Simplify bursts into equity index options lead

Simplify Asset Management added $39.1 billion of equity index options notional to its books in the third quarter of 2022, becoming the most active US mutual fund and exchange-traded fund (ETF) manager in the space. The increase skewed heavily towards puts, growing the firm’s book seventy-one-fold.

US funds expanded their equity index options positions by $42.9 billion in Q3, pushing the market to $159 billion, the highest in the 11 quarters of data for mutual funds and ETFs starting Q1 2020. Notably, managers added $23.5 billion of purchased puts, growing them 3 percentage points to 46%, and $16.8 billion of written puts, increasing them 5 percentage points to 25%. This boosted the overall puts ratio by 9 percentage points to 70%, an all-time high.

Meanwhile, purchased calls increased by $3.2 billion to $8.8 billion, growing 1 percentage point to 6%, and written calls decreased by $657 million to $38.5 billion, falling 10 percentage points to 24%.

Risk.net’s Counterparty Radar has taken the figures from filings made to the US Securities and Exchange Commission.

Virtually all the major changes were in options referencing the S&P 500, with Simplify Asset Management in the lead. The manager added $17.2 billion of purchased puts on the large-cap index, and $16.8 billion of written puts, while also putting on $3 billion of purchased calls and $2.1 billion written.

Guggenheim joined the S&P 500 put party, boosting purchased puts by $2.8 billion, and written ones by $2.5 billion. This contributed to an overall $5.4 billion book growth to $6.2 billion, securing the manager seventh spot.

Not to be left behind, SunAmerica Asset Management added $5.2 billion of purchased puts on the Standard and Poor’s index, growing overall to $7 billion, and joining the top 10 in sixth place.

At the opposite end, Calamos led the decreases, cutting its book by $7.7 billion to $11.6 billion and sliding from second to third place. On the S&P 500, the manager took off $3.5 billion of written calls, scrapped its $2.9 billion written puts position and reduced written puts by $1.4 billion.

While not in the top 10, Bessemer Investment Management implemented the second-largest downsizing, liquidating its $1.9 billion purchased puts position and exiting the market.

JP Morgan Asset Management made the third largest cut, $1.1 billion, of which $903 million consisted of purchased puts on the S&P 500. The manager settled in second spot with $24.2 billion, ending a growth streak of five successive quarters starting in Q2 2021. While continuing to top the largest trades, Simplify joined it with a $5.1 billion purchased put and a $4.8 billion written put.

Apart from the S&P 500 changes, the Nasdaq 100 dropped from $3.4 billion to $2.3 billion, with managers taking off $879 million of written calls and $239 million of purchased calls. Nationwide led the decline, scrapping a $700 million written calls position, followed by T Rowe Price and Columbia Threadneedle.

About this data 

The information used in this analysis comes from Nport-P filings to the US Securities and Exchange Commission. This is a relatively new form, introduced at the end of 2019, which requires mutual funds and exchange-traded funds to file monthly summaries of their portfolio holdings to the SEC.  

The filings include over-the-counter derivatives trades that were live at the time of the filing, and show details such as bank counterparty names, currencies, trade sizes and remaining maturity.

The forms are filed to the SEC on a monthly basis, and the regulator makes the final filing of each fund’s quarter public 60 days after the end of that period. The filings are in a structured XML form, making it possible to download and parse the data for trends.  

It’s important to caveat the information. While these are pro forma regulatory filings to the SEC and should be accurate, mistakes and miscategorisations do occur. The data was cleaned and obvious errors excluded. 

Notionals for equity options are not included in the filings, so have been calculated independently by Counterparty Radar. This involved multiplying the reported number of contracts by the number of shares per contract, and then multiplying this figure by the strike price.

The resulting strike-adjusted notional may differ from funds’ annual or semi-annual reports, which often use the spot price at time of filing instead of the strike. We chose to use the strike price to allow for quarter-to-quarter comparability – otherwise notional amounts might change solely due to changes in spot prices. The methodology is based on feedback from market participants, but if you have any comments please contact us, using the details below.

As the database is updated and improved periodically, data presented may not mirror information published in previous stories. Each story reflects the most accurate representation of data at the time of publication. 

Information from these filings is the basis for the new Risk.net service, Counterparty Radar, which allows users to search the filings information themselves to discover the most popular dealers and most active managers for a range of OTC derivatives – the addition of single-stock and equity index options takes the number of instruments covered to eight, across four asset classes. We will track these stats every quarter, so please get in touch if something doesn’t look right, or to suggest other ways to present the data: michael.paterakis@infopro-digital.com