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Equity Index Highlights – November 2018 edition

Release date: 14 Nov 2018 | Eurex Exchange

Equity Index Highlights – November 2018 edition

Market briefing

October saw 10-year US treasuries confirm the technical breakthrough of the psychological 3% yield barrier. This confirmation was a cue for a global decline in equity markets and a spike in realized volatility. Amongst past month's noise, there were some clear themes with volume hotspots across several products: iShares Physical Gold ETC options, Total Return Futures, Banks Sector derivatives, and DAX® family benchmark derivatives.

Listed just this May, our members embraced the iShares Physical Gold ETC Options, already breaching the one million contract threshold. Large blocks of put options traded in the March 2019 expiry drove the volume. The Total Return Futures saw notable record volumes and open interest building in the last week of October, indicating forward hedges being initiated. The bulk of trading was on the Dec 2020 bucket, likely due to the maturity extension of key strikes coming from auto-callable risks. Open interest has now reached EUR 23 billion, spread across the full term-structure out to Dec 2027. The Banks Sector has also been in sharp focus. Not in the least because of the Italian banks, which have drawn scrutiny over a deteriorating national budget and bank stress tests. This intense flow of news led to volumes increasing in Banks futures & options and Banks index dividend futures. Intesa Sanpaolo was the most active single stock dividend future as a projected 10% dividend yield looks to be a potential outlier. The regional elections in the German state of Hesse saw the centrist parties of the CDU and SPD down 10% compared to the previous election. It prompted Chancellor Merkel to confirm that she will be stepping down at the end of her term in 2021. Market response was most clearly visible in the volumes of DAX® and Mini-DAX® Futures which have been strong for several months now.

Market participants have had good reason to adopt a 'buy the dip' mentality over the past decade. However, some investors may now choose to implement a 'sell the bounce' approach as a few red flags have been raised. These flags include heavy losses in high momentum US tech stocks and a jump in implied volatility. This jump impacts minimum variance and volatility target strategies. Regardless of market moves, Eurex has proven itself more than capable over the past volatile month, providing its members deep liquid markets and price transparency in our benchmark derivative products.

Zubin Ramdarshan, Head of Equity & Index Product Design, Eurex


Facts & figures



News section

Eurex spoke with market participants from BlackRock and Morgan Stanley to understand the opportunities available for investors to trade IGLN options, how to incorporate them in trading strategies and what the future for IGLN options holds.

Asian trading hours extension: "This will improve the price discovery process and general stability of markets"

Harold de Boer, Transtrend, gives a commodity trading advisor's opinion on Eurex' plan to extend its trading hours into the Asian time zones.

Total Return Futures reached a daily record


An important milestone for our futurization strategy: on 30 October, we reached a new daily record for Total Return Futures with 52,500 traded contracts, which is equivalent to EUR 1.65 billion notional.


Watch the first part of our dividends video series. In this short video interview, Gabriel Messika, Delta One Trader at BNP Paribas, discusses how dividends evolved, its growth drivers, and how Eurex contributed to joint market innovation with market participants.


Events

Thank you for attending Derivatives Forum London

A big thank you to all Derivatives Forum London 2018 speakers and participants. Over 260 buy and sell side representatives attended this insightful afternoon. Discussions ranged from industry innovation to euro clearing and of course Brexit. Our asset class breakout sessions were forum highlights. In case you missed it, learn more on our equity index derivatives, futurization and our innovative product suite of Total Return Futures, iSTOXX and dividends.

 

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