Latest news with #optionsmarket
Yahoo
3 days ago
- Business
- Yahoo
Quant Traders That Dominate US Options Market Move in on Europe
(Bloomberg) -- The option market makers that dominate US trading are taking a bigger share of volume in Europe. Billionaire Steve Cohen Wants NY to Expand Taxpayer-Backed Ferry Now With Colorful Blocks, Tirana's Pyramid Represents a Changing Albania Where the Wild Children's Museums Are The Economic Benefits of Paying Workers to Move NYC Congestion Toll Brings In $216 Million in First Four Months While the tariff-driven market turmoil in April boosted trading on both sides of the Atlantic, Europe remains far behind. Even with talks about the end of 'US Exceptionalism' and investment flows directed away from the country, Europe lacks the abundant retail demand that drives a robust, relatively transparent options market in the US. But despite the differences, in both places market makers are pushing in to service customers directly. More nimble, with more sophisticated quant models than traditional banks and comfortable hedging across markets, they already held 30% of the open interest in Euro Stoxx 50 Index listed options on Eurex in 2022, an Acuiti report found at the time. Their share is estimated to have grown further since then. 'Market makers have long been dominant players in the US options market, consistently making up the top three participants by volume,' said Josh Ward, an equity-derivatives salesman at Susquehanna International Group. 'This trend is now emerging in Europe.' While market makers have historically maintained a strong presence on screen, they're increasingly capturing share in off-screen volumes in Europe. Also known as principal trading firms, they're making up two of the top three participants in block trades on Eurex so far this year, Ward said. 'Principal trading firms now have very established relationships with the buy-side,' said Piebe Teeboom, secretary general of the European Principal Traders Association. 'Within the options space, the trend of buy-side firms seeking out PTFs on off-screen blocks is only likely to increase given how competitive those firms are on pricing.' It raises the question of how much the presence of quant firms can encourage more overall volume in Europe, especially from the smaller, non-institutional traders that have driven US growth. But they still face challenges in the region. A big one is the frequency of late cross trades that aren't initially visible to the wider market — where a placeholder is made at 6 p.m. UK time and the price is disclosed at 10 p.m. That reflects, at least in part, traders' concerns about information leaking out. The intensifying competition in Europe is a boon for buy-side clients, who despite stagnant volumes are able to trade big option blocks on index and single stocks. On any given day, several billion euros in notional value could be sourced on Euro Stoxx 50 options in a single ticket. 'The rise of dedicated market makers is a net positive for investors as it leads to more competitive pricing across asset classes, which our clients ultimately benefit from as end investors,' said Stefano Amato, senior fund manager at M&G Investments. 'It's also prompting banks to become more competitive and/or focus on certain segments where they have a particular strength, which again in aggregate contributes to bringing down the overall cost of trading for market participants.' While the European market has become increasingly competitive, some buy-side firms view the relationship with banks holistically: They're working with them across other asset classes, hence keeping a big portion of the equity-derivatives business with them. But daily options flow has always been highly commoditized and price sensitive, so even the most loyal clients may shift more orders to the market makers. Some market participants have noted that option auctions are at times so competitive that pricing becomes inverted, with some market makers willing to offer below the bid in order to win the business. 'We attribute the expanding footprint of market makers' direct client trading desks to their ability and willingness to consistently quote tighter spreads and larger sizes for their clients,' said Ward. 'Their conviction to do this is supported by significant resources, including advanced technology, balance sheet capital, specialist back-end infrastructure and larger, more experienced trading teams dedicated to their respective areas of market expertise.' The shift in options flow to firms like Optiver and Susquehanna is an extension of a gradual trend since the Great Financial Crisis of some banks focusing on more profitable businesses such as Quantitative Investment Strategies and light exotics. While they compete with market makers for buy-side clients, they still work together to offset risk. 'We continue to work closely with banks and see our role as complementary to the services they provide to their clients and to us,' said Edward Monrad, head of corporate strategy for EMEA at Optiver. 'There's still plenty of room for growth as well.' 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Bloomberg
3 days ago
- Business
- Bloomberg
Quant Traders That Dominate US Options Market Move in on Europe
The option market makers that dominate US trading are taking a bigger share of volume in Europe. While the tariff-driven market turmoil in April boosted trading on both sides of the Atlantic, Europe remains far behind. Even with talks about the end of 'US Exceptionalism' and investment flows directed away from the country, Europe lacks the abundant retail demand that drives a robust, relatively transparent options market in the US.
Yahoo
27-05-2025
- Business
- Yahoo
Hedge Funds Bet on Korean Won to Mirror Taiwan Dollar's Surge
(Bloomberg) -- Hedge funds are ramping up bets in the options market that the South Korean won will mirror the Taiwan dollar's recent rally against the greenback. NY Private School Pleads for Donors to Stay Open After Declaring Bankruptcy UAE's AI University Aims to Become Stanford of the Gulf NYC's War on Trash Gets a Glam Squad Pacific Coast Highway to Reopen Near Malibu After January Fires Dollar-won option trading volume spiked to this year's high last week, according to the Depository Trust & Clearing Corporation data, as speculation grew that Korea and the US discussed the won's direction in their currency talks. Barclays Bank Plc said there's been increased demand for put options from hedge funds. A surge in the Taiwanese dollar this month has reshaped market expectations for Asian currencies. Investors see the won as a likely candidate for comparable gains, as Korea's trade surplus with the US adds pressure on local authorities to tolerate a stronger currency. The US last year added Korea to its foreign-exchange monitoring list — which already included Taiwan. A key question 'most hedge funds have been asking is: which currency pair can have the same magnitude of move that was observed in' the Taiwan dollar, said Mukund Daga, head of foreign-exchange options for Asia at Barclays in Singapore. 'This has led to decent demand for dollar-won put options in digital and vanilla formats by fast-money names.' Vanilla options are standard contracts with no special features attached to them, while digital trades offer a fixed payout if the FX pair hits a preset level at expiration. Demand for dollar-won put options with notional sizes over $60 million outpaced call options on DTCC by a 3:2 ratio on Wednesday, underscoring the bias for bearish bets on the pair. The premium to hedge dollar-won downside over the next month compare to the upside, as measured by risk reversals, traded near a 21-year high last week. The dollar-won pair 'was already seeing active downside interest for digitals and put spreads since the big move in the Taiwan dollar a few weeks back,' said Saurabh Tandon, global head of foreign-exchange options at Standard Chartered Bank in Singapore. 'The recent FX related comments have spurred on interest in downside dollar-won trades.' The tariff talks between the US and its trading partners have raised speculation that President Donald Trump's administration is open to a weaker greenback. For many, the won is becoming a favored proxy for broader shifts in US-Asia trade dynamics and a key hedge against declining dollar strength. The won rallied last week as local media cited an unnamed government official as saying that the US believes a relatively weak local currency is a fundamental cause of Korea's trade surplus. The finance ministry has said that while FX talks with the US are ongoing, nothing has been decided yet. The Taiwan dollar's 7% surge this month has raised hedging costs for Taiwanese insurers, who are large holders of US-dollar assets. That's making the won a major proxy for hedging, according to a Bank of America note dated May 21. The 'market is showing insatiable appetite for owning optionality in the won,' said Ivan Stamenovic, head of Asia Pacific G-10 FX trading at Bank of America Corp. 'We are seeing major interest across the term structure indiscriminate of tenors. --With assistance from Jaehyun Eom and Betty Hou. Why Apple Still Hasn't Cracked AI Mark Zuckerberg Loves MAGA Now. Will MAGA Ever Love Him Back? How Coach Handbags Became a Gen Z Status Symbol Inside the First Stargate AI Data Center AI Is Helping Executives Tackle the Dreaded Post-Vacation Inbox ©2025 Bloomberg L.P.
Bloomberg
27-05-2025
- Business
- Bloomberg
Hedge Funds Bet on Korean Won to Mirror Taiwan Dollar's Surge
Hedge funds are ramping up bets in the options market that the South Korean won will mirror the Taiwan dollar's recent rally against the greenback. Dollar-won option trading volume spiked to this year's high last week, according to the Depository Trust & Clearing Corporation data, as speculation grew that Korea and the US discussed the won's direction in their currency talks. Barclays Bank Plc said there's been increased demand for put options from hedge funds.
Yahoo
23-05-2025
- Business
- Yahoo
Is the Options Market Predicting a Spike in BALL Stock?
Investors in Ball Corporation BALL need to pay close attention to the stock based on moves in the options market lately. That is because the June 20, 2025 $2.5 Call had some of the highest implied volatility of all equity options today. Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could also mean there is an event coming up soon that may cause a big rally or a huge sell-off. However, implied volatility is only one piece of the puzzle when putting together an options trading strategy. Clearly, options traders are pricing in a big move for BALL shares, but what is the fundamental picture for the company? Currently, BALL is a Zacks Rank #3 (Hold) in the Containers - Metal and Glass industry that ranks in the Top 14% of our Zacks Industry Rank. Over the last 60 days, three analysts have increased their earnings estimates for the current quarter, while two have dropped their estimates. The net effect has taken our Zacks Consensus Estimate for the current quarter from 85 cents per share to 87 cents in that period. Given the way analysts feel about BALL right now, this huge implied volatility could mean there's a trade developing. Oftentimes, options traders look for options with high levels of implied volatility to sell premium. This is a strategy many seasoned traders use because it captures decay. At expiration, the hope for these traders is that the underlying stock does not move as much as originally expected. Check out the simple yet high-powered approach that Zacks Executive VP Kevin Matras has used to close recent double and triple-digit winners. In addition to impressive profit potential, these trades can actually reduce your risk. Click to see the trades now >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ball Corporation (BALL) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
