SPY, 16%
.SPX, 7%
.VIX, 4%
AAPL, 3%
IWM, 3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Average Daily Volume %
SPY
.SPX
.VIXAAPLIWMBAC
QQQ
VXX
XLF
FBEEM
AMDNVDA
GDXGLD
TSLA TWTR AMZN
MSFT UVXY TLT FCX RAD USO FXI
Top25
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Premium Concentration
Source: Trade Alert, 2017
.SPX, 45%
SPY, 8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
.SPX SP
Y
AA
PL
AM
ZN
.RU
T
IWM FB
.ND
X
TSLA
.VIX
NV
DA
Q
PCLN
GOO…
BA
C
GO
OG
VX
X
NFL
X
BA
BA
GLD G
S
UV
XY
AM
D
MSF
T
GIL
D C
AG
N
JPM
EEM
SVXY
GD
X
XLF X
TLT
CM
G
BM
Y
DIS
XOP
DIA
TWTR
WFC
BIIB
NU
GT
MU
QCO…
Average Daily $ Premium
.SPX, $1903.1M
SPY, $321.7M
AAPL, $129.9M
AMZN, $108.4M
.RUT, $88.5M
IWM, $67.9MFB, $66.9M
.NDX, $65.7M
TSLA, $65.3M.VIX, $59.0MQQQ, $37.1M
PCLN, $29.1M
GOOGL, $28.2M
BAC, $27.2M
GOOG, $25.4M
BABA, $18.0M
GLD, $17.6M
GS, $15.7M
Premium Leaders Top 80%
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As of Aug 2017, Source: Trade Alert
![Page 15: Sourcing Liquidity in Index Options - Cboe...Sourcing Liquidity in Index Options Henry Schwartz, President, Trade Alert, LLC Kristin Boyd, Director, Credit Suisse William J. Ellington,](https://reader033.fdocuments.us/reader033/viewer/2022050521/5fa5118f703ee84fd16718dd/html5/thumbnails/15.jpg)
As of Aug 2017, Source: Trade Alert
![Page 16: Sourcing Liquidity in Index Options - Cboe...Sourcing Liquidity in Index Options Henry Schwartz, President, Trade Alert, LLC Kristin Boyd, Director, Credit Suisse William J. Ellington,](https://reader033.fdocuments.us/reader033/viewer/2022050521/5fa5118f703ee84fd16718dd/html5/thumbnails/16.jpg)
Source: OCC, Trade Alert
0M
5M
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20M
25M
30M
35M
2010 2011 2012 2013 2014 2015 2016 2017(Forecast)
Annual FLEX Option Volume
ETF Index Stock Grand Total
![Page 17: Sourcing Liquidity in Index Options - Cboe...Sourcing Liquidity in Index Options Henry Schwartz, President, Trade Alert, LLC Kristin Boyd, Director, Credit Suisse William J. Ellington,](https://reader033.fdocuments.us/reader033/viewer/2022050521/5fa5118f703ee84fd16718dd/html5/thumbnails/17.jpg)
Source: Trade Alert
0
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Quote width and Realized SpreadTOP50 Single Stocks
avg(quotedspread) avg(effectivespread)
AAL, AAPL, ABX, AMD, AMZN, BABA, BAC, BBRY, BIDU, BMY, C, CHK, CMCSA, CSCO, DAL, DIS, F, FB, FCX, GE, GILD, GM, GOOG, GOOGL, GS, INTC, JD, JPM, LOW, MSFT, MU, NFLX, NKE, NVDA, P, PBR, PFE, QCOM, RAD, S, SNAP, T, TGT, TSLA, TWTR, VRX, WFC, WMT, X, XOM
![Page 18: Sourcing Liquidity in Index Options - Cboe...Sourcing Liquidity in Index Options Henry Schwartz, President, Trade Alert, LLC Kristin Boyd, Director, Credit Suisse William J. Ellington,](https://reader033.fdocuments.us/reader033/viewer/2022050521/5fa5118f703ee84fd16718dd/html5/thumbnails/18.jpg)
Source: Trade Alert
0%
5%
10%
15%
20%
25%
30%
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3
2010 2011 2012 2013 2014 2015 2016 2017
ATM
IV
Hal
fSp
read
SPX Realized Half-SpreadAvg Quoted HalfSpread
Avg Realized Spread
ATMIV
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Source: Trade Alert
0
5
10
15
20
25
30
35
$0.00
$0.01
$0.01
$0.02
$0.02
$0.03
$0.03
$0.04
$0.04
$0.05
$0.05
Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3
2010 2011 2012 2013 2014 2015 2016 2017
VIX
Clo
se
Hal
fSp
read
VIX Realized Half-SpreadAvg Quoted HalfSpread
Avg Realized Spread
VIX
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Source: Trade Alert
---- Nov 4, 2016
---- July 21, 2017
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Source: Trade Alert
---- Nov 4, 2016
---- July 21, 2017
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Panel DiscussionHenry Schwartz, Trade Alert, LLC
Kristin Boyd, Director, Credit Suisse
William J. Ellington, Managing Partner, X-Change Financial Access LLC
Stacey Gilbert, Head of Derivatives Strategy, Susquehanna
Sander van Zelm, Head of Institutional Trading, Optiver