This Week in Futures Options

HOST: MARK LONGO, OPTIONS INSIDER MEDIA GROUP CO-HOST: SEAN SMITH, FTSE RUSSELL CME HOTSEAT GUEST: RICK ROSENTHAL - DIRECTOR OF BUSINESS DEVELOPMENT, FTSE RUSSELL INDICES - Cboe EQUITIES VIX  21.60 - UP 4 FROM LAST SHOW  VVIX: 113 -  UP 13 FROM LAST SHOW RVX: 24.25 - UP OVER 3.5 PTS FROM LAST WEEK VIX/RVX SPREAD - 2.65 - TIGHTER BY .35 POINT FROM LAST WEEK EARNINGS SEASON DRIVING MORE VOLUME IN MICRO EMINI FUTURES WHAT WERE THE MOVERS AND SHAKERS THIS WEEK? CRUDE OIL  OIL FALLS AGAIN TODAY AFTER TAKING A DRUBBING YESTERDAY AGS  CORN ANNIHILATED THIS WEEK FUTURES OPTIONS FEEDBACK  QUESTION FROM DORN2: Any updates on premium harvesting strats in the russell 2000 right now? - Is put selling still the way to go? QUESTION FROM ITMTIM: Has RVX ever dipped below VIX? Thx for such a fun show. Especially enjoyed the recent #hoglove.  QUESTION FROM PRIME3: Are there any plans to bring back RVX? Seems like a great time to have a product on russell 2000 volatility? QUESTION FROM NELLY:  Does the big recon have any impact on russell 2000 volatility?

HOST: MARK LONGO, THE OPTIONS INSIDER MEDIA GROUP CRUDE OIL Down 10% on the week coming into Thursday.  That followed a session in which the futures closed at $51.09 a barrel, the lowest level since Jan. 14. Futures fell as much as 5.8% Wednesday to seven-month lows after American crude stockpiles posted a surprise increase. The loss sent the resource tumbling into bear market territory. Having extra supply dilutes prices, while fears of a global recession added to worries that demand may slow.   EIA Lowers World Oil Demand Forecast Again Oil Regains Ground as Saudis Discuss Crude-Market Intervention METALS - GOLD Good week - Up 5.21% coming into Thursday. Gold's ride hinges on rates. For gold prices to head for $1,600 or higher, it will take a few more rate cuts from the Fed. Global tensions still matter for gold, but with the trade war in play, global tensions are now correlated with economic expectations and, thus, rates. METALS - SILVER Silver is having another rock'em sock'em week. Silver prices book largest daily rise in 3 years on Wednesday.  EQUITIES VIX  17.65 - UNCHANGED FROM LAST SHOW  VVIX: 100 - DOWN 6 FROM LAST SHOW RVX: 20.6 - UP 1 POINT FROM LAST WEEK  VIX/RVX SPREAD - 3 - WIDER BY 1 POINT FROM LAST WEEK  Earnings season driving more volume in micro e-mini futures. Micro E-mini Equity futures traded 5 consecutive days over 1M contracts, reaching a record high of 1.4M contracts on August 8. Liquidity continues to build as market participants turn to Micro E-Mini futures for greater precision and flexibility in managing risk. Notable options trading in Russell indexes. FUTURES OPTIONS FEEDBACK  QUESTION FROM STI6RY: Big move in iron ore this week off the trade war. Much options action out there? QUESTION FROM JACK: What about a weekly skew report on twifo? Biggest changers from week to week? QUESTION FROM NMEDIA: Much on with beans this week QUESTION FROM LILBIGGS: What’s your most memorable thing you’ve learned from doing this show? QUESTION FROM ELLES: Any more firmness to the wti skew this week?

HOST: MARK LONGO, THE OPTIONS INSIDER MEDIA GROUP CO-HOST: SEAN SMITH, FTSE RUSSELL EQUITIES VIX  17.65 (13.90) - UP NEARLY 4.5 FROM LAST SHOW -  HIT A HIGH OF 15.44 EARLIER THIS WEEK VVIX: 106 (91.5) -  UP 21 FROM LAST SHOW RVX: 19.65 (17.15) - 15.80 -  UP 3.85  VIX/RVX SPREAD - 2 (3.25) - TIGHTER BY .75 (wider by half a point from last week) Earnings season driving more volume in micro e-mini futures. Micro E-mini Equity futures traded a record high of 919.6K contracts ($13.5B notional) on July 31 as market participants looked to efficiently manage risk amid the FOMC rate cut announcement. Russell US Equity Indices Reconstitution Results The Reconstitution event itself culminated in one of the highest trading volume days in US equity shares in the last year.  The Nasdaq Closing Cross, for instance, witnessed a record 1.279 billion shares, worth $42.59 billion, executed within 1.14 seconds2. Russell 3000® market capitalization hit an all-time high of $31.7 trillion on Reconstitution day, up 3% from a year earlier. Large caps led the charge.  The Russell 1000® gained 6.1% from last year’s rebalance through May 10, during which time the Russell 2000® posted a 5.5% decline.  At Reconstitution, Russell 1000® market cap was $29.3 trillion versus $28.2 trillion a year earlier. The technology sector emerged as the main driver of these gains, rallying nearly 40% since last year, abetted by big contributions from the consumer staples and healthcare sectors. The largest five companies in the Russell 3000® universe stood unchanged from 2018’s Reconstitution, but their rank order is rearranged.   Visa, at ninth place with $351.2 billion market cap, is the only new Top 10 entrant in this year’s Reconstitution, superseding Bank of America. Why Reconstitution matters METALS - SILVER Silver options continue to grow in volume. July has seen two of the top ten all-time highest trading days, including over 33K contracts traded on July 19.  FUTURES OPTIONS FEEDBACK  QUESTION FROM DORN2: Any updates on premium harvesting strats in the russell 2000 right now? QUESTION FROM NLENT: Why aren’t there options on the Russell 3000? COMMENT FROM FENS: I’m with you guys that join market functionality is really kind of scary. What happened to price discovery? QUESTION FROM JACK TRENT: Any interesting options action in hogs with the big down move this week? QUESTION FROM CLAMAGNE: Thank you for talking futures options every week. I wish more people followed your lead. I have a question about the volatility skew of crude oil. I heard your recent episodes where you mentioned there wasn’t much interest in an upside movement. Why do you think wti call skew has remained relatively week despite the big move down in crude oil futures?

TWIFO 161: Crude Skew and other Mysteries HOST: MARK LONGO, OPTIONS INSIDER MEDIA GROUP CO-HOST: NICK HOWARD, BANTIX TECHNOLOGIES CME HOTSEAT GUEST: ADAM WEBB, Founder of Macrohedged  CRUDE OIL Oil ends lower as support from storm-fueled, 11 million-barrel drop in U.S. crude supplies disappears Oil futures settled lower on Wednesday, as support from a storm-induced, 11 million-barrel drop in U.S. crude supplies wore off and traders turned their attention back to concerns about weaker energy demand. U.S. crude inventories dropped by 10.8 million barrels for the week ended July 19, according to data from Energy Information Administration Wednesday, and production also edged lower, with analysts citing temporary disruptions caused by a Gulf of Mexico storm earlier this month.   METALS GOLD Gold prices have lost their good gains seen earlier in the session and in overnight trade, following some stronger-than-expected U.S. economic reports. Reasons Gold trade  Skew was over done  Could get size on  Limited risk  Didn’t want to play a full RR as there was silly blow out risk to 1500 So we looked at just the PSkew    EQUITIES   VIX  13 - DOWN 1.25 FROM LAST SHOW - THREATENED THE 12 HANDLE RECENTLY VVIX: 87.5 -  UP 3 FROM LAST SHOW RVX: 15.80 -  DOWN .6 PTS    VIX/RVX SPREAD - 2.8 - WIDER BY NEARLY A POINT FROM LAST WEEK EARNINGS SEASON DRIVING MORE VOLUME IN MICRO EMINI FUTURES   FUTURES OPTIONS FEEDBACK  QUESTION FROM SHUTDL: Nick still scalping his gold gamma? QUESTION FROM crypto messi: Is WTI SKEW usefull for directional trading? COMMENT FROM @trader1906 - It won't give you buy sell signals, I have modeled some skew bends that let you know moves are over done similar to the gold one I published but no holy grail. QUESTION FROM AZERAFEL: What is the best commodity market for options traders right now. Best mix of volume, volatility and liquidity? When is Nick coming back on the show? QUESTION FROM DAZZNE: Can you explain how the fedwatch tool actually works?    

TWIFO 160: All The Research You Could Ever Need HOST: MARK LONGO, OPTIONS INSIDER MEDIA GROUP CME HOTSEAT GUEST: ERIK NORLAND - EXECUTIVE DIRECTOR AND SENIOR ECONOMIST, CME GROUP FX Brexit: Pound Set For Volatile Fall after Calm Summer? Options traders see a calm summer but volatile fall for GBPUSD. Implied volatility is far below 2016 levels. Options skewness is negative, especially for this fall, but not exceptionally so. A great deal of bad news has been priced into the pound. SONIA futures have abandoned hopes for the BoE rate hike, now suggest a cut is more likely. If U.S. Dollar Weakens, Who Benefits? The U.S. dollar could weaken because of bigger deficits, lower rates and slower growth. British pound may be undervalued because of Brexit and susceptible to a long-term rally. It may be hard for central banks to further devalue Euro, Swiss franc and Yen. Among emerging market currencies, the low-debt, not-commodity-dependent Indian rupee may be a winner. The Renminbi might follow USD downward. Iron ore and coal cast a dark cloud over the future of the Australian dollar. CRUDE OIL Oil: Three Signs of Prices Hitting Bottom - 6/19/19 Oil prices have fallen out of bed again, with WTI crude oil tumbling 24% between April 23 and June 5. Refined products experienced similar declines, with gasoline and ultra-low sulfur diesel off 21% and 18%, respectively, over the same period. Not even attacks on shipping through the Strait of Hormuz appear to be enough to spark a sustained rally in either crude oil or refined markets. In April, when oil prices hit their high for the year, three factors gave warning signals that a decline was becoming more likely: Soybean oil prices, often a leading indicator of crude, had been falling for months (Figure 1). Out-of-the-money (OTM) crude oil options skewness became less negative than usual. OTM options on refined products had achieved extreme positive skewness. Oil: Are Options Skews Reliable Price Indicators? 21 May 2019 By Erik Norland Topics: Energy Off The Charts! examines the pertinent economic issues of the day, providing a deeper dive into complex topics and framing the issues in a way that can lead to a better understanding of the financial and commodities markets. EQUITIES RALLY TAKING A BIT OF A BREATHER TODAY VIX 14.25 - UP 1.5 FROM LAST SHOW VVIX: 86.5 - UNCHD FROM LAST SHOW RVX: 16.40 - UP .4 PTS VIX/RVX SPREAD - 2.15 - TIGHTER BY MORE THAN A POINT FROM LAST WEEK Portfolios and Investing: If/When “Winter” is Coming? The Fed may have overtightened monetary policy. The economic cycle may be gradually turning towards a wintry downturn. In past “winters,” equities have usually underperformed. Short-term bonds could soar because of the Fed’s policies. If the Fed doesn’t ease policy soon, brace for a surge in volatility. Forces That Drive Equity Select Sectors   GOLD Gold: Impact from U.S. and Chinese Policies Gold has earned broadly similar returns for Chinese and U.S. investors since 2000. The divergence in returns could grow as US and Chinese monetary policy part ways. Growing Chinese debt and a rising U.S. budget deficit could be globally bullish for gold. Fed rate cuts, if they happen, might also be bullish for gold. If the Fed stands firm and does not cut rates, gold prices might suffer. SOYBEANS China, Brazil and the Soybean Crush Chinese growth exerts a strong, positive correlation to soy oil. Chinese growth has a weaker and even inverse relationship with soy meal prices. Soy oil is typically about 2-2.5x more expensive than soy meal per pound. Soy oil has a stronger influence on planting decisions than less valuable soy meal. Soy oil moves in lockstep with the Brazilian real. Soy meal has a much weaker relationship with Brazilian growth.  

TWIFO 159: Pop-Tart Arbitrage And The Mysteries of the Options Liquidity Matrix. Russell Rhoads, Director of Derivatives Research at Tabb Group,  joins us to break down the latest findings from his Options Liquidity Matrix. Mark and Russell also discuss: - Is pop tart arbitrage the new frontier of trading? - Why is WTI call skew so weak? - What is going on with Gold volatility? - How does the explosion of micro emini futures volume impact the broader equity market? - What the heck is going on in the crypto markets? - And much more... Futures Options Feedback QUESTION FROM ANTHONY: Are we in a new volatility regime for gold? QUESTION FROM CLDD: How do I read this Fedwatch tool? QUESTION FROM 787WEST: I like the movers and shakers but you only do them for futures. Is there a futures options movers and shakers report as well?

Topics this week include: Equities Crud Oil/WTI Ags/Soybeans Metals/Gold     FUTURES OPTIONS FEEDBACK Question from Dazzne - Can you explain how the FedWatch tool actually works? Question from ELE3S - What does Sean think of the new micro futures Russell products? Are there more planned in the future? When does he expect options to be listed? Question from Omar - Does recent BTC spike make CME more likely to list additional crypto futures like Eth? Question from Adam Sam - Hello, I have a question about best way of hedging for day traders? I want to short oil ( or anything for that matter) what would be best way for hedging using options? I short oil future but I want to protect the upside. Would you buy ITM call? Write OTM put? Considering that I am day trading would you recommend hedging using shortest expiration or go further out in the month?

Topics this week include: Equities Russell/E-mini Crude Oil/WTI Metals/Gold     FUTURES OPTIONS FEEDBACK #QuestionoftheWeek: Let's play a guessing game. Which of the following names has the highest 30-day REALIZED volatility? No cheating. What does your gut tell you? $TSLA #BITCOIN #CRUDEOIL #NASDAQ $QQQ #WTI $TSLA #BITCOIN #WTI #CRUDE OIL $QQQ

Topics this week include: Equities Metals/Gold Crude Oil Ags/Corn     FUTURES OPTIONS FEEDBACK Question from SHUTDL - Nick still scalping his gold gamma? Question from Tom D. - What is the biggest stumbling block for an equity option guy looking to dip his toes into the massive futures options pool? I’ll probably start with E-mini options. Question from Trilo47W - I have to admit that your show is luring me to the “dark side” of futures options. I’m thinking about diving into corn. Good choice? Question from Elle SW - What is the date for the Russell 2000 reconstitution to take effect? Question from AllenTown - If you had to bet on the next big crypto derivatives what would it be?

Topics this week include: Crude Oil/WTI Rates Equities Metals/Gold       FUTURES OPTIONS FEEDBACK Comment from Optionsgame - You don’t need to talk about gold anymore. There is no Vol. Question from Animele - OIV is back in the mid 40s. Do you feel crude vol is somewhat unheralded these days as a tradeable vehicle compared to equity vol? Maybe it’s time for a crude vol tradeable product like a VXX to get people into this space?