Options for Managing Risk

Options for Managing Risk

Rohit Gupta and Hitendra Varsani

April 12, 2022

 

Options linked to MSCI indexes have helped some investors manage their global exposures and portfolio risk. While these options have been traded in the over-the-counter market and on global exchanges for years, recent trends have shown an increase in market liquidity for the exchange-traded version. In the chart below, we examine liquidity-related statistics for options linked to MSCI indexes and listed on several global and local exchanges. The top chart illustrates aggregated “Volume notional” (in USD), month-end “Open interest notional” (USD), month-end “Open interest” and average daily volume (“ADV”), along with their moving averages (“Month”: last 3 months and “Quarter”: last 4 quarters). At the bottom, the table illustrates top five contract exposures based on previous-month “ADV notional” (USD).

How to interact with this plot: Use the frequency drop-down menu at the bottom to select monthly or quarterly frequency. For the top chart, click the relevant radio button to select the required parameter and hover the mouse over the chart to see more details. The table at the bottom auto-populates based on previous month-end values.

 

 

 

Based on data from ICE Futures US, ICE Futures Europe, SGX, EUREX, HKEX, Cboe and Tadawul. Open Interest from EUREX shows a T-2 lag.


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