美股翻转展望

GlobalQuantitative&DerivativesStrategy10September2018USEquityFuturesRolloverSeptember-DecemberTheS&P500futuresrollistradingsignificantlyricherthanlastquartervs.Eurodollarfairvalue(inlargepartduetothenarrowerLIBOR-OISspread),andhasbeenricheningoverthepast2weeks.Onnetwebelievetherollisslightlybiasedtowardsamoderatefurtherricheningintoexpirythisquarter,butwithrelativelylowconviction.Further,therollmaybespotdependent,incaseinvestorsdemandliquiditytoenternewdirectionalpositionsonmarket-movingnews,e.g.aroundtrade.WebelievetheRussell2000andNASDAQrollsarealsoslightlybiasedtowardsricheningintoexpiry,GlobalQuantitative&DerivativesStrategy10September2018USEquityFuturesRolloverSeptember-DecemberTheS&P500futuresrollistradingsignificantlyricherthanlastquartervs.Eurodollarfairvalue(inlargepartduetothenarrowerLIBOR-OISspread),andhasbeenricheningoverthepast2weeks.Onnetwebelievetherollisslightlybiasedtowardsamoderatefurtherricheningintoexpirythisquarter,butwithrelativelylowconviction.Further,therollmaybespotdependent,incaseinvestorsdemandliquiditytoenternewdirectionalpositionsonmarket-movingnews,e.g.aroundtrade.WebelievetheRussell2000andNASDAQrollsarealsoslightlybiasedtowardsricheningintoexpiry,buttheMSCIEMandMSCIEAFErollsaremorelikelytocheapenduetoweakenedpositioning.Overallourrollviewsmirrortherecent‘USexceptionalism’seeninmarketperformance,aswebelievefuturespositioningisroughlycongruentwiththespotmoves.GlobalQuantitativeandDerivativesStrategyBramKaplan,CFAMarkoKolanovic,J.P.MorganSecuritiesTherollfacesinterestrateriskduetovolatilityintheLIBOR-OISbasis,whichhasnarrowedstronglysinceQ1.However,weseelimiteddividendrisksincefewdividendsthatgoexaroundtheSeptemberexpiryremainunannounced.ThebacksectionofthereportcontainsdetailedrollstatisticsfortheS&P500,Russell2000,NASDAQ100,S&P400,MSCIEM,andMSCIEAFEindexfutures,andanoverviewofliquiditytrendsforglobalequity-linkedmarkets.RollcostprogressionfortheS&P500Sep-Dec2018futuresEuro$Jun-Past1YAvg(vsEuroCurrentRollcost(vsCurrentRollcost(vs0-2725232119171513 TradingDaystoSource:J.P.MorganEquityDerivativesStrategy,Seepage35foranalystcertificationandimportantJ.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.IFRSpreadbps每日每日免费获取报（增值服务关注公回复：研究报加入“起点财经”微信群(1-212)272-121510SeptemberTableofCurrentQuarterlyRoll Rates S&P500RollDynamicsand S&P500 Russell2000andNASDAQ MSCIEMandEAFE MSCI RollData Equity-LinkedMarket AmericasEquityLiquid EuropeEquityLiquid Asia-PacEquityLiquid Appendix1:BasicRoll Appendix2:RollCostExpressedasImpliedFinancing Appendix3:DynamicsoftheJun-Sep2018S&P500 2(1-212)272-121510SeptemberCurrentQuarterlyRollTheS&P500futuresrollistradingsignificantlyricherthanlastquarter,andhasbeenricheningoverthepast2weeks.Onnetwebelievetherollisslightlybiasedtowardsamoderatefurtherricheningintoexpirythisquarter,butwithlowconvictiongivenanumberoffactorsthatcouldmovetherollineitherdirection.Supportingthericheningthesis,wenote:1)therollisstillhistoricallycheap(atitslowestcostin2years,excludingJune,Figure1),andlikelyaroundhalfoftheq/qricheningcanbeexplainedbythe~20bpnarrowingoftheLIBOR-OISbasis1;2)dealershortpositionsarestillhistoricallyelevated(atsimilarlevelsto2017whentherolltraded20bpsricheronaverage),eventhoughtheyarelittlechangedoverthepastquarteranddownsignificantlyfromtheJanuarypeak(Figure2),andpositioninginUSequitiesoverallappearsstrongervs.aquarterago;3)wehavetorespecttherecentpriceaction(1-212)272-121510SeptemberCurrentQuarterlyRollTheS&P500futuresrollistradingsignificantlyricherthanlastquarter,andhasbeenricheningoverthepast2weeks.Onnetwebelievetherollisslightlybiasedtowardsamoderatefurtherricheningintoexpirythisquarter,butwithlowconvictiongivenanumberoffactorsthatcouldmovetherollineitherdirection.Supportingthericheningthesis,wenote:1)therollisstillhistoricallycheap(atitslowestcostin2years,excludingJune,Figure1),andlikelyaroundhalfoftheq/qricheningcanbeexplainedbythe~20bpnarrowingoftheLIBOR-OISbasis1;2)dealershortpositionsarestillhistoricallyelevated(atsimilarlevelsto2017whentherolltraded20bpsricheronaverage),eventhoughtheyarelittlechangedoverthepastquarteranddownsignificantlyfromtheJanuarypeak(Figure2),andpositioninginUSequitiesoverallappearsstrongervs.aquarterago;3)wehavetorespecttherecentpriceaction–therollhasrichenedby~10bpsoverthepast2weeks.However,afewfactorstemperourconvictionforamovehigher:1)lastquartertherollcheapenedoverall(suggestingashorttilt)andtheimprovementinpositioningsincethenismodest;2)wedon'tseesignsofquarter-endfundingstressatthemoment;and3)therollcouldbespotdependent–e.g.wecouldseetherollcheapenifamajorescalationofthetradewarweretocauseamarketsell-off.Inaclosetounchangedmarketenvironment,wewouldexpecttheS&P500rolltoberelativelyuneventful(withabiastowardsricheningslightly,asdiscussedabove).Figure1:TheS&P500futuresrollistradingricherthanlastquarter,butcheapcomparedtootherrollsoverthepast2yearsS&P500futuresvolumeweightedaveragerollcostinthequarter*(vs.3MLIBOR,annualized)Figure2:DealernetshortpositionsinS&P500futureswere~55%sincetheJanpeak,butremainelevatedvs.historical0NetDealerS&P5000--Source:J.P.MorganEquityDerivativesStrategy,CFTC,Bloomberg.LatestpointasofSource:J.P.MorganEquityDerivativesStrategy.*Sep-18showscurrentrollcost,notOverallourrollviewsmirrortherecent‘USexceptionalism’seeninmarketperformance(USequitiesareupQTDandYTD,whilemostinternationalmarketsaredown),aswebelievefuturespositioningisroughlycongruentwiththespotmoves.Thisistosay,webelievetheUSindexfutures(S&P500,Russell2000andNASDAQ100)areallslightlybiasedtowardsrichening,whiletheinternational1Aswe’vediscussedinthepast(e.g.seetheSpecialTopichere),dealersfundthemselvesthroughavarietyofchannelsandtenors,andfinancingcostsforthesepositionsoverallareacombinationofLIBOR-linkedandFedFunds-linkedrates.Asaresult,anarrowerLIBOR-OISbasisshouldcausetherolltotraderichervs.Eurodollarfairvalue(butcheapervs.FedFunds).3(1-212)272-1215GlobalQuantitative&Derivatives10Septemberfuturesrolls(MSCIEMandMSCIEAFE)aremorelikelytocheapenintoexpiry(seebelowfordetails).Therollsmaybespotdependent,asinvestorsdemandliquiditytoenternewdirectionalpositionsonmarket-movingnews.WhiletheS&P500appearstohavebecomerelativelyinuredtoheadlinevolatilityaroundthetradewar,thereremainsthepossibilityofamajordevelopmentthatsendsmarketparticipantsscramblingforliquidity(eithertotheupsideordownside).Theensuingshiftinpositioningcouldinturndrivechangesinimpliedfinancingrates/movetheroll.Moreover,MSCIEMhasshowngreatersensitivitytotraderisks,andthusitsrollcouldseesignificantspotTherollfacesinterestrateriskduetovolatilityintheLIBOR-OISbasis,whichcontinuedtocompressoverthepastquarterandhasfullyreverseditswideninginFeb/Martotradeclosetolonger-termaveragelevels.(1-212)272-1215GlobalQuantitative&Derivatives10Septemberfuturesrolls(MSCIEMandMSCIEAFE)aremorelikelytocheapenintoexpiry(seebelowfordetails).Therollsmaybespotdependent,asinvestorsdemandliquiditytoenternewdirectionalpositionsonmarket-movingnews.WhiletheS&P500appearstohavebecomerelativelyinuredtoheadlinevolatilityaroundthetradewar,thereremainsthepossibilityofamajordevelopmentthatsendsmarketparticipantsscramblingforliquidity(eithertotheupsideordownside).Theensuingshiftinpositioningcouldinturndrivechangesinimpliedfinancingrates/movetheroll.Moreover,MSCIEMhasshowngreatersensitivitytotraderisks,andthusitsrollcouldseesignificantspotTherollfacesinterestrateriskduetovolatilityintheLIBOR-OISbasis,whichcontinuedtocompressoverthepastquarterandhasfullyreverseditswideninginFeb/Martotradeclosetolonger-termaveragelevels.OurRatesStrategistsbelieveLibor-OISismoretolikelywidenthannarrowfromhereasweheadtowardstheendoftheyear.VolatilityinthisLIBOR-OISbasiscandrivevolatilityintherollfinancingrates.Thisquarter,theFOMCmeetingisscheduledtobeheldafterfuturesexpiry,soFed-relatedrollriskthisquarterwillcomefromchangingmarketexpectations(andanyFedspeechesoreconomicdatareleasesthatshifttheseexpectations),ratherthantheannouncementitself.However,thehurdletoshiftmarketexpectationsforaSeptemberhikeislikelyhigh,sinceahikeisfullyexpected(byeconomists)andpricedin(bythemarket).SeetheRatesOutlooksectionformoredetails.Figure3:S&P500financingspreadshavebeenreboundingsinceS&P500swapspreads(to3MFigure4:TheJun-Seprolltrendexhibitedaslightlypositivetime-weightedtrend,closetoourmodel’spredictionofaflattrendJun-Seprollspread(indexRollJun-Sep'18RollRicheningtrendSPX3MSwapSPX1YSwap9876 321Apr-17Jul-17Oct-17Jan-Apr-18Jul-WeseelimiteddividendriskfortheupcomingrollsincefewdividendsthatgoexaroundtheSeptemberexpiryremainunannounced.RollTrendThisquarter,ourrolltrendmodelpredictsclosetoaflattrendintoexpiry(veryslightcheapeningtrendoflessthan0.1bps/day,or~3bpsoverthe2weeksintoexpiry).Withinthemodel,positioningvariablesdeterioratedslightlyvs.lastquarter:2SeeourMarch2013andMarch2016USFuturesRollOutlookreportsfordetailsonthe4(1-212)272-1215(1-212)272-121510Septemberdealers’netfuturespositionswerepared(shortsdecreasedby~6%ofOI),whiletheSPYETFrecordedsmallnetoutflowsthepastcoupleofmonths.However,riskaversion/sentimentandfundingindicatorswereslightlyimprovedvs.lastquarter,astheVIXdroppedtoa~13averageintheleaduptotheroll(vs.~14lastquarter),andFinancials’CDSlevelsdecreasedslightly.Jun-SepRollTheJun/SepUSequityfuturesrollsgenerallycheapenedthefirstweekoftherollperiod(astherollspreadsweredecliningatthesametimeasbothspotandEurodollarrateswererallying),butmostreboundedduringexpiryweek.MSCIEMwasthenotableexception,asitsrollcheapenedthroughout.Thecheapeningduringthefirstweekandfactthatmostrolls’averagecostwascheaperthantheirstartingpoint,suggestsweakenedpositioning,in-linewithourview.TheS&P500,NasdaqandMSCIEMrollsalltradedattheircheapestaveragerollcostinover2years.SeeourJun-SepRollRecapformoredetails.Russell2000andNASDAQTheRussell2000rollistradingatthesecondrichestrollcostinourrecordsandrichrelativetoEurodollarfairvalue.WebelievetheshiftinRussell2000rollcosts,fromadeepdiscounttoFVuntil3Q16totradingaroundFVflatforthepast2years,isduetotwomainfactors:1)apick-upindemandforRussell2000futuresfromfundamentalinvestors,and2)increaseddemandforRussell2000financingoriginatingfromthelargeincreaseinRussell2000-linkedstructuredproductissuancethepastcoupleofyears.Weexpectthesedriverstoremaininplace,andhencethecurrent(higher)regimeforRussell2000financingratestopersistfortheforeseeablefuture.LastquartertheRussellrolltradedlargelysidewaysduringthefirstweek,butthenrichenedduringexpiryweek.WebelieveRussellfuturespositioningmodestlydeterioratedoverthepastquarter,butlikelyremainstiltedlong,whichslightlyskewstherolltowardsricheningintoexpiry,barringamarketsell-off.TheNASDAQrollistradingrichtotheEurodollarfairvalue,butistradingmuchcheaperthanwherethecontractrolledinrecentquarters,apartfromlastquarter(similartotheS&P500).LastquartertheNASDAQrollfollowedsimilarpatternstotheS&P500,cheapeningthefirstweekbutreboundingduringexpiryweek.PositioningappearstohaveimprovedforNASDAQfuturesoverthepastquarter,andweexpecttherolltoagainfollowsimilarpatternstotheS&P500.Wethereforehaveaslight/lowconvictionbiastowardsexpectingtherolltorichenintoexpiry.MSCIEMandMSCIEAFETheMSCIEMrollistradingcheaptotheEurodollarfairvalue,andcheaperthantheVWAProllcostinanyquarteroverthepast3years,otherthanlastquarter.However,lastquarter’srollcheapnesswaspartlyattributabletodividendconcentration,whichisn’tthecasefortheSep-Decroll.Rather,thecheapnessoftherollthisquarterismainlyduetostillweakpositioningandsentimentinEM.Lastquarter,theMSCIEMrollcheapenedconsistentlythroughouttherollperiodduetoweakenedpositioningandstrongdealerliquidity(in-linewithourview).PositioninginEMfuturesappearstoremainweakthisquarter;however,dealerliquiditymaybegintocomeunderpressureduetothelowimpliedfinancingrates,potentiallylimitingtheextenttowhichtherollcancheapenfurther.GiventheweakpositioningandsentimentinEM,weexpecttheMSCIEMrolltocheapenintoexpiryagainthisquarterandrecommendrollinglongslate/shortsearly.5(1-212)272-1215GlobalQuantitative&Derivatives10SeptemberTheMSCIEAFErollistradingcheaptotheEurodollarfairvalue.Volumesontherollsofarhavebeensmall,sowecouldstillseeasizablepriceadjustmentoncetherollspreadbeginsactivelytradingthisweek(ashasoccurredfrequentlyinthepast).Lastquarter,theMSCIEAFErollexhibitedamoderatericheningtrendintoexpiry,reflectingthecontract’simproved(long)positioning(afterseeingalargepriceadjustmenttoatradablelevelatthestartoftheroll).Investorpositioningininternationaldevelopedmarketequitiesappearstohavedeterioratedoverthepastquarter,butit’sunclearwhetherthedeteriorationwassufficienttotiltthedemand/supplyimbalance.Onbalancewethinktherollisslightlybiasedtowardscheapeningintoexpiry.RatesTherollfacesinterestrateriskduetovolatilityintheLIBOR-OISbasisandaheadoftheSeptemberFOMCmeeting.Thisquarter,theFOMCmeetingisscheduledtobeheldafterfuturesexpiry(onSep26th),ratherthanthemorecommontimingonWednesdayofexpiryweek.(1-212)272-1215GlobalQuantitative&Derivatives10SeptemberTheMSCIEAFErollistradingcheaptotheEurodollarfairvalue.Volumesontherollsofarhavebeensmall,sowecouldstillseeasizablepriceadjustmentoncetherollspreadbeginsactivelytradingthisweek(ashasoccurredfrequentlyinthepast).Lastquarter,theMSCIEAFErollexhibitedamoderatericheningtrendintoexpiry,reflectingthecontract’simproved(long)positioning(afterseeingalargepriceadjustmenttoatradablelevelatthestartoftheroll).Investorpositioningininternationaldevelopedmarketequitiesappearstohavedeterioratedoverthepastquarter,butit’sunclearwhetherthedeteriorationwassufficienttotiltthedemand/supplyimbalance.Onbalancewethinktherollisslightlybiasedtowardscheapeningintoexpiry.RatesTherollfacesinterestrateriskduetovolatilityintheLIBOR-OISbasisandaheadoftheSeptemberFOMCmeeting.Thisquarter,theFOMCmeetingisscheduledtobeheldafterfuturesexpiry(onSep26th),ratherthanthemorecommontimingonWednesdayofexpiryweek.Thus,Fed-relatedrollriskthisquarterwillcomefromchangingmarketexpectations(andanyFedspeechesoreconomicdatareleasesthatshifttheseexpectations),ratherthantheannouncementitself.However,thehurdletoshiftmarketexpectationsforaSeptemberhikeislikelyhigh–theratesmarketisalmostfullypricinginahikeinSeptember(andclosetozerochanceofa2ndhikeinNovember),andboththeJulymeetingminutesandFedChairPowell’sspeechatJacksonHoleappearedtosignalahikeinSeptemberandcontinuationofquarterlyhikes.J.P.MorganEconomistsexpecttheFedtohikeintheSeptembermeeting,andagaininDecember.TheStreetconsensusamongeconomistsisalsopredictingexactlyonenear-termhike,with93%oftheeconomistssurveyedbyBloombergforecastingahikeintheSeptembermeeting,andnonelookingforasecondhikebytheNovembermeeting.Figure5:3MEurodollarfuturesvs.effectiveFedFundsFigure6:3MLIBOR–FedFundsbasisfullyretraceditsQ1-3MEurodollarFuture3MFedFundsimplied0200920102011201220132014201520162017Source:J.P.MorganEquityDerivativesStrategy,TheLIBOR-OISspreadcontinuedtocompressoverthepastquarterandhasfullyreverseditswideninginFeb/MarduetoUS-centricfundingissues(discussedhere),andtradesclosetolonger-termaveragelevels(Figure6).OurRatesStrategistssuspectthespreadcompressionisduetoaninfluxofcashintoprimeMMFsandthematerialdeclineinbankCP/CDoutstandingprovidingaveryfavorablefundingenvironmentforbanks,whichledtoamultitudeoftransactionsprintingbelow3mLevenasOIScontinuedtoinchhigher.However,theydon’texpectthisfundingenvironmenttobesustainedthrough4Q18duetoexpectationsof6FundingRates(1-212)272-121510(1-212)272-121510SeptemberpositivenetbillissuancebeginninginOctober,EuropeanMMFreform,andyear-endbalancesheetfundingpressurearisingoutofG-SIBcapitalsurchargerequirements.Assuch,theybelieveLibor-OISismoretolikelywidenthannarrowfromhereasweheadtowardstheendoftheyear.Aswe’vediscussedinthepast(e.g.seetheSpecialTopichere),dealersfundthemselvesthroughavarietyofchannelsandtenors,andfinancingcostsforthesepositionsoverallareacombinationofLIBOR-linkedandFedFunds-linkedrates.Asaresult,volatilityinthisLIBOR-OISbasiscandrivevolatilityintherollfinancingrates(e.g.awiderLIBOR-OISbasisshouldcausetherolltotradecheapervs.Eurodollarfairvalue,butrichervs.FedS&P500RollDynamicsandBasedonourdividendassumptions(13.76indexpointsbetweenthetwoexpiries),theSep-Dec2018S&P500quarterlyfuturesrolliscurrentlytradingatanimpliedfundingratethatis~18bps3richrelativetotheEurodollarfinancingrateand~38bpsrichrelativetotheFedFundsrate.S&P500futurespositioningmetricsappeartohavemoderatelyimprovedoverallduringthepastquarter.Inparticular,wenotethefollowingpositivepositioningSystematicstrategies(CTAs,VolatilityTargetingandRiskParityportfolios)re-leveredsignificantlyintheUSsincetheirQ1de-leveragingevent,givenpositivemomentumanddecliningvolatility.However,theyappeartobeunderweight/shortinEMandEurope(seehere).USequitiesrecentlyralliedtonewrecordDealerscontinuetorunhistoricallylargeshortpositionsinS&P500futures,buttheirpositionsizeisdown~55%fromthepeakinJanuaryandisslightlysmallerthanlastquarter,accordingtoCFTCdata(Figure7).TheglobalhedgefundbetatotheS&P500recoveredrecently,andisaboveitsmedianoverthepastfewyears(Figure10).SpeculativeS&P500futurespositionsremainsignificantlynetlong~$25Bn),butfellsinceJuneexpiry(FigureNetmargindebtusageinbrokerageaccountsremainedneararecordhighinJuly,reversingitsmodestdipinJune(Figure11).••••••However,thefollowingindicatorspointtoweakenedUSlargecapequityfunds(ETFs+mutualfunds)recordednetinflowsQTD,buttheseinflowsonlypartiallyoffsettheoutflowsrecordedinlateJune,andnetflowsremainnegativeYTD(Figure9).Wediscusssomeofthesepositioningmetricsingreaterdetail3Rollrichness/cheapnessfiguresinbpsare7(1-212)272-1215GlobalQuantitative&Derivatives10SeptemberFigure8showsthenetlongspeculative(non-commercial)openinterestforS&P500futures(positivevalueindicatesnetlong,negativeindicatesnetshort).Speculativepositionsremainsubstantiallylong,butfellsinceJuneexpiry(tiltedtowardslongsby~$25BnasofSeptember4th).Notethatdealerpositionsaremoreinstructiveonrollpositioningthanspeculatorpositions,inourview,asit’snotjustspeculatorswhowilldemandrollliquidity(i.e.hedgersneedtorollpositionstoo).Moreover,wedidn’tfindCFTCspeculatorpositionstobeveryusefulinpredictingtherolltrendwhenwedevelopedourrolltrendmodel.Figure7:DealernetshortpositionsinS&P500futureswerepared~55%sincetheJanuarypeak,butremainelevatedvs.Figure8:NetspeculativeS&P500futuresopeninterest50S&P500SpeculativeNetLong(1-212)272-1215GlobalQuantitative&Derivatives10SeptemberFigure8showsthenetlongspeculative(non-commercial)openinterestforS&P500futures(positivevalueindicatesnetlong,negativeindicatesnetshort).Speculativepositionsremainsubstantiallylong,butfellsinceJuneexpiry(tiltedtowardslongsby~$25BnasofSeptember4th).Notethatdealerpositionsaremoreinstructiveonrollpositioningthanspeculatorpositions,inourview,asit’snotjustspeculatorswhowilldemandrollliquidity(i.e.hedgersneedtorollpositionstoo).Moreover,wedidn’tfindCFTCspeculatorpositionstobeveryusefulinpredictingtherolltrendwhenwedevelopedourrolltrendmodel.Figure7:DealernetshortpositionsinS&P500futureswerepared~55%sincetheJanuarypeak,butremainelevatedvs.Figure8:NetspeculativeS&P500futuresopeninterest50S&P500SpeculativeNetLongFutures($Bn)0NetDealerS&P500USlargecapequityfunds(ETFsandMutualFunds)sawsignificantinflowsquarter-to-date,buttheseonlypartiallyreversedtheoutflowsinlateJune.NetflowsinlargecapfundsarenegativebothsinceJuneexpiryandYTD(Figure9).SMidcapfundsrecordedclosetozeronetflowssinceJuneexpiry,whileTechnologyfundssawrelativelyconsistentinflowsduringthequarter.Figure9:USequityfundsineachcategorysawinflowssinceJuly,butlargecapflowswerenetnegativeoverallsinceJuneexpiry,whileTechfundssawconsistentinflowsCumulativenetfundflows(ETFs+MutualFunds,Figure10:GlobalHFbetatotheS&P500isaboveitsmedianoverthelastfewyearsGlobalHF1MBetatotheS&PLargeCapSMidCapGlobalHFBetatoS&P5000May-Jul-Source:J.P.MorganEquityDerivativesStrategy,Figure11showsthataggregatenetmarginbalancesreportedbyFINRAmemberfirmswasnearrecordhighsinJuly,reversingamodestdeclineinJune.Thisimpliesthatmemberscontinuedtohavesubstantialamountsofcashinvestedinequities.8(1-212)272-1215GlobalQuantitative&Derivatives10SeptemberFigure11:MargindebtnearrecordFigure12:TheS&P500put/callratioislittlechangedoverthepastcoupleofmonths0--S&P500RatiooftotaloutstandingputstoFINRAnetmargindebt2SPXPut/Call2012201320152017(1-212)272-1215GlobalQuantitative&Derivatives10SeptemberFigure11:MargindebtnearrecordFigure12:TheS&P500put/callratioislittlechangedoverthepastcoupleofmonths0--S&P500RatiooftotaloutstandingputstoFINRAnetmargindebt2SPXPut/Call2012201320152017TheS&P500put-callratio,typicallyregardedasacontrarianindicator,waslittlechangedoverthepastcoupleofmonths(Figure12),andremainshistoricallyelevated,butwellbelowitspeaklevels.High(low)levelsoftheput-callratioaretypicallyassociatedwithhigher(lower)levelsofequityexposure,asinvestorstypicallybuyputswhentheyhavesubstantialequityexposuretohedge.RollTheS&P500Sep-DecfuturesrollistradingmoderatelyrichtoLIBOR-basedfairvalue–cheaperthanmostrollsoverthepast2years,butmuchricherthaninJune,andhasbeenricheningthepastcoupleofweeks(Figure13).Figure13:RollcostfortheS&P500Sep-Dec2018futuresEuro$Jun-Figure14:S&P500E-minirollAverageofpast2Past1YAvg(vsEuroLastCurrentrollCurrentRollcost(vsCurrentRollcost(vs0-50272523211917151311 TradingDaysto531TradingdaysbeforeSource:J.P.MorganEquityDerivativesStrategy,ThisquartertheS&P500rollpaceisslowerthannormal.Wenote~3.7%oftheSeptemberE-minicontractshaverolledasofSep6th,comparedto4.4%rolledontheaverageatthisstageduringthepasttwoyears’rolls(and6.1%rolledbythispointlastquarter,Figure14).Futuresliquidity/marketdepthcollapsedduringFebruary’svolatilityspike,andhasbeengraduallyrecoveringoverthepastfewmonthsasvolatilitysubsided,but9IFRSpreadbps(1-212)272-1215GlobalQuantitative&Derivatives10Septemberremainsrelativelylowbyhistoricalstandards(Figure16).Wenotethatvolumessittingonthebestbidswerefairlyevenlymatchedagainstthoseonthebestoffersthroughoutmostoftherollperiodlastquarter.Totalvolumeonthebestbid/offerduringtherollperiodwasdown~30%comparedwiththepreviousquarter,andthebid-offerspreadgenerallyremainedatickwidethroughoutmostoftheroll.Thissuggeststhatrollliquiditydeterioratedquarter-on-quarter,evenasoutrightfuturesliquidityimprovedsomewhat.Asusual,themostliquiddaysoftherollwereswitchdaythroughTuesdayofexpiryweek,illustratedbythespikesintheshadedareasinFigure15.Figure15:IntradaybestbidandoffersizeandspreadfortheJun-Sep2018S&P500E-minirollFigure16:MarketdepthcollapsedinFebruary,andcontinuestograduallyrecover#ofcontractsonbidandofferAvgbid-offerpricespread(indexMarketNotionalE-miniavgdailyvolumesDepth-ADV($B/day)-(1-212)272-1215GlobalQuantitative&Derivatives10Septemberremainsrelativelylowbyhistoricalstandards(Figure16).Wenotethatvolumessittingonthebestbidswerefairlyevenlymatchedagainstthoseonthebestoffersthroughoutmostoftherollperiodlastquarter.Totalvolumeonthebestbid/offerduringtherollperiodwasdown~30