Loading summary
Transcript79 lines
- [00:00]
Unknown Host
Foreign.
- [00:10]
Brendan
Welcome back to the Crypto 101 podcast. We have another killer interview in store for all of you today because we're bringing in one of the largest Trad 5 players to talk to us, and, man, we're excited to do it. So we have Kathy Clay. She is the global head of derivatives over at cboe. Cathy, welcome. And it's good to have you.
- [00:32]
Kathy Clay
Brendan, it's great to be here. Thank you for having me on the show. I hear the TRADFI introduction, I say, oh, no. Your listeners might have a reaction to that, but it's still great to be here with you. Thank you.
- [00:42]
Brendan
No, you know, I think it's a good thing, because what it's done is it's shown just how far I think crypto has come. You know, crypto really is becoming more than just defi, and I think now it's becoming a integrated part of what a lot of us may be crypto natives would just call traditional finance or the tradfi markets. And the two really are emerging. And there's so many different ways that this is happening, and one of the big ways is through the derivatives market. And that's going to be a big focus of this podcast, is talking about, you know, what the future of crypto, and especially on the derivative side, what that holds. Because a lot of investors are excited about this. Right. You know, kind of leading up until this point, getting your hands on crypto derivatives wasn't always the easiest task. There was all sorts of regulations and different kind of things that acted as roadblocks. But now we're seeing that, hey, this could really be the next major step for cryptocurrency moving forward. So we're stoked to do this. I want to talk about you and your background, but before we even do that, let's just lay a foundation, you know, what is CBO and kind of the role that it plays in not only the crypto markets, but the traditional markets as a whole.
- [01:55]
Kathy Clay
Great. So CBO is a global exchange provider. We operate 27 markets around the world. Most people will know us for US Markets off the top. You know, SPX and VIX of course, are our top options products, but we also run equities exchanges in North America, Canada, Europe, Australia, Japan. We. We have offices around the world, and we trade in cash, spot equity derivatives, and FX market. So we're a much broader exchange, and I think people know us. For me, many people think of us back to our CBO options exchange roots, but we have grown to a much more global market. Participant at this point.
- [02:35]
Brendan
Yeah, I mean, what has it been like to see the derivatives market grow into what it is today? Because I think, you know, even as myself, someone who's been doing this for over a decade and working with different kinds of derivative products, I feel like it has grown so exponentially even in the last couple of years. I think if you look at like pre Covid, to post Covid, like to where we're at now, just a simple five year period, it feels like it has, and maybe it has, maybe you have some cool metric for me, but it feels like it is at least doubled in size.
- [03:06]
Kathy Clay
It's definitely been up and to the right for many, many, many years. But you're, you're spot on that. Before COVID through Covid, and then especially after Covid, there seems to be this acceleration of adoption of listed derivatives. And that's primarily being driven from the retail sector. And a lot of that. If you think back to the pandemic, we all had a lot of time on our hands. We all had some time to think about how we might invest money. Some people got some federal funds coming into their pockets that they wanted to learn how to invest. And the retail broker dealers themselves have done just an amazing job of educating the retail traders such that they're far more successful in the derivatives markets and they're actually really sophisticated. The tooling, the data, the analytics that the retail trader now has at his or her fingertips is just unparalleled. I wish I had some of those tools when I was a market maker many, many years ago. I mean, they're that good. And it has really driven this drive into the derivatives market. So it has been a great thing to see. CBO has its own education arm, by the way, called the Options institute. And for 40 years that institute has been educating the end retail investor. But now we really see that baton passing to the retail broker dealers themselves. And there's just been this absolute craze of adoption into derivatives. And for all the reasons retail traders would want exposure into the derivatives markets, the hedging, the income, the speculation, it's all been quite well received.
- [04:37]
Brendan
And I think the reason that we've seen so much growth on the derivative side is for the exact reasons you just listed, the tools, the that average retail investors have at their disposal in the current day is just phenomenal. I mean, it's as if they were some, you know, big institution or hedge fund or something and they have access to everything, all sorts of data and different options and analytics. And I think that that helps encourage people to get in. It kind of removes this, this fear or this barrier to entry because people can be more confident, they can do a little bit more research, they can have a better understanding. And I think that's been one of the biggest catalysts, I guess you could call it, that has helped derivatives kind of explode into the giant market that it's become.
- [05:22]
Kathy Clay
Yeah, it's absolutely true. And think about the cost of client acquisition from a retail broker dealer's perspective. It's, it's not cheap to bring on new investors and so to help them be successful so that they continue to grow their assets, grow their portfolio, engage in new strategies. It's all very much of a story of aligned incentives, guys.
- [05:42]
Unknown Advertiser
It's been a massive year in crypto with big price movements, headlines everywhere, and major institutions with even countries getting involved. That's why you're here listening to this podcast right now. And if you've been curious but feel like you've missed the boat, don't worry, there's still time. Like we talk about on these episodes every week. With only 21 million Bitcoin ever to exist, it's designed to be scarce. And that scarcity can mean real staying power. And the team at Coin Flip Preferred believe stepping into crypto should be simple, secure, and on your terms. That's why they pair you with a dedicated crypto expert who guides you through every step, from your very first transaction to more advanced solutions. Plus, Coin Flip is a registered money services business and does not custody funds, so you stay in control and protected. With nearly a decade of collective experience, Coin Flip Preferred's client managers know the space inside and out. If you already explore the world of digital assets with confidence, visit CoinFlip Tech Crypto 101 or use the promo code Crypto 101 for 50% off transaction fees valid 1 per customer until May 30, 2025. Have you ever wanted to trade bitcoin but haven't Dared tried? With Plus500 futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo. See a trading opportunity. You'll be able to trade in just two clicks. Feel ready? You can move to real money with as little as $100 once your account is approved.
- [07:07]
Kathy Clay
And.
- [07:07]
Unknown Advertiser
And the great thing is that in addition to crypto, Plus500 gives you access to a wide range of instruments like the S&P 500, NASDAQ, gas, and much more. Explore equity indices like Energy, metals, Forex and beyond. With a simple and intuitive platform, you can trade anytime, anywhere. Experience the fast accessible futures trading you've been waiting for with Plus500. With over 20 years of experience, Plus500 is your gateway to the markets. Visit us500.com to learn more. Trading in futures involves risk of loss and is not suitable for everyone. Not all applicants will qualify and this is not personal financial advice. Plus 500. It's trading with a plus.
- [07:43]
Kathy Clay
Wow. What's up? I just bought and financed a car.
- [07:46]
Brendan
Through Carvana in minutes.
- [07:48]
Kathy Clay
You, the person who agonized four weeks over whether to paint your walls eggshell or off white, bought and financed a car in minutes.
- [07:54]
Brendan
They made it easy. Transparent terms, customizable, down and monthly.
- [07:58]
Kathy Clay
Didn't even have to do any paperwork. Wow. Hey, have you checked out that spreadsheet I sent you for our dinner? Options finance your car with Carvana and experience total control financing subject to credit approval.
- [08:13]
Brendan
Well, let's just first break down because I'm sure that there's listeners coming in there. You know, we're called Crypto101. We like to make sure that everyone has a 101 understanding of what we're going to be talking about. We've been throwing it down or thrown around a couple of terms here, such as derivatives. Can you just explain the difference between maybe what the derivatives market is and how that's different from maybe just simple spot trading?
- [08:35]
Kathy Clay
Yeah, so you know, spot trading or Delta one trading as we call it, really just taking a long or short position in an underlying stock or etf, whereas the derivatives is a derived contract from that underlying, which actually gives you the right to buy or to sell that particular underlying by a particular point in time. So it lets an investor, for oftentimes less capital, take a bet on whether or not they think a stock or an ETF is going to rise in price or to fall in price and to get that exposure through a call or a put option on that underlying price, underlying security.
- [09:14]
Brendan
So instead of, you know, for everyone that's listening, instead of just owning shares of something, you know, you can go out there and let's just talk in simple Bitcoin terms. You know, you can go and you can buy half a Bitcoin, you can go buy an entire Bitcoin, you are owning the actual shares of, of Bitcoin. And that's what we traditionally call spot trading. Now with derivatives, it's a little bit different. You know, you're not, instead of owning the actual asset, you're making a bet. On a contract. You know, like Kathy just mentioned, we have different kinds of calls where you can bet that the markets are going to go up or down or different things there, but it's a little bit different. And typically, almost always they are leveraged in nature. Now at the end of that, you can, you know, execute those contracts, you know, assuming they go your way, and then you can actually get compensated in dollar amounts. But, you know, it's a little bit different from our just average, you know, buying and selling of an asset. So we can get all these different kinds of options contracts that are typically a leveraged version that allow us to get exposure towards either the up or the downside, which is really big, because I would say one of the biggest things that this brings is liquidity at the end of the day. And I think it also brings a lot of extra interest. But would you say that you would agree with that?
- [10:25]
Kathy Clay
I definitely would. I mean, imagine that your only choice is to buy an underlying. So let's say you take your favorite stock. I think the favorite one stock du jour is, let's say Nvidia. Let's say you wanted to buy Nvidia. If you didn't have the derivatives market, the really only way to do that is to buy the underlying. You couldn't buy a call or sell a put in order to get exposure to that underlying. And what happens typically, and I think we'll get into this when we get to the derivatives on Bitcoin, is really when you bring in the derivatives ecosystem around an underlying asset or an underlying stock, you then give the participants the ability to hedge that portfolio or that stock. You give the the holder the ability to generate income by selling calls on that particular stock or etf. And you're able to position around your underlying holding in order to stay invested rather than, you know, try to time the market, let's say. And so the derivatives landscape just provides an amazing amount of opt for that end investor to really curate a portfolio with the risk tenors that they're comfortable with and the objectives that they're trying to achieve with their portfolio. And once you see the derivatives come in, you start to see a lot more participants come in, because there's other ways to express a sentiment or ways to get a specific exposure that isn't possible with just a single Delta one instrument, like owning the stock or shorting the stock.
- [11:46]
Brendan
Yeah, it adds an entire new, and maybe adding an entire new layer of versatility is an understatement because there's so many different ways that these These contracts can essentially be used. So, yeah, I mean, just beyond the markets going up, down, sideways, you know, using some for passive income and hedging and there's, there seriously is so many different ways that this can affect the market. I think that's why people are so excited to have this become mainstream. So before we even get any, any deeper, I want to take a step back. You know, were you always interested in crypto or, you know, maybe a better way to phrase this? At what point did crypto kind of come onto your radar?
- [12:28]
Kathy Clay
Not early enough. Let's just be honest. You know, I think, I think the first time I remember hearing bitcoin was a friend of mine who's a big idea kind of guy said he was learning about this thing called bitcoin and he was trying to explain it. I think this was around 2012. And I was like, well, that sounds interesting. Didn't pay much attention to it at the time. But in 2017, CBO was the first exchange to launch futures on bitcoin. We beat cme, the Chicago Mercantile Exchange by one week and we launched those futures and we had the Winklevoss twins at our headquarters in Chicago to really explain what the heck bitcoin was again. So here we are in 2017 and that was really when I thought, this is fascinating. And then I really started to get into digital assets, thinking about it and first put some of my own portfolio, probably in 2018 or 19, into Bitcoin. So it's definitely been a journey. I wish I would have paid attention to my smart friend in 2012 instead of just dismissing this as a novel, great idea and not really taking the time to be as curious as I should have been.
- [13:31]
Brendan
Yeah, I mean, well, you know, it's a double edged sword. You know, maybe it's a good thing that you didn't get too invested then because then we wouldn't have you here today if you were getting in on, on, you know, a couple dollar Bitcoin.
- [13:41]
Kathy Clay
Yes. You're trying to make me feel better, Brendan, and I appreciate that. Thank you.
- [13:46]
Brendan
Well, we hear a lot of stories like that. You know, it's easy to look back on it now and be like, oh man, you know, it was obvious. But at the time it was an entirely different landscape. You know, in 2012, not only was it hard to learn about bitcoin, but it was hard to buy it. You know, you couldn't just go to Coinbase or open up Robinhood or, or go on. And I think now you can get it on PayPal and all these, you know, Apple Pay and all these different sources and you can just get crypto nowadays. And it's so easy, it's so seamless. You can go to a credible, trusted source. And it wasn't always like that. So I think looking back on it, it was an entirely different landscape. And just kind of goes to show, man, we've really come a long way here. And now it's become so much more mainstream. And the cool part about that is that we still have a long ways to go.
- [14:32]
Kathy Clay
It's really interesting because as you're talking, Brendan, I'm thinking back to even when I first invested in bitcoin, it was 2018, I think, and I was trying to figure out all these things, like how do I actually store this? Like what? What are you talking about? I have cold storage. What does that mean? There's so much to get your head around. You could see why it was a barrier for adoption. Just the friction and getting up to speed on how to even take possession of Bitcoin at that time.
- [14:56]
Brendan
So I guess what caused things to shift and focus more on crypto in recent years?
- [15:02]
Kathy Clay
Well, I think, I mean, the investing world for a few years now has been interested in bitcoin digital assets in general. But I think we've struggled from the lack of regulatory framework, frankly, to really be able to move at light speed on this asset class. And while incremental progress has been made over the years, it really feels like the last four years before the new administration came in, there was a bit of not risk taking appetite. People just didn't want to wade in waters where they were going to get in trouble. And so it prevented a lot of innovation, a lot of adoption. Fast forward to just a year ago when the Bitcoin ETFs finally got approved. And that opened up Bitcoin as an asset class, as an investment vehicle to the world, in essence. So retail traders, institutional traders who couldn't heretofore get access to like the underlying Bitcoin in a spot form and holding that and custody in that, and all the complexities around that, could now buy an ETF that represented a fractional ownership of Bitcoin. And that was really the game changer, I think, between where we had been and where we are today, getting those ETFs listed. And that has just been incredible momentum as you see the AUM grow in those products.
- [16:15]
Brendan
Yeah, I mean, that was the moment where the floodgates were opened and, you know, now it's just been as successful as it could have Ever been, I think more successful than people even imagined. Going down in history as one of, if not the most successful and explosive ETF launches in its first year. So we love to see it. And you know, SIBO already offers several crypto related ETF products. I guess my question here for you is why do you believe that derivatives is that next stage of adoption for crypto?
- [16:47]
Kathy Clay
Well, because as we talked earlier Brendan, when you bring the derivatives into the landscape, you now offer optionality around what everyone can do with their portfolios. And so to being able to put in a hedging instrument on an asset you own is a great, great, great relief. Especially in a volatile asset like Bitcoin has been. When you think about being able to protect the downside lets you stay invested in the asset. When you think about, well, I don't necessarily want to own the underlying, but I'd like the optionality to be able to buy it at a certain price by a certain time. That's what derivatives gives you the right, but not the obligation to buy or sell. And so really you're, you're playing in the rights to own or to sell versus actually having to take a position in the underlying. And I do think that once the derivatives get laid on top of an asset like Bitcoin and hopefully ether in the near future, then you can start curating portfolios. The institutions come in because they want to do certain overlays with the options. They want to build new ETFs that actually embed the options into the ETF. So we're going to see that whole ecosystem start develop just like we see it has developed in the equities world.
- [17:58]
Brendan
Yeah, and it really does make sense once you break it down like the way that you did. And I think it helps people understand like, oh, this does make sense. People are going to have like you said, more optionality. They're gonna, it's ultimately gonna create more liquidity. It's going to bring in maybe investors who weren't interested before. You know, there's a lot of options traders out there and that's all that they do. You know, that's what they specialize in. And so they've probably been waiting for who knows how long because they don't want to go to like some offshore exchange or they don't want to do this or that, and they've probably been patiently waiting. And so I think what this does is it really does open up the doors now. You know, there's a couple players out there, right. You know, we have cme that we mentioned earlier, holding a lot of the Bitcoin futures market share. And then we have offshore exchanges like Binance or Dairy Bit that are kind of leading on the, the crypto derivative side. You know, what is CBO strategy to maybe attract more institutional or even retail traders to, to its products and maybe trying to take that market share away from like cme, Dairy Bit, Binance and a couple of those outside players.
- [19:03]
Kathy Clay
So you know, what we're focused on, at least initially, is bringing cash settled index options to the market. That's one thing we're very well known for. Our SPX OR S&P 500 index options, our cash settled European exercise, etc. Our Vix options are the same. So this is really our playbook to say this is what's additive to the ecosystem, to the landscape. And so we launched first, last fall, this late, late last year in bringing options, index options on Bitcoin ETFs to life. And this was important for a couple of reasons. First, there's some very significant differences between options that are listed on one of the ETFs, like IBIT for example, versus the index options. The in the IBIT options are American exercise, which means you can get assigned at any time given certain parameters. And so you have the risk of having to take the underlying when you maybe don't want it. You also have corporate actions risk, should there be one. And it's not European exercise. And so when you go to the cash settled, these are the ones that are basically European exercise. So there's no risk of early assignment in these instruments. So they provide a bit of comfort for those that don't want that early assignment risk. And they also provide more notional value. And this is important because when you think about institutions and ETF issuers that want to embed options and ETFs, they want their ETF to have a lot of assets under management. That is the goal when they launch an etf. They want it to grow, they want the assets to increase. But that means more and more liquidity has to come back into the options ecosystem. And so given the higher notional of our index options and the idea that it can have flex option functionality. Now, flex options are not standardized options, but those options that are created by the ETF issuer for the precise exposure that they want to embed in their etf. And so flex option functionality is approved by the regulators in our index options. It's not approved yet in the IBIT and other ETF options. So there's a flavor for everyone. But the index options kind of rounds out that ecosystem of derivatives on Bitcoin.
- [21:16]
Brendan
And there's also, you know, we're chatting before this, there's a migration happening, right, of the CBOE futures to a new digital platform that you all acquired, right?
- [21:25]
Kathy Clay
Yeah, that's true. So we acquired Aeris X a few years ago, which had the own, its own clearinghouse, and it was trading 247 on the, what you call a designated contract market, or dcm, the exchange. But we've realized that there's much better synergies and opportunities available if we migrate those futures, the Bitcoin and Ether margin futures, from the digital exchange over to CBO Futures Exchange, where we have the VIX futures trading, for example, and our Ibox Credit futures trading. So to provide a more holistic ecosystem for those clients who are already connected to that exchange to trade those contracts, we wanted to give them access very seamlessly to the Bitcoin and Ether futures. And so those will be migrating mid year, this year to CFE at sebo. Really excited to get that done for our clients.
- [22:14]
Brendan
Yeah, I mean, there's, there's so much stuff on the way. I, again, I'm a trader. I love derivatives and futures and options and all this stuff. I'm like a kid in a candy shop right now. I've been waiting for all of this to become mainstream for years. And, you know, here it is like literally happening right in front of our face. And so, you know, if you're a listener out there and, you know, maybe you are used to doing this stuff in the traditional markets, you know, maybe you're used to futures, contracts, options, all these different things. Well, big news for you. You know, this stuff is coming just as seamless as it has ever been to crypto. And man, I'm stoked for it, I really am. And I'm sure everyone that's listening in here, you know, if you haven't looked into it, maybe you should. It's not for everyone. Again, we can't give you financial advice, but this is really cool because it is like the next evolution in the markets.
- [23:05]
Kathy Clay
Yeah, I would completely agree with you. And there are again, kind of circling back to where we started, Bren. There's so much great educational content out there for those that are learning about this space. And I again, encourage, as you did, learn about trading, get good at it and then enter the market safely.
- [23:21]
Brendan
Yeah, well, I think a big pillar of this is the easing regulatory environment. And that's been something that we've, you know, had the awesome Chance of talking to a couple different people about already. But what role does that play in all of this? Because, again, you know, this really wasn't possible in years past, but now we start, we are starting to see it loosen and kind of shift.
- [23:45]
Kathy Clay
I think the most important thing is whether it's tight or loose regulatory policy, just clear guidance is what we are wanting and I think what the industry has been wanting. We just want to know where the guardrails are and where we're safe to play loose or tight. That's up to the regulators, but clear guidance is what has been needed.
- [24:08]
Brendan
I am so glad that you said that because I believe we had a conversation, I think it was with the Coinbase team, and they said the exact same thing. They were saying, hey, you know, we're fine, like either way here, you know, you know, make it stricter, this or that. We just want to have it clear. We are willing to do whatever it is. If you guys want to have it stricter, fine. If you want to have it looser, fine. Just let us know what the parameters are, because that is what we care about and we're willing to be flexible in either direction. We just need to know what these clear lines are and we're willing to adhere to them. And that has to be the most reassuring thing is I think maybe not having the fear that the SEC or someone else is going to come after you for doing something wrong where you thought you probably did it right.
- [24:53]
Kathy Clay
Yeah. In any market, if you know the operating rules, then, then it's easy to perform to them. So wherever we land, if it's clear.
- [25:02]
Brendan
Guidance, we'll be in a good place, 100%. Well, you know, let's talk a little bit more about options. You know, what is the utility? And we kind of touched on this, but like, what is utility of options in a portfolio? You know, you have hedging and income generation and all these different things.
- [25:19]
Kathy Clay
Yeah, I mean, we could spend an entire couple hours talking about that. But I think just, you know, whenever you think about options, there's a way in which to deploy an option strategy that meets an objective that you have from an investment perspective. So if I'm somebody who wants to generate extra income in addition to maybe dividends that I'm receiving, I might embark on a volatility selling, typically call selling strategy where I might be systematically rolling those calls every week, every month, every quarter, to give me that systematic income generation. I might be a value investor and I want to wait until a certain stock or an index falls 20%. So I might sell some puts 20% down, which gives me an entry into that stock or index or ETF, you know, 20% from where it's trading. I might be somebody that thinks the market's not moving or Bitcoin's not going to move. And so I might sell things like a straddle or strangle, which is really just selling movement and saying this entity, the stock is going to stay in this range and I'm going to take advantage of what is basically a no movement strategy. So whatever your premise is, whatever your outlook is, whatever your investment strategy is, there is an option enabled way to engage in that strategy. And that's what the learning has to be about is what do you want for your portfolio, what makes sense for you as an investor? Learn about that. And then I assure you there is a way to engage in the options market with that actual outcome that you're trying to get.
- [26:48]
Brendan
And the cool takeaway that I have there is that you can make money whether the market's going up, down, sideways, no matter which way the market is going. There is a way to profit off of it through this.
- [27:02]
Kathy Clay
And there's also a way to protect your portfolio.
- [27:05]
Brendan
Absolutely.
- [27:06]
Kathy Clay
With buying puts that just basically enables you to sleep at night knowing that you have downside protection and you hope to lose money on that insurance that you just bought. Right, we hope to lose money on the put we just bought because it's protecting a portfolio. So again, there are so many ways to engage with the options market and there's a, you know, there's somewhat something for everyone for their portfolio.
- [27:26]
Unknown Host
You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. Stop struggling to get your job posts seen on other job sites with Indeed sponsored Jobs, your post jumps to the top of the page for your relevant candidates so you can reach the people you want faster. According to Indeed data, Sponsored Jobs posted directly on indeed have 45% more applications than non sponsored Jobs. Don't wait any longer. Speed up your hiring right now with Indeed. And listeners of this show will get a $75 sponsored job credit. To get your jobs more visibility@ Indeed.com podkatz13 just go to Indeed.com podkatz13 right now and support our show by saying you heard about Indeed on this podcast. Terms and conditions apply. Hiring Indeed is all you need.
- [28:25]
Brendan
And let's just explain that concept so the listeners can get a better understanding of it. But the premise of it, and I want to have you kind of explain it but the premise is, you know, say you have a million dollar portfolio. Well, you could come in here and maybe buy a little bit of insurance through the form of a put, right. Betting that the market is going to go down. Like you said, we hope that that stays in the red. We don't want the put to go into the money. But in the off chance that the markets do go down, well, you have a little short position that will help offset the losses of your portfolio falling. Right?
- [28:59]
Kathy Clay
That's. That's exactly right. You nailed it. When, when you buy a put, you're basically saying whether you believe the market is going there or not, you know, that you've protected your assets at a certain level and you don't have to worry anymore.
- [29:11]
Brendan
And that typically comes from maybe investors that are on the larger side of things. Right. You know, that's not necessarily a strategy, at least that I see, you know, for people that maybe have like $1,000 portfolio or 10,000 portfolio. Not that that's a bad thing by any means, but that is, this is a strategy that we typically see with larger investors. You know, people that probably have six, seven, eight figures in terms of money. In my experience.
- [29:36]
Kathy Clay
Yeah, I mean, it's much more an institutional strategy. You're managing money, you have a large book, you're going to want to have a decent return for all of the people that you're a fiduciary for. I do see it though, trickling down more into the retail space where somebody may have a concentrated stock holding because they work at the company or because they just invest it and they want to protect that in volatile times or uncertain times, and they'll go into the market and buy that, put at whatever percent out of the money that they're trying to hedge towards. So you do see everything somewhat start institutional and work its way down to retail. And in fact, that is what's happening.
- [30:08]
Brendan
You know, that. I think that's some great insight. And you know, we were talking earlier about, you know, both the future side and the derivatives and options side. You know, is there an expectation for maybe which one of these could be bigger or even just numbers of what you all are expecting over the course of the next year or two.
- [30:29]
Kathy Clay
Yeah, I mean, we had a, you know, in the option space we had a great year over year growth, fifth record year of our options business in a row. And so we can, we expect to continue to see growth in the options space. Retail adoption of futures trading is becoming more prevalent. So we should expect to see that the retail traders will Move into the futures area a bit more. It's been options more than futures for the retail segment. The futures tend to be more of an institutional product at this particular point.
- [31:01]
Brendan
And I've noticed that even, you know, liquidity is getting better there. Like as time goes on, as more of this is being added, I've noticed that the order books are becoming, are becoming more filled. Liquidity is getting better, there's more people doing this and so that kind of fits in. And again, I'm just going off of just my potential just bias. You know, my personal experience, it's easy to say, hey, as a trader, I experience this, but that's not always a reality. So it's kind of cool to say, hey, you know, I've noticed, you know, liquidity and all this other stuff growing. And you know, you all are saying, hey, we actually see the numbers increasing, you know, probably through what I would assume is both not only in terms of volume but, but also with users as well.
- [31:43]
Kathy Clay
Yeah, I mean, you make a good point. Especially like in the top 100 stocks in the U.S. liquidity is, is never been better. Yeah, the health of the, of the ecosystem around trading always includes that retail element. So to the extent the retail traders come in, it makes it much healthier for institutions and market makers to participate.
- [32:02]
Brendan
You know, are there any other features or features, excuse me, that are related to crypto products that you want to see this year? And I don't want to get you in trouble, you know, maybe talking about things that you can't, but is there anything specific that you want to see?
- [32:18]
Kathy Clay
Yeah, I mean, I think with the clear regulatory guidelines that we all anticipate we're going to get, I do expect that that's going to open up innovation into additional futures contracts on additional tokens. We know we've heard Solana Ripple is some that are mentioned. I would anticipate that we're also going to see, you know, may getting into some staking ETFs, but these are all in front of the regulars right now. So it's too early to say. But the thing I think I'd leave the listeners with is really there's an appetite to innovate that has been suppressed for a few years. And I do think when the guidelines come out, we're actually going to see innovation really start to be prevalent again, which is exciting, which is exciting to see.
- [33:01]
Brendan
And you know, I have already noticed that on the crypto front we're starting to see that a lot of these projects are starting to pump out all These big updates. You know, we just saw Uni Swap doing it with Uni Chain. We just saw Lido doing it with their, their V3. We just saw Avax or Avalanche doing it with Avax 9000. And there's all these big crypto projects that are saying, hey, we're going to start pumping out new things. And what this is is a new type of innovation that they probably wouldn't have been able, able to do or launch previously or maybe they could have and they were just too nervous to. But we are already seeing in, you know, the first few months of this year, just a new wave of innovation come across. And I think you're spot on with that. I think we're going to see a lot more in the creativity there is just going to continue to grow and we're going to look back and be like, Man 25 was this transformative year for crypto.
- [33:53]
Kathy Clay
Yeah. And I think one of the things to also throw into that great list that you've mentioned is tokenization of real world assets is high on the topic list again. And there's real projects being done across banks and across different infrastructure players. So I really look forward to seeing what is going to be done in the tokenized space because that is a game changer when it comes to balance sheet optimization, atomic risk, things like that that really bring efficiencies to the market. And so to the extent that we'll see real legitimate products being stood up, it's going to be a fun area to watch.
- [34:27]
Brendan
Yeah, I mean, that's a fascinating one because we've even seen blackrock's Larry Fink talk about this and believe in it. We've seen other, other groups like, you know, bank of America and Citi and JP Morgan and a lot of other institutions talk about how excited they are about tokenization. And that seems to be a really big focus point moving forward. And so there's so many different ways that that can be applied, but it's definitely an interesting one to keep on everyone's radar.
- [34:54]
Kathy Clay
When you see a company, a utility, an industry utility like the dtcc, which clears all of our equities here in the United States, when they're wading into tokenization, that tells you something. These are not nimble, typically nimble companies and utilities moving into tokenized assets. But it's happening, as you said, all the names you provided, and even an industry utility. So it's going to happen, it's just a matter of when and not if.
- [35:22]
Brendan
So let's just say that, you know, there's a listener out there. They want to get involved. You know, we've sparked their interest. They want to get involved with the derivatives and. Or the futures market. How would you maybe point someone in the right direction to learning about it and then actually getting started?
- [35:39]
Kathy Clay
Yeah, so the first step, I would say, is go to the CBOE Options Institute. We have 101 education on all things derivatives, including digital asset derivatives. And then I would say whatever broker dealer, retail broker dealer, whether it's Robinhood, Tastytrade, Schwab, wherever you are, engage with the education curriculum that they offer as well, because they're gonna get more specific into the actual tooling they have available on their own platform. So go to the Options Institute and then see what you can find resourcing at your retail broker dealer. And those two things should be really good.
- [36:14]
Brendan
Two first steps, 100%. And, you know, I guess another final question here is you mentioned Schwab. There's a few players, Schwab is one of them. I think Merrill lynch has been another, that have been a little bit more hesitant towards crypto. You know, do you think that we see a lot of these players who have been more hesitant to crypto start opening up here in the coming year?
- [36:36]
Kathy Clay
I would anticipate, yes. I don't know. The timelines, the risk appetites are different with all players in the industry. But I would say that ultimately, I think this is just something that's an inevitability as well.
- [36:48]
Brendan
Awesome. Well, hey, do you have any big final predictions, you know, anything that you're looking out for in the coming year? Not financial advice. It could be an event, it could be an upgrade, it could be a product. Is there anything that's on your radar for the remainder of 2025?
- [37:04]
Kathy Clay
Yeah, I think one of the things that we see in 2025 is just more volatility in general. We have a new administration in. The policies are quick and fast and sometimes unpredictable. And that generates investing opportunities. For sure, it's stock picking opportunities, but it's also hedging opportunities. And so I think this is just a year where maybe volatility as an asset class in conversation reemerges because it's a real thing. It has an effect on portfolios and performance. And so it's something to really spend some time understanding the impact on a person's particular situation. And portfolio.
- [37:41]
Brendan
Yeah. And volatility for everyone listening, that's not always a bad thing. It's easy to hear the word volatility and be like, oh, no, you know, we're used to seeing volatility in both directions. And it can be a really good thing, it can also be a bad thing. You know, the markets go up and down, and that's just a natural part of investing or trading, is that things are gonna go both directions. So, you know, when you hear the word volatility again, don't always assume it's a bad thing. Just recently here, in recent months, we've had some really good volatility. Remember when we went from like 50K up to, you know, 110K? Well, that was great volatility. And so, depending on what time you're watching this, maybe you're experiencing some good ones, maybe you're experiencing some bad ones. But, you know, we always like to zoom out and say, hey, look at the bigger picture. Despite what kind of history and volatility that the crypto markets have, because they have been and probably will continue to be very volatile, we like to zoom out to the bigger picture here. We talked about a lot of different things, and the one consistent theme is, hey, we're excited. There's all sorts of interest, there's all sorts of new products. There's all these things that are working behind the scenes. And we wouldn't be having this conversation even in the first place if there wasn't a lot of retail and institutional interest in the crypto markets. If that wasn't the case, we wouldn't be talking about these products. We want to be, you know, there want to be a podcast, but there is, and that's because there is so much going on. So, you know, we hope that everyone continues to follow along. Kathy, we appreciate you coming on. Where can people follow what you're doing and what CBOE is doing?
- [39:16]
Kathy Clay
I think LinkedIn is where we have most of our action happening, but the website also has all sorts of fresh news and updates coming from there. So I direct people to both of Those and follow CBO Global Global Markets100.
- [39:29]
Brendan
Well, Kathy, we're gonna have to have you back on here. I know that there is a lot of stuff that's up in the air with the regulators, especially when it comes to the, the altcoin market. And we're sure that things are going to be moving at lightning speed like you said this year. So there's going to be a lot of updates, upgrades, new things to talk about. So as that stuff develops, we're gonna have to have you back on so that you can talk about all of it. But we appreciate you coming on here and spreading your wisdom.
- [39:55]
Kathy Clay
Hey, thank you, Brennan. It's great to be here and look forward to coming back when things change materially, because they will.
- [40:01]
Brendan
Absolutely. Well, that's going to go ahead and wrap us up for this episode, everyone. Thank you all for tuning in. Make sure you stick around. We got a lot of great content, a lot of great interviews coming your way in the not so distant future. So we'll see them all. We'll see all of you at the next podcast very soon.
- [40:28]
Kathy Clay
Wow. What's up? I just bought and financed a car.
- [40:31]
Brendan
Through Carvana in minutes.
- [40:32]
Kathy Clay
You, the person who agonized four weeks over whether to paint your walls eggshell or off white, bought and financed a car in minutes.
- [40:39]
Brendan
They made it easy, transparent terms, customizable, down and monthly.
- [40:43]
Kathy Clay
Didn't even have to do any paperwork. Wow. Hey, have you checked out that spreadsheet I sent you for our dinner? Options Finance your car with Carvana and experience total control financing subject to credit approval.
- [40:58]
Unknown Host
You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. Stop struggling to get your job posts seen on other job sites with Indeed sponsored jobs. Your post jumps to the top of the page for your relevant candidates so you can reach the people you want faster. According to Indeed data, sponsored jobs posted directly on indeed have 45% more applications than non sponsored jobs. Don't wait any longer. Speed up your hiring right now with Indeed and listeners of this show will get a $75 sponsored job credit. To get your jobs more visibility at indeed.com podkatz13 just go to indeed.com podkatz13 right now and support our show by saying you heard about Indeed on this podcast. Terms and conditions apply. Hiring Indeed is all you need.