Equity Insights | Q3 2020

Q3 market insights: Equity market movement continues

The equity market reached all-time highs in August before trading lower again in September, but Q3 still posted the best quarterly returns in the last 20 years. With the ongoing global nature of Covid-19 playing out against a backdrop of broader geopolitical events, the market is expected to continue moving in unpredictable ways.


Recapping the Q3 equity roll

The Sep/Dec roll moved higher sequentially from -33bps and +6bps in the last two quarters to +23bps, following the market rally going into the roll period. The elevated level exceeded Q3 2019 (+13bps), matching Q3 2018 (+24bps). While the running 4-quarter moving average is still subdued (+9bps), the implied financing going into year-end bears watching after the election.

Source: CME Group


Micro E-mini futures and options trading highlights

Volume for the recently-launched Micro E-mini S&P 500 and Nasdaq-100 options is gaining momentum. Average daily volume (ADV) surpassed 7.8K in the first month of trading, reaching a high of 23K contracts on September 21, and open interest reached a peak of 55.9K contracts on September 24.

Trading activity in the underlying Micro E-mini futures continues to be robust. Micro E-mini S&P 500 and Micro E-mini Nasdaq-100 futures daily volume reached a record of 2.04M on September 8 and 1.88M on September 3, respectively. Over 447M contracts have traded since launch and Q3 daily volume averaged 1.96M contracts across all four indices. 

Explore Micro E-mini options


Nasdaq-100 Volatility Index (VOLQ) futures are here

Recently launched on October 5, the Nasdaq-100 Volatility Index (VOLQ) futures contract provides a fresh new way to hedge market uncertainty. These contracts are based on at-the-money options with 30 days until expiration.

Learn more about VOLQ futures


Coming Q4: NQH2O futures

To help market participants manage price risk associated with the largest water market in the US, CME Group plans to launch the Nasdaq Veles California Water Index (NQH2O) futures. The contract is a first-of-its-kind regulated risk management tool to manage water supply and demand risk.

Find out more


AIR Total Return futures gain traction

CME Group launched the Adjusted Interest Rate (AIR) S&P 500 Total Return futures on September 21. Liquidity is building with 6-7 basis points wide and markets through December 27, 2020.

Source: CME Group


Strong customer interest in E-mini S&P 500 ESG futures

Over 88K contracts ($11.9B notional) have traded since their launch in November 2019. Open interest averaged $587.6M throughout Q3 with liquidity at the top of the order book remaining tight at just 2 bps wide in US hours. More recently, SPDJI concluded that companies with over 5% of revenue derived from thermal coal will be excluded, and those changes were implemented on September 21, 2020. Read more about the recent rebalance here.

Source: CME Group


Q3 volume and open interest

Equity Index futures:

  • Volume: 4.78M ADV
  • Open interest: 4.6M contracts per day

Equity Index options on futures:

  • Volume: 626K ADV
  • Open interest: 3.6M contracts

Futures

2020 ADV

ES

2.1M

NQ

599K

YM

252K

RTY

211K

NIY & NKD

58K

BTC

8K


Equity price limits update

Effective October 12: Overnight limits will expand from +/- 5% price limit to +/- 7% limit with a +/-3.5% dynamic circuit breaker.

Get the details


Read: Get a breath of AIR

Get to know Adjusted Interest Rate (AIR) Total Return futures, including a detailed explanation of contract valuation, specifications, and use cases.

Read the whitepaper


Webinar: Navigating Volatility

Watch our recent webinar featuring CME Group and Nasdaq experts to learn more about the newly launched Nasdaq-100 Volatility Index (VOLQ) futures.

Watch the replay


Options update

  • Bitcoin options set records: OI continued to increase during Q3 with an average OI of 3.7K, an increase of 11% over Q2. Institutional interest is also continuing to increase with large open interest holders averaging 80 in Q3, and a record of 94 the week of August 18. Learn more at cmegroup.com/bitcoinoptions.
  • Growth in client adoption of SP option blocks: Since the temporary closing of the trading floor in March, over 1.8M blocks have transacted with an ADV of 13.5K.  Recently introduced rules on block trading for S&P 500 options on futures are designed to provide greater flexibility and capital efficiency during this period. The minimum block threshold remains at 50 contracts.
    Learn more