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Recap of CBOE RMC Europe

Recap of CBOE RMC Europe

By CBOE Holdings

Three times a year CBOE hosts a variety of derivative and volatility market participants at a CBOE Risk Management Conference (RMC).  In the United States, the 32nd Annual RMC was held in California back in March.  This past month the 6th Annual RMC Europe occurred just outside of London with over 220 participants spending three days discussing equity market derivatives and all types of volatility markets.  Each year there are a few themes that seem to be hotter topics of conversation, usually as a reflection of the current market environment.  A few that stood out to me this year were; discussions of market timing, CBOE Sector Indexes, and continued low volatility. 
Market Timing – the word ‘timing’ is usually scarce at RMC, but not this year.  In side discussions, I got two general responses as to why.  One was with respect to the low volatility environment and being a bit more strategic when taking short positions in volatility.  The other was with respect to being more tactical when putting on a hedged position, possibly since many hedges have not been needed in 2017.


CBOE Sector Indexes – at each RMC there are small meetings involving market participants who focus on markets traded at CBOE.  Last year there was some discussion around how index options are preferable to options on ETFs for European traders.  In response to this CBOE announced plans to list options on S&P Select Sector Indexes upon regulatory approval.  www.cboe.com/sectors 


Low Volatility Environment – year to date the average VIX close is around 11.40.  The lowest annual average close for VIX on record is 12.39 in 1995.  In order for 2017 to not go down as the record lowest VIX, the fear index needs to average over 15.00 for the remainder of 2017.  Although VIX is low, realized volatility for the S&P 500 has been lower which means short volatility strategies have ruled the day.  Average daily volume in VIX futures is well above 2016’s numbers despite the low VIX.  One presenter actually said as long as the low volatility music is playing, he will keep harvesting volatility risk premiums. 


There is still a third RMC to come in 2017, December 5 – 6 in Hong Kong.  Last year RMC Asia was heavily attended and based on the trends for the US and European version the Asian RMC should see those numbers grow.  For more information on CBOE RMC Asia visit www.cboermcasia.com