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TRADERS Q&A: Northern Trust’s Cherry Speaks on Options

Traders Magazine Online News, April 17, 2018

John D'Antona Jr.

While the bevy of financial market news focuses on cryptocurrencies and Presidential tweets targeting specific companies, there is one segment of this universe that is flying under the radar. And successfully.


Options volumes have been steadily rising of late as investors continue to use them as an alternative to higher-priced equity securities and in some cases, part of multi-legged and multi-asset strategies designed to both add alpha and act as hedging vehicles. Jon Cherry, Head of US Options at Northern Trust Capital Markets, took some time out of his schedule to discuss with Traders Magazine’s editor John D’Antona Jr. the state of the sector and the trends he sees. He believes in low volatility strategies – as rates rise, dividend yields go up, with options offering enhanced performance. Prior to Northern Trust he was the Head of Trading at TJM Investments.

Here is an edited version of the conversation:

Traders Magazine: What's the state of the options market now and what are the prevailing trends that you are seeing?

Jon Cherry:         For us, it’s pretty much business as usual. The reason why I say that is the type of activity that we see from both our asset owner clients and our asset manager clients is such that our clients don't tend to get spooked by what I call the headline type of trading. Now, that being said, with the increased level of volatility that we've had, there are often times that you might see more opportunistic trades come through.

TM:                      No one is spooked by this spike in volatility?

Cherry:                No. In some instances, I would say it's almost a welcome sign to go back to historically normal levels of VIX volatility.             

There have been some conversations about what happened in the early part of the first quarter with some of the securities products that didn't respond so well to the volatility and things like that. But, the thing that was most commonly talked about was that a lot of people in our industry, while we've been around for a long time, some newcomers haven't seen a market with increased interest rates, or sustained elevated levels of volatility.

TM:                      What types of options products are popular these days? Weeklies? Or are more traditional options products still en vogue

Cherry:                Yes, weekly options, specifically in broad-based indexes, are increasing in popularity. From our viewpoint, it's a welcome sign to be able to have more of the listed offerings available for your systematic and/or rules-based type strategies. However, most commonly we've seen, still, options overall volume is in the broad-based Index/ETF space with traditional 30-day to 60-day expiries.

TM:                      Are there any new products that are out there that I should be aware of? Should we be expecting a bitcoin option soon?

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