Benzinga teamed up with Cboe Global Markets Inc. to host an engaging webinar aimed at helping traders understand the utility of 0DTE options.
Cboe's Rob Hocking, SVP, Head of Product Innovation, walked traders through the potential opportunities and risks of short-dated options. Participants came away with a better understanding of the various strategies for using these fast-paced products.
Cboe Global Markets operates 26 markets globally, facilitating trading in options, futures, equities and FX. The company has long been an innovator in financial products.
Cboe's Rob Hocking, SVP, Head of Product Innovation, walked traders through the potential opportunities and risks of short-dated options. Participants came away with a better understanding of the various strategies for using these fast-paced products.
Cboe Global Markets operates 26 markets globally, facilitating trading in options, futures, equities and FX. The company has long been an innovator in financial products.
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NewsTranscript
00:00Welcome, Benzinga Nation.
00:05In today's world of trading options, we have a great guest lined up for you today in Rob
00:09Hawkins, who is a senior vice president and head of product innovations at SIBO Global
00:13Markets.
00:14Rob, welcome to the show.
00:15Awesome.
00:16Thanks for having me.
00:17Excited to be here.
00:18You know, I'm always excited to talk about options and there's a lot of things happening
00:20in this world.
00:21So let's kind of, for the folks that might not be familiar with it, give us a brief overview
00:25of what SIBO does.
00:26Sure.
00:27So SIBO is the world's go-to derivatives and exchange network.
00:31We provide trading solutions and products in multiple asset classes across North America,
00:37Europe, Asia Pacific, including equity, derivatives, FX, and digital assets.
00:44We're continually focused on delivering really cutting edge trading, clearing, investment
00:49solutions that drive value to our customers.
00:52And we do that through the lens of innovation with the goal of providing these solutions
00:56and products really anytime, any day to every customer to help them navigate, you know,
01:02any market environment that they might come into.
01:05Now you mentioned, you know, the clearing aspect of it, because SIBO has been an innovator
01:09in investment products.
01:11But what have been some of the most successful ones that you've seen and what did their introduction
01:16like kind of add to the market in terms of value to the traders and investors?
01:21Oh, it's a great question.
01:22And for this one, I kind of like to take almost a little trip down memory lane.
01:26You know, SIBO has a long history of bringing first to market when it comes to what are
01:31some of the most successful things, you know, things that pop to mind, obviously, first
01:35marketplace to list options, period 1973.
01:39It started at SIBO, the first to introduce options on broad based stock indices.
01:43We were the first to introduce leap options, flex options, weekly options.
01:49And then, of course, we introduced volatility as a trading tradable asset class with our
01:53VIX franchise.
01:54So when I think some of the most recent innovations, like you mentioned, that have had an outsized
01:58impact, I really think, you know, probably first and foremost, I think about the expansion
02:03of our existing product suite when we added Tuesday and Thursday options to SBX back in
02:08April of what it had been 2022.
02:11This really changed how the market could manage risk around particular events and introduce
02:17that really short dated optionality that the market is really gravitated towards, like
02:22just to give the audience some some stats, you know, SPX options trade around three million
02:28contracts a day.
02:29And of that, we've been ranging between 45 to 50 percent of that options that expire
02:35on the day on that same day.
02:37So think today options that expire today, people, you know, basically start a trade
02:42and expire trade on the same day.
02:44And that's had a massive, massive impact to the market.
02:47Yeah, let's just say my trading activity may or may not have gone up when you introduced
02:51Tuesday's and Thursday's options trading activity there.
02:54OK, well, we can't talk about innovation and not bring this topic up.
02:58You've got options that are planned to launch on October 14th on VIX futures.
03:03What are you looking forward to with this launch?
03:06That's right.
03:07Well, obviously, like the VIX complex as a whole, we're excited to continually keep expanding
03:11it.
03:12And so we've had we have a number of things in the last few years on the index front.
03:16So we introduced credit ball indices off the VIX methodology.
03:20We introduced the one day VIX, which caught a lot of headlines when we did that kind of
03:24centered on that short dated trading like we talked about.
03:27And then most recently, we introduced VIX TLT.
03:30That is a measure using the VIX measurement on Treasury Ball, kind of helping you compare
03:35equity to Treasury Ball markets.
03:38Now we're going into the tradable product and expanding that franchise more to like
03:42you said, options on VIX futures.
03:45These are neat.
03:46VIX introduces a completely new part of the risk curve for us in the VIX complex.
03:52Options the way they work on the security side, you can't run daily settlements.
03:57So we basically settle options through an auction process in SPX and that happens once
04:01a week on Wednesdays.
04:03But there's been demand for shorter dated, more regular expiries in VIX.
04:07And so by introducing an option that settles into a future, we can run daily settlements.
04:12And this will allow us to introduce effectively a daily option on VIX that settles each day
04:18into the underlying future.
04:19So it gives you more of that short dated access of the curve and just kind of a new risk to
04:24trade as part of that bigger VIX complex.
04:27Okay, so we talked about what's coming up on October 14.
04:30With so many things happening though in the options world, what would you say is the number
04:34one thing that someone should consider when trading options, like what should they understand
04:38pretty much?
04:39Well, here, let me ask, let me turn that around to you and ask you a quick question.
04:42Do you trade options currently?
04:44Oh, absolutely.
04:45A hundred percent.
04:46Yes.
04:47So when you were getting into that, did you have any fear?
04:49Were you nervous?
04:50Like what was that first step in that process?
04:52Yeah, I think, you know, as I took the shorter dated options and I saw the stock price maybe
04:58move 10 cents, but then my contracts moved by say a dollar, perhaps that was a bit of
05:02a learning curve.
05:03Then you have to learn about the Greeks and you have to kind of really understand what
05:07is under the hood of the vehicle that is options and what is impacting the price, whether it's
05:11theta, whether it's time, whether it's Delta, whether it's a movement in the stock.
05:14So it's a whole university of itself.
05:17Did I just answer your question for you?
05:19You did.
05:20You just nailed it.
05:21It's great.
05:22That's what I was hoping for.
05:23It's that, it's exactly that.
05:24It's that risk reward payouts.
05:26It's customers understanding the ins and outs of when you lose, like if you buy an option,
05:32you can only lose the premium you pay.
05:34If you're short an option, you have unlimited risk.
05:36It's going into these characteristics and really understanding the risk reward payouts
05:41that you have.
05:42I know when I first started getting into options, I had to chart everything.
05:46It was basically charting payoff diagrams.
05:48So you could visually see, okay, if the, if the underlying goes here, this is what I,
05:52you know, this is where my risk exists.
05:55And I think, you know, number one thing that people need to consider are those exact things
05:59is really understanding the nature of when the underlying market moves, how does your
06:03position adjust that derivative aspect.
06:07And then it's about, you know, getting comfortable with different sizes, different products,
06:12different risk exposures.
06:13We have a number of things you mentioned SPX, obviously we've been looking at and we've
06:18been working at building out that complex.
06:20So you have things like nanos that have a one multiplier, a very small product that
06:24you can effectively not risk a ton of capital, but get your introduction to options with.
06:29We have the XSP, which is the mini SPX, and that kind of tracks the same size as the spider
06:34ETF contract.
06:35And then we got obviously the big contract in SPX and that you're tracking, you know,
06:40obviously the bigger, more, a little bit more institutional product has a much bigger notional,
06:44but we keep trying to build out the product set so that in tandem with education, people
06:49can get more and more comfortable using options and then can get more and more comfortable
06:53kind of ramping up their use of options.
06:57You mentioned charting.
06:58I may or may not chart options sometimes.
07:00I may be that nerdy with it.
07:01And you know, there's also tax advantages, which again might be a conversation for another
07:05day as well.
07:06But let me wrap this conversation up about what are you most excited to see in the coming
07:10years in the market as well?
07:12Any trends that you're seeing that folks should keep an eye out for?
07:15Yeah.
07:16I mean, obviously options usage as a whole has been on the rise, volumes, massive increases
07:21over the last few years.
07:23And I think it's smart, right?
07:25Investors are learning how to define their outcome through the use of options.
07:29And so I'm excited to see that continue.
07:32Overwriting is becoming a very, very big, you know, I would say theme that we're seeing
07:36in the market, whether it's people going in and actually selling upside calls against
07:40their underlying long portfolio, or whether it's using ETFs that do that for you kind
07:46of in a managed solution.
07:48It's just the overall learning.
07:50And I'll say it again.
07:51It's that idea of defining your outcome.
07:54When options were introduced, I think a lot of people are nervous about them.
07:58They think risk, they think high volatility, what do I need to be afraid of?
08:02And actually the introduction of options was designed around the opposite.
08:06It was designed around removing volatility from your portfolio.
08:09It was designed around defining your outcome and giving you more certainty in your investment.
08:16And so I think more and more people are realizing that we're getting more and more eyes, more
08:20and more, you know, tweets, messages, what have you, everybody is starting to get a buzz
08:25around options usage.
08:27And I think that's really going to drive volumes in the future.
08:29And it's exciting to see.
08:30I mean, look, this was a great conversation.
08:33I hope to never sell a naked put because I like to get my beauty sleep in.
08:37But Rob, it's always good to catch up and talk options, man.
08:40I appreciate your time.
08:41Absolutely.
08:42Thanks for having me.
08:43You got it.
08:44That was Rob Hawkins, who is a senior vice president and head of product innovation at
08:48Cibo Global Markets.