| January 30, 2023 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Hindenburg's Adani Attack Whips Up a Frenzy in Options Trading
Akshay Chinchalkar - Bloomberg
Hindenburg Research's attack on the Adani Group is sparking a flurry of bets in the options markets, with a wide divide between those behind the short seller and others predicting a rebound in the shares.
Data from the options chain show that all the Adani stocks that trade in the derivatives segment are closer to their support levels relative to their resistances, so a continued decline here will exacerbate downside volatility as investors are either forced to book losses or hedge their open positions. The optimists view stems from the fact that implied volatility for most of the group's stocks is already at a 12-month high, so unless more bad news trickles in, swings are likely to come off.
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The "broken" Vix
Robin Wigglesworth - Financial Times
The Vix volatility index has been remarkably calm lately. In fact, it's been so subdued that some people think it's either a harbinger of chaos, or simply broken. Is it though?
The index, which financial journalists appear contractually obliged to describe as "Wall Street's fear gauge", does look a bit low given everything going on. Earlier this month it even fell below the 20-per-cent mark that is roughly its long-term average.
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Wall Street's 'fear gauge' VIX shaping up more like 2021 than 2022, as U.S. stocks rally this year, says DataTrek
Christine Idzelis - MarketWatch
U.S. stocks have rallied in 2023, as a measure of the market's fear subsided ahead of the Federal Reserve's policy meeting this week and as investors weighed company earnings.
The CBOE Volatility Index, known as Wall Street's "fear gauge," ended Friday at 18.5, "below its long-run average of 20," Nicholas Colas, co-founder of DataTrek Research, said in a note emailed Monday. That's down from early January, when the gauge, which trades under the ticker VIX, kicked off the year with a close of 22.9, FactSet data show.
"We have started 2023 with the VIX looking a lot more like 2021 rather than 2022," said Colas.
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Bullish Bets Surge During January Rally
Gunjan Banerji - WSJ
Traders are rushing to profit from the January rally in the stock market, sending call options trading to one of the highest levels ever.
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A Wild Ride Trading One-Day Tesla Options
Gunjan Banerji - WSJ
Tesla options activity hit a record Friday. The explosive gains offered by one of most actively-traded bets that day help explain why.
One of the most actively-traded options during the trading session that sent Tesla shares up around 11% was a call contract tied to the shares hitting $175, which expired on Friday.
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It's a key week for the stock market. If you're not nervous, you should be, this global strategist warns.
Barbara Kollmeyer - MarketWatch
Investors have got the jitters as a big week unfolds â several central bank meetings including the Fed, earnings from Apple and Amazon.com, and jobs data. Yikes.
Any investor out there who isn't nervous, perhaps should recheck his gut, says our call of the day, from Standard Chartered's global head of research, Eric Robertsen.
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Commodity trade costs surge as industry seeks up to $500bn in extra finance; Rising rates, market volatility and the war in Ukraine are making it more expensive to move goods around the world
Leslie Hook - Financial Times
High interest rates, volatile prices and the war in Ukraine have made it significantly more expensive to finance commodity trade, forcing the industry to hunt for an extra $300bn to $500bn in working capital to keep raw materials moving around the world. Changing trade patterns have made the global flow of raw materials less efficient and more costly to finance and are also likely to push up the price of commodities for consumers, according to a new study by consultancy McKinsey.
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Column: Funds defend CBOT corn long but sell soymeal after historic run-up
Karen Braun - Reuters
Chicago grain and oilseed futures slipped early last week amid the lack of fresh news to support recent highs, particularly as rain fell on drought-stricken crops in major exporter Argentina.
Speculators were net sellers across the soy complex and in wheat in the week ended Jan. 24, but they extended their net long in CBOT corn to an 11-week high of 201,797 futures and options contracts, up nearly 10,000 on the week.
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| | | | | | Exchanges | | | Strong Volume Year Expected for Listed Derivatives; Global listed derivative volumes are expected to remain strong in 2023 after reaching a record last year according to data tracked by Liquidnet.
Shanny Basar - MarketsMediaGroup
2022 global listed derivatives volumes (excluding single stock options) reached 71.1 billion contracts, an increase of 47.7% from the previous year according to Liquidnet's 2022 Listed Derivatives Review. However, options trading on Indian indices accounted for 20.2 billion contracts of growth, almost all of the global increase of 22.5 billion contracts exchanged globally last year. Removing India from the data reduces total global growth to 7%.
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Derivatives volumes are up - and it's giving the buy-side a headache; Equity index derivatives volumes jumped 73% in 2022, according to the Futures Industry Association (FIA) - but the increase is causing higher operational risk and capacity burdens for asset managers and buy-side traders.
Laurie McAughtry - The Trade
The FIA futures and options exchanges data findings for December 2022 and annual year 2022 show that numbers are broadly up for listed futures and options, with equity index derivatives volumes increasing 73% to 48.6 billion in 2022, making up more than half the overall global total. The worldwide volume of exchange-traded derivatives reached 8.44 billion contracts in December, up 8.9% from November 2022 and up 37.4% from December 2021.
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Meet Our Chief Clearing and Settlement Services Officer, Mike Hansen
OCC
Experience: More than 20 years of options industry experience; OCC's Dallas site leader; Has served in various roles throughout his tenure at OCC, including in back office processing, pricing and member services. Education: Bachelor's degree in agricultural economics from the University of Illinois at Urbana-Champaign; Graduated from SIA's Securities Industry Institute at the Wharton School of the University of Pennsylvania. Quick Facts: Dallas Regional Chamber Member Director; Metrocrest Services Board Member; Leadership Dallas Class of 2021 - Dallas Regional Chamber of Commerce
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MIAX Is Making Volatility Trading More Accessible To Retail Investors With Its Volatility Products: SPIKES Options, Futures, And ETFs
Rachael Green - Benzinga
With persistent inflation and the aggressive interest rate hikes from the Federal Reserve, the stock market in 2022 experienced its most volatile year since 2009.
The S&P 500 has been on a shaky decline since January 2022, and despite a few short-lived rebounds, it was down 19.4% at the end of 2022. Intraday volatility â the percentage change in share price from market open to market close â averaged 1.84% in 2022, compared to its 40-year average of 1.3%.
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MIAX Options Exchange - Trading Of Complex Orders With Non-Conforming Ratios
Press Release
The MIAX Options Exchange will begin accepting non-conforming ratio option-only complex orders beginning Friday, February 3, 2023.
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ICE Announces Plans to Implement EU Market Correction Mechanism and Related Price Cap on TTF Natural Gas
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of data, technology, and market infrastructure, today announced how it intends to implement the European Union's Market Correction Mechanism Regulation (MCM Regulation) and related price cap on TTF natural gas derivatives, in time for entry into force of the regulation. ICE Endex, based in the Netherlands and operator of the world's most liquid trading venue for TTF natural gas futures and options, plans to change its Rulebook to promote compliance with the MCM Regulation, effective February 15, 2023, subject to completion of relevant regulatory processes.
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NSE world's largest derivatives exchange for fourth straight year in 2022; Sovereign Gold Bond's daily average turnover in the secondary market was Rs 7 crore in CY 2022, a jump of 59 per cent YoY
Press Trust of India
The National Stock Exchange of India (NSE) has again emerged as the world's largest derivatives exchange in 2022, in terms of the number of contracts traded, according to the Futures Industry Association (FIA). This is the fourth consecutive year when the exchange earned the top spot, the NSE said in a statement on Sunday. In addition, the exchange was ranked third in the equity segment by the number of trades (electronic order book) in 2022, an advancement from the previous year when it was in the fourth position, as per statistics maintained by the World Federation of Exchanges (WFE).
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| | | | | | Regulation & Enforcement | | | Regulator Says FTX's LedgerX Auction Shows Need for More CFTC Clout on Acquisitions
Lydia Beyoud - Bloomberg
A senior Commodity Futures Trading Commission official says the agency needs the power to approve or reject an unregulated company's acquisition of a derivatives exchange. The planned sale of crypto derivatives exchange LedgerX, a solvent piece of Sam Bankman-Fried's collapsed FTX empire, has raised concerns about the CFTC's authority over these acquisitions. LedgerX and other parts of the business are being auctioned off as part of the FTX bankruptcy proceedings.
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'City is defining the rules of Continental Europe more than ever post-Brexit', says Euronext cash and derivatives head; European regulators have made several U-turns in the last few months, in particular around their stance on systematic internalisers and dark trading, that mimic UK proposals.
Annabel Smith - The Trade
The influence of the City of London and the UK's Financial Conduct Authority (FCA) on European regulation has never been greater, says Euronext's head of cash and derivatives, Simon Gallagher. Regulators in the UK and Europe have been shoring up their newly separate regulatory regimes following Brexit, taking seemingly divergent stances to transparency and dark trading. However, a U-turn proposal put forward the Czech Presidency and then approved by Member States at the end of last year signals a change of direction for EU regulation.
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Congress should reinvigorate the CFTC so it can regulate shadowy financial markets
Todd Phillips - MarketWatch
The Commodity Futures Trading Commission, or CFTC, is the federal regulatory agency that is charged with regulating derivatives, the complex financial products that helped cause the 2007-08 financial crisis and subsequent recession. Despite its importance in ensuring the stability of the nation's financial system, the CFTC's authorization lapsed in 2013. After a decade and several failed attempts, Congress should reauthorize the CFTC this year, perhaps as part of the farm bill.
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JPMorgan reviews oversight of traders amid boom in financial markets - sources
Stefania Spezzati - Reuters
JPMorgan Chase & Co. (JPM.N) is working with KPMG to improve how the U.S. bank supervises its traders, sources with knowledge of the review told Reuters, as Wall Street wrestles with how to spot potential wrongdoing during a securities trading boom.
KPMG is reviewing JPMorgan's oversight of traders across the bank's markets division globally, the people said. The bank's revenues from buying and selling of bonds, currencies and stocks, rose to $29 billion in 2022, the largest among the top five U.S. banks and a near record high.
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| | | | | | Moves | | | Sean Feeney shared on LinkedIn that he has been promoted to head of US options at Nasdaq, which he described as a lifelong dream come true.
Congratulations to OCC Executive Director for Business Continuity and Cyber Resilience Clint Fransen, who was re-elected to and promoted to chair of the ChicagoFIRST board of directors. ChicagoFIRST is a nonprofit that facilitates collaboration between critical businesses and relevant local, regional and national public sector agencies on resilience and emergency management planning and response.
| | | | | | Strategy | | | Goldman Sachs: Make these 10 trades right now for a guaranteed profit whether a stock soars or crashes after it reports earnings
Business Insider
Goldman Sachs researchers have concocted an investing strategy that's designed to be profitable whether a stock spikes or dives after reporting earnings.
While it almost sounds too good to be true at first, that's exactly what a straddle trade accomplishes, provided that the underlying stock makes a large-enough move within a certain timeframe.
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Event Volatility Effects
Cbooe (Video)
In today's #Vol411, Cem Karsan @jam_croissant explains how the passing of major binary outcome events leads to implied volatility decay and 'counterintuitive' market moves.
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| | | | | | Events | | | The FIA/SIFMA AMG Asset Management Derivatives Forum 2023 is February 8-10, 2023, at the Ritz-Carlton Laguna Niguel in Dana Point, California. The eighth annual Asset Management Derivatives Forum is an opportunity for market participants from all sides of a trade and leading regulators to examine the latest developments impacting the use of derivatives by asset managers, including business, clearing, regulatory and operations issues. You can view the agenda and register here.
| | | | | | Miscellaneous | | | Thomas Cashman: FIA Futures Hall of Fame 2023
FIA
Thomas J. Cashman was a veteran independent floor broker and trader on the Chicago Board of Trade and part of a prominent family that has featured several members working in the city's commodity trading markets. For more than five decades, he filled orders in the Soybean Futures pit of the CBOT and has been a full member of the Chicago Board of Trade for over 60 years. Cashman served on numerous exchange governance committees including the Floor Governors Committee, the CBOT Nominating committee and the CBOT Ethics and Integrity Committee, each as Chairman. He also served on its Board of Directors in the early 1980s, during a period of significant change and growth for the Exchange.
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