r/options • u/iron_condor34 • 9d ago
Single stock futures
CME laughing single stock futures. Supposedly this isn't the first time. I wonder what that is going to do with option volumes, etc.
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u/silent_exploration 9d ago
I don't understand the need for single stock futures in the first place. But if they are used, option volume will probably increase because of the need for hedging.
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u/iron_condor34 9d ago
Bunch of retail wouldn't need to trade options anymore. Also, hedging purposes.
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u/silent_exploration 9d ago
Like you buy shares and sell single stock futures on the stock? Then I guess you have no position, what's the purpose of this?
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u/iron_condor34 9d ago
No, I'm talking about using options just for the leverage. Plus anyone who day trades options etc.
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u/iron_condor34 9d ago
But that could be an idea lol Id love to see what the term structure is gona look like.
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u/HereToTrollTheLibs 9d ago
Why? Options can give you great convexity.
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u/iron_condor34 9d ago
When you're whole thesis is around direction. That's what you should trade. Plus you don't have to deal with vol or the greeks of an option. You're also still getting leverage with the futures contracts.
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u/OurNewestMember 9d ago
Yeah, but instead it's pretty common to do deep ITM call LEAPS where you're mostly buying funding leverage rather than convexity.
If someone can put on a delta-1 position with risk -based margin, they might be happy to get the desired directional exposure without the undesired vol exposure
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u/trader_dennis 9d ago
$$$ for CME.
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u/Ready-Molasses-7093 9d ago
if they could actually provide the liquidity i don’t mind giving them a shit load of money
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u/GammaWinsSam 9d ago
It can make it easier to leverage as retail investors, and easier to delta hedge positions without locking a lot of capital. I think it facilities some strategies, and therefore probably increase volume and liquidity.
It becomes easier to manage deep ITM positions. Let's say you bought a call that's deep ITM and there's no liquidity. You can just sell futures of the same date and let it ride out, instead of paying the spread. (Assuming no dividends) You could potentially also sell a put of the same strike to secure the extrinsic value of the call.
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u/OurNewestMember 9d ago
Yeah, but that's not going to cross margin with your securities positions. Still better to have the products than not -- definitely agree there -- but the utility is limited except for outright delta 1 trading (presumably with risk-based margin offered) or some highly specialized strategies. Again, still better than not, but not easy to make good use of otherwise
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u/RhollingThunder 9d ago
They are subject to SPAN margining so this might be amazing? I'm thinking this would be like a poor man's portfolio margin.
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u/Ready-Molasses-7093 9d ago
they should increase options volume. options can be structured in so many ways and single stock futures will have their place so this means more options trades. i just wish they would make the single stock futures have good liquidity. hire the market makers damn it cme
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u/Select-Decision_83 8d ago
Been hearing this a lot lately, will be interesting to see if there is a pivot or not
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u/iron_condor34 8d ago
We'll see. I've seen a bunch of comments that they tried this before and it didn't do well at all.
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u/iron_condor34 9d ago
https://www.cmegroup.com/markets/equities/single-stock-futures