Traders are turning to the deep liquidity of ETF option markets

The growth in European ETFs has triggered an uptick in ETF options use both for hedging and alpha generation. When set against credit default swaps, credit default swap options and equity options, ETF options have really deep liquidity which gives traders greater comfort in using them, surprising some.

As dollar high yield ETFs are not UCITS eligible traders are getting into European alternatives, and while the US market is far larger than Europe’s, the engagement in credit ETF options over 2020 shows greater promise and both tactical and strategic trades are being placed using these instruments.

Robin Fox, volatility trader at JP Morgan and Lee Bartholomew, head of fixed income R&D product development at Eurex detail how traders can take advantage of this market.

Published on December 17, 2020

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