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The Long and Short of Futures Options: Interest Rates

Feb 13, 2013

In this episode, Mark is joined by Pete Barker, Executive Director of Interest Rate Products, and Dave Reif, Senior Director of Interest Rate Products at CME Group, as well we Jeff Lewandowski, CTA at Protean Trading.

What to Know: Catching up on the latest developments.

  • What volume and activity trends are happening in the interest rate complex?
  • Do mid-curve options continue to be the main driver of interest rate option volume?
  • Are short duration contracts still a big driver of volume for the interest rates complex?
  • Why do we see so many people buying premium in short duration interest rate futures options?
  • Why is the trend in the equity side of the fence so overwhelmingly swayed toward selling short-duration premium?
  • Why do so many people flock to mid-curve products right now vs. the rest of the yield curve?

What's New: A quick overview of the Fedwatch tool and what it offers. More information on the empirical duration tool. What is the liquidity analytics tool? Are there any interesting new developments in the interest rate space?

What to Watch: Are there more retail customers adopting interest rate products? If not, what steps can be made to generate more retail interest in these products? Financial advisors/asset managers are also a big target audience for options and futures these days. Are there any specific initiatives in the interest rate complex to target these users? Why are so many financial advisors are "on the sidelines" from a derivatives perspective?

What's on your Mind: Our experts answer listener mail.

  • Email from Tod Dunkins, Calgary - Most of my interest in interest rates products tends to lean towards the income side of the equation. I'm always looking for products that help me capture income though dividend yields, etc. I've seen a few products like the CBOE BXM that mimic SPX buy-writes. Has CME Group ever considered creating products in that vein to help customers generate income through options writing? While the underlying would probably be a financial index, their income and steady yield would make them very attractive to interest rate traders. I know I would be interested in that type of product. Thanks for the show. Looking forward to the next episode.
  • Tweet from (handle withheld) - Has CME Group considered making an ETF based on their futures (rates, ags, etc) to drive volume back to their exchange? Or is that left to third parties?