| February 23, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Bank of America Says Options-Driven 'Volmageddon 2.0' Warning Is Overblown
Lu Wang - Bloomberg
A week after JPMorgan Chase & Co.'s Marko Kolanovic issued a "Volmageddon 2.0" warning on the explosive rise in short-dated options, Bank of America Corp. strategists are pushing back. Investor positioning in hot derivative-powered trades - like S&P 500 contracts that expire within 24 hours - looks less threatening to the wider marketplace compared with the mania that led up to the 2018 volatility rout, per BofA.
/jlne.ws/3xK0m46
Watch Volmageddon 2.0 Talk 'Overblown to Third Power,' Says Evercore's Emanuel
Bloomberg (Video)
Evercore ISI Chief Equity and Quantitative Strategist Julian Emanuel says the chances of a repeat of the volatility rout that occurred in February of 2018 are "overblown to the third power-- it's not going to happen," he says on "Bloomberg Surveillance."
/jlne.ws/3m3QJum
Short-dated options trade behind Thursday's U.S. stock market choppiness -Nomura's McElligott
Saqib Iqbal Ahmed - Reuters via Yahoo
An intraday dip in the S&P 500 Index on Thursday was spurred by large trades in short-dated derivatives that piled selling pressure on the market, according to Nomura strategist Charlie McElligott.
Some 26,000 Feb 23 put options on S&P 500 e-minis futures with a strike price corresponding to the 4,000 level were bought early in Thursday's session, McElligott said in a note.
/jlne.ws/41knWlF
The S&P 500's Already Volatile Year May End in Gains, History Suggests
Carla Mozée - Markets Insider
It's been a volatile year for stocks so far - and at least one investor has placed big bets on volatility spiking - but history indicates the rocky road for equities could eventually lead to the S&P 500 logging a gain by year's end, according to market research firm Bespoke Investment Group.
The S&P 500 notched its 35th trading day of 2023 on Wednesday, and nearly half of those sessions have recorded daily moves of at least 1%. Other years carrying such volatility were 1988, 2003, 2008, 2009 and 2016.
/jlne.ws/3Iq563J
More volatility, possible correction ahead for global stock markets: Reuters poll
Hari Kishan - Reuters
Volatility in global stock markets is not yet over, as more investors reckon interest rates will likely stay higher for longer, according to a Reuters poll of equity analysts, a slight majority of whom expected a correction within three months.
Global stocks (.MIWD00000PUS) fell nearly 20% in 2022 and would have fared worse if it were not for a late-year rally on hopes falling inflation and weaker growth would force central banks to halt an historic rate-hiking run and swiftly start cutting within months.
/jlne.ws/3krAEhW
| | | | | | Regulation & Enforcement | | | SEC Is Not the Right Regulator for Stablecoins, Circle's (USDC) Allaire Says
David Pan and Stacy-Marie Ishmael - Bloomberg
The US Securities and Exchange Commission is not the right regulator for stablecoins, according to Jeremy Allaire, the chief executive and founder of Circle Internet Financial Ltd.
The Boston-based firm is the issuer of the second-largest stablecoin, USD Coin, with over $42 billion in circulation. Stablecoins usually aim to maintain a one-to-one ratio with key assets such as the dollar by holding comparable reserves, and act as a crucial medium between the traditional financial system and digital assets. The tokens are used to facilitate trades, exchange assets between blockchains and serve as a haven from the volatile price swings that hit cryptocurrencies, hence the stablecoin name.
/jlne.ws/3SFpwuB
| | | | | | Education | | | Explainer: The rise of 0DTE stock options and how they could be a risk to markets
Saqib Iqbal Ahmed - Reuters
Investors are piling into shorter-dated options contracts, boosting trading volumes in the options market to new highs while sparking concerns about a potential volatility shock that could ripple out to the broader stock market.
Growing investor interest in these contracts - dubbed 0DTE (zero days to expiry) options - is shining a light on a corner of the market where both retail and institutional players are jockeying to profit from intraday market moves.
/jlne.ws/3IP3rWN
| | | | | | Strategy | | | Zero-Dated Options Aren't as Hazardous as Many Think. Here's How 0DTEs Work.
Steve Sosnick - Barron's
A seemingly new product has options markets buzzing. So-called Zero Days to Expiration, or "0DTE," options, have spurred historic trading volumes alongside a wave of concerned commentary. Any financial innovation brings a rightful share of concerns, but these new contracts are evolutionary, not revolutionary.
It's more like the casinos opened a new set of tables rather than introduced truly new games. Remember, every option eventually becomes zero-dated on expiration day. What differs is the frequency of expirations, not the expirations themselves.
/jlne.ws/3xQsxi2
VIX jumps this week amid Fed worries after stock-market fear gauge's 'very quiet' start to 2023
Christine Idzelis - MarketWatch
The stock market's fear gauge jumped suddenly this week, with volatility returning to equities amid heightened concern the Federal Reserve may raise interest rates higher than investors had been expecting, according to DataTrek Research.
"Equity vol is back," said Nicholas Colas, co-founder of DataTrek, in a note Wednesday. "We are back in '2022 mode', where it pays to watch the VIX."
/jlne.ws/3IOucdZ
Huge Equity Options Volumes
Cboe (Video)
In today's #Vol411, Scott Bauer @cboesib talks heavy #trading in equity #options - $SBUX, $TSLA & $NVDA - and the shift in $SPX ATM implied #volatility between Friday's expiration and Monday.
/jlne.ws/3m0iUuu
| | | | | | Miscellaneous | | | Reddit's Army of Retail Investors Is Partying Like It's 2021
Phil Rosen - Business Insider
Happy Friday eve, team. Phil Rosen here. Did you catch yesterday's Fed minutes release?
It looks like central bank officials unanimously agreed that the last rate hike of 25 basis points was the appropriate size, and that slowing down the pace would "better allow them to assess the economy's progress."
/jlne.ws/3xKUHuC
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| | | Jeff Bergstrom
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