The Long & Short of Futures Options:
What to Watch: Craig LeVeille and Patricia Cauley join this episode and discuss how metals options volume has exploded. How does current volume compare to the volume a year ago? To what do you attribute the current explosion of interest in precious metals options, particularly gold and silver? Platinum and palladium -- why have these precious metals failed to capture the spotlight like gold and silver, despite the fact that they have been lighting up the tape as well? What sort the grow and interest is there in the Euro and other currency that track closely to it?
What's New: Mini-metals contracts -- what sort of contracts are being discussed for possible launch? Short duration contracts -- when can we expect the metals side to dive into these popular options? Any new metals contracts on the horizon? Weekly metals -- what's on your mind? Electronic execution is reaching close to 75%, and out pacing the growth from the pit, in the FX products, about 50-60% in the metals. Gold volatility - when and/or if might we expect a volatility contract? Any near-term plans for options on that contract? Discrepancies between realized and implied volatility have presented a number of opportunities emerging in several product classes.
What's On Your Mind: Liquidity in Metals Options
Hello LSFO Team:
The current environment has me very interested in metals options. However, most of the sources I track seem to focus on the ETF options (GLD, SLV, etc). Is this due to a difference in liquidity between the two products? Are the CME contracts less or more liquid than the ETF options? If the latter, then to what do you attribute the recent surge in popularity of SLV & GLD? Thanks and I'm looking forward to more episodes. Hopefully more frequently than once a month.
Posted by: Captain Options
Changes to Metals Contracts
The CME has made headlines several times over the last year when it dramatically increased the margin requirements for precious metals contracts. These increases resulted in dramatic sell-offs in the underlying metals. I would appreciate more insight into the CME's process for changing margin requirements. Is there a certain percentage increase in volume or percentage swing in the underlying price that triggers a margin adjustment? Does the CFTC inform you when a margin change in required? Also, many of these recent adjustments occurred during times of intense political scrutiny on derivatives speculation. Does outside pressure ever play a role in the CME's decision to adjust a contract? I'm sure I'm not the only retail costumer who's confused about this process, any insight you can provide would be greatly appreciated. Thanks, keep the episodes coming and I'm a big fan of the show.
Posted by: Alan
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