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.
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