Options market had low correlation in 2025, says Susquehanna's Chris Murphy

Kelly Evans (Anchor) 00:00.430

joining us now is chris murphy susquehanna 's co head of derivative strategy i love illiquid markets chris because bigger price moves more to talk about

Chris Murphy (Co-Head of Derivatives Strategy) 00:09.240

you're right you're right i mean it could be more exciting at the end of the year we hope it is i mean i'm stuck here most of the days until the end of the year so i wouldn't mind some some excitement but yeah probably the highest volume day of the year till the end of the year

Chris Murphy (Co-Head of Derivatives Strategy) 00:22.160

and then with those expiration notional stats sure it is the biggest notional expiration all time but if you think about year over year more options trade than ever and S and P is at all time highs so really not that much surprise it's the biggest notional expiration ever i

Chris Murphy (Co-Head of Derivatives Strategy) 00:41.190

think it'd be bigger news if that number started to drop ever

Kelly Evans (Anchor) 00:44.350

i'm going to put you on the spot because you're so good at thinking on your feet if you look back on twenty twenty five you know we talked a lot maybe maybe last year maybe earlier this year about zero day options and so forth what would you say was kind of the takeaway from

Kelly Evans (Anchor) 00:56.750

options action this year we're about to talk later in the show again about prediction markets and the rise there what would you say we learned this year vis a vis you know the options market just just a question to throw out there

Chris Murphy (Co-Head of Derivatives Strategy) 01:09.350

well i think the story of most of this year was low correlation so you know the index products themselves were not moving a ton and you saw a massive moves in underlying stocks up down you know not just the AI names you guys discussed at nike before this the home builders all

Chris Murphy (Co-Head of Derivatives Strategy) 01:30.910

these big earnings moves so i think the story of of this year has been you know idiosyncratic risk and you know as the options markets get more and more liquid every year the ability to play individual stock moves and also take advantage of much higher individual stock

Chris Murphy (Co-Head of Derivatives Strategy) 01:49.510

volatility volatility levels through selling options you know that's been the story and i would expect that to continue into next year and like you said about exciting markets you know when when things are trading with low correlation and it's a stock pickers market that's

Chris Murphy (Co-Head of Derivatives Strategy) 02:02.950

better for us and it's better for your show yeah

Kelly Evans (Anchor) 02:06.470

and hopefully people pick the right stocks but it's really hard to do with those situations two more quick questions for you one what is the options market signaling or telling you about positioning into next year because the forecast from the street i'd love someone to pull the

Kelly Evans (Anchor) 02:18.030

data on this seemed to me one of the most optimistic we've had in some time

Chris Murphy (Co-Head of Derivatives Strategy) 02:22.030

well you know when we're watching the options trades i think we're we would kind of call it cautiously optimistic you know obviously a lot of tech kind of took a pause recently but we're seeing very consistent mostly call spread buying in you know let's always of course focus on

Chris Murphy (Co-Head of Derivatives Strategy) 02:38.630

the mag seven names you know people are saying look you know maybe AI is a little bit over its skis maybe i want to reduce my underlying positions a little bit but i certainly don't want to miss a rebound a breakthrough and you more upside so certainly the most popular trade

Chris Murphy (Co-Head of Derivatives Strategy) 02:55.750

we've been seeing into the first quarter of next year has been taken advantage of attractive call spreads because of elevated call skew and mag seven names so that's been the focus on our desk recently okay

Kelly Evans (Anchor) 03:07.310

and finally what do you make of this whole move to twenty four seven trading is it synthetic is it real is it affect things like you know the time of day that options expire and so forth

Chris Murphy (Co-Head of Derivatives Strategy) 03:18.840

well i mean i think that the the liquidity is still most likely going to be in the US hours i think it's interesting for me when i see you know for example an aggressive after hours or pre market trade in the vix or the S and P you know because that's a sign to me you know this

Chris Murphy (Co-Head of Derivatives Strategy) 03:38.110

person does not want to wait until they open there might be more information in this trade something yeah exactly you know i'm hoping to not be trading at after bedtime so you know i think it's mostly going to be trading mostly during the same trading hours