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John Lothian News | |
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| Observations & Insight | | |
Leverage WTI Weekly options to manage weekend risk ahead of the 4th of July and OPEC weekend. See how.
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| Lead Stories | | | Jane Street Shows Dangers of Finance as Shampoo; The regulator's probe should help India's retail traders understand why cheap, near-expiry, equity options were always meant to sting.
Andy Mukherjee - Bloomberg
Indian consumer businesses have long understood that the key to making poor people buy more shampoo is to put a little bit in small, affordably priced plastic sachets. In the past few years, high-frequency traders have used the same formula - risk packaged for as little as 12 cents - to reap billions of dollars in profits from unsuspecting masses. The whole experiment succeeded beyond anyone's imagination, and India became the world's largest options market by volume. Then all hell broke loose Friday.
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Wall Street's 'fear gauge' declines as stocks settle after yesterday's tariff news
Gordon Gottsegen - MarketWatch
The Cboe Volatility Index, also known as Wall Street's fear gauge, was trading around 16.78 on Tuesday, or 5.7% lower, according to Dow Jones Market Data. This follow's the index's spike on Monday.
The VIX climbed over 11% intraday on Monday after President Donald Trump announced reciprocal tariffs for about a dozen nations, before ending the day 8.6% higher. That was the index's largest jump since mid-June.
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Wall St is mixed as investors monitor Trump's latest tariff moves
Sinead Carew and Pranav Kashyap - The Wall Street Journal
The S&P 500 and the Nasdaq struggled for direction on Tuesday, as anxiety over President Donald Trump's comments on tariffs overshadowed earlier investor hopes that ongoing discussions might provide some clarity on U.S. trade policies.
Wall Street equities had sold off on Monday after Trump warned of sweeping new tariffs on goods from key trading partners such as Japan and South Korea and a range of smaller countries starting in August.
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Jane Street's Lucrative India Trade Highlights Key Market Quirk
Cecile Vannucci and Chiranjivi Chakraborty - Bloomberg
The trading strategy that helped Jane Street Group earn billions of dollars in India likely wouldn't have worked nearly as well in other markets.
The US firm made use of the country's peculiar market structure, where derivatives turnover is more than 300 times larger than cash equities, thanks to the outsized presence of options-loving retail investors.
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Robinhood has rolled out 'tokenized' stocks and ETFs. Here's what to know about the crypto-like assets.
Samuel O'Brient - Business Insider
Robinhood stock surged last week after the company announced that users in Europe would be able to trade "tokenized" versions of popular US stocks and ETFs, including shares of private companies like SpaceX and OpenAI.
OpenAI ultimately responded by issuing a warning that it doesn't endorse the move and wasn't involved in issuing any equity to back these tokenized shares.
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Wall Street Builds S&P 500 'No Dividend' Fund in New Tax Dodge
Vildana Hajric - Bloomberg
Wall Street's latest tax dodge doesn't hide in the Cayman Islands or rely on complex derivatives. It's engineered to turn a publicly traded fund into a tax-minimizing machine that hums quietly on autopilot. While dividends have long been a defining feature of stock investing - a sign of corporate discipline and investor reward - Roundhill Investments plans to launch the S&P 500 No Dividend Target exchange-traded fund on July 10 with the ticker XDIV. Its ambition is simple but strategic: track the performance of the famous benchmark while dodging its payouts. The fund will sell holdings just before their dividend dates - steering income away from ETF shareholders and, in the process, away from their tax bills.
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| Exchanges | | | Floor Traders Want Their Seats Back (Opinion)
Matt Levine - Bloomberg
Trading floors used to be natural monopolies. Some brokers get together and start trading stocks with each other under one particular tree, or in one particular coffeehouse, and they keep coming back every day; over time they get themselves a dedicated exchange building with a comfortable trading floor where they can meet and trade stocks. If you are a broker with stock to sell, you will naturally go to the exchange with the most potential buyers; if you are a broker who wants to buy stock, you will naturally go to the exchange with the most sellers. If you dislike something about the exchange - if you think the room is too drafty or the other brokers are unfriendly or the rules discriminate against you - well, tough. You could go across the street and start a new exchange, but that's hard to do, because everyone wants to be where everyone is. If it's just you across the street, who will want to trade with you?
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Old-School Floor Traders Finally Get Their Day in Court Against CME; Trial opens in the Chicago plaintiffs' long-running lawsuit claiming harm from the launch of electronic markets
Alexander Osipovich - The Wall Street Journal
Thousands of jostling traders once packed the floors of Chicago's futures exchanges, before the advent of high-speed computerized trading turned them into relics of a bygone era. Now, some of them will finally have their day in court.
On Monday, a trial began in a long-running class-action lawsuit filed by traders who say that exchange giant CME Group duped them out of the privileges they held as members of the city's once-elite community of floor traders.
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Index Insights: June
Cboe
June 2025 marked a third strong month for broad-based equity indices with gains near 5% for the S&P 500 Index (SPX) and the Russell 2000 Index (RUT) benchmarks. Implied and realized volatility trended lower despite continued geopolitical situations, including U.S. action against Iranian nuclear sites late in the month. The Cboe S&P Equal Weight Index (SPEQX) gained 3.23%, slightly lower than the other equity indices. The Cboe Volatility Index (The VIX Index) closed the month at 16.73, down more than 5.5 points, one of the lowest close since February. Consistent with lower levels of general concern, correlation among stocks decreased, with the Cboe 1-Month Implied Correlation Index (COR1M) sliding from mid-month highs above 30 to a month-end close of 14.48, also the lowest since February.
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Cboe Europe to Launch Pan-European EBBO Trading Solution for Retail Investors
Cboe
Cboe Europe, operator of the largest pan-European stock exchange by value traded and a division of Global Markets, Inc. (Cboe: CBOE), today announced its plans to launch a retail-focused trading service on its Lit order book designed to enhance execution outcomes for retail investors trading stocks and ETFs across Europe. The service is scheduled to go live on 8 September 2025, subject to receiving the required regulatory non-objections in the Netherlands and the UK.
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MCX Strengthens Commodities Portfolio with Launch of Electricity Futures
MCX
The Multi Commodity Exchange of India Ltd. (MCX), India's leading Commodity Derivatives Exchange and the largest Commodity Options Exchange globally (FIA, 2024), had received SEBIs approval for launch of electricity derivatives in June 2025, and is pleased to announce the launch of the Electricity Futures Contract, effective from Thursday, July 10, 2025, marking a significant milestone in the development of the country's energy derivatives market.
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MEMX Appoints Ishaan Acharya as Chief Financial Officer
MEMX
MEMX, a technology-driven exchange operator founded by members to benefit all investors, today announced the appointment of Ishaan Acharya as Chief Financial Officer. Acharya is based in New York and will be responsible for MEMX's financial activities including accounting, budgeting, forecasting and strategic planning. Prior to joining MEMX, Acharya spent seven years at Hudson River Trading LLC, most recently serving as Head of Financial Strategy where he built and led the firm's financial strategy and global treasury function. His deep experience across financial services-including investment banking at J.P. Morgan, where he advised financial institutions on M&A and capital markets transactions, and investment management at Goldman Sachs-positions him well to help MEMX build on its strong financial foundation as it scales its U.S. equities and options trading platforms.
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| Regulation & Enforcement | | | Jane Street Defends India Trading Activity, Blasts Regulator
Bei Hu and Chiranjivi Chakraborty - Bloomberg
Jane Street Group LLC told its employees that India's securities regulator made "many erroneous or unsupported assertions" about its trading activity in the country, and the firm intends to defend itself against the accusations.
In an email to staffers over the weekend, the American proprietary trading firm and market maker said it strongly rejects the premise and substance of an interim order from the Securities and Exchange Board of India that accused it of "index manipulation."
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Jane Street to challenge India ban, says it engaged in basic arbitrage
Urvi Manoj Dugar and Chandni Shah - Reuters
Jane Street has told staff it will contest a ban by India's financial regulator which has accused the U.S. high-frequency trading giant of market manipulation, adding that its practices in question were "basic index arbitrage trading".
Jane Street said it was "beyond disappointed" by what it called "extremely inflammatory" accusations from the Securities and Exchange Board of India (SEBI) and is working on a formal response, according to an internal email sent to employees over the weekend that was seen by Reuters.
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| Strategy | | | Wall Street's Fear Gauge Drops. Reasons to Watch for a New VIX Spike.
Adam Clark - Barron's
Markets are relatively calm in the face of President Donald Trump's latest tariff announcement. But there's still room for a summer surprise.
The Cboe Volatility Index, which tracks S&P 500 options and trades under the ticker VIX, was down 2.8% at 17.30 in early trading on Tuesday. A reading below 20 is typically seen as a sign of relatively low volatility.
Still, that doesn't mean investors can totally relax and enjoy their summer holidays.
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Short Option Performance after Price Reversions
tastylive (Video)
In this episode of Options Jive, the Tom Sosnoff and Tony Batista discuss the performance of selling out-of-the-money options and the concept of price reversion. They examine a study on SPDR S&P 500 ETF Trust (SPY) 20 delta strangles, detailing how the underlying asset often reverts to its initial price. With 75% of trades showing price reversion before expiration, they emphasize the importance of managing trades early in their life cycle to maximize profits. The discussion highlights the balance between patience and taking profits effectively.
/jlne.ws/3GxOB8W
Historic Rally Analysis: 23% Gain in 86 Days with Fastest VIX Decline Ever
tastylive (Video)
Hosts Tom and Tony analyzed the historic nature of the current market rally, identifying 11 similar occurrences since 2005 using criteria of 20%+ gains in two months with interruptions no larger than 6%. The current rally's 86-day duration and 23% magnitude places it as the third fastest recovery, trailing only the post-financial crisis (2009) and post-pandemic (2020) rebounds. Most remarkably, the VIX decline from peak to current levels happened faster than any comparable period, with Tom attributing this speed to modern information dissemination and faster market reactions. Despite the impressive statistics, both hosts expressed nervousness about current extension levels, noting this represents the first meaningful pullback after making new highs, with markets showing signs of internal struggle between bulls and bears.
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| Education | | | June Webinar Key Takeaways: Generating Premium Income With Option Strategies
OIC
In June, OIC hosted two webinars, Premium Income I: Covered Calls and the Poor Man's Covered Call and Premium Income II: Cash-Secured Puts & the Wheel Strategy, led by Ken Keating, OIC Instructor and Principal, Investor Education, OCC. The sessions focused on premium income generation through options trading, illustrating both the risks and potential benefits involved.
In the first webinar Ken detailed the mechanics of covered calls, including the obligation to sell shares at the strike price if assigned, and the impact of early exercise, particularly concerning dividends. He also introduced LEAPS® (Long-term Equity Anticipation Securities®) as a possible alternative to traditional covered calls.
/jlne.ws/3IiR1J5
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| Miscellaneous | | | What Anti-Woke Funds and ESG Have in Common; Conservative investment vehicles can fall into the same traps that befell socially conscious investments
Gunjan Banerji - The Wall Street Journal
Investors hoping to abandon so-called woke principles might be looking in the wrong place.
Some of them have turned to exchange-traded funds that promise an antidote to the liberal culture that has rankled many Americans. The American Conservative Values ETF, for example, says it lets investors align portfolios with political beliefs and boycotts companies that are viewed as hostile to its values. It singles out "big tech and banking elites" such as JPMorgan Chase, the New York Times and Meta Platforms, saying they silence conservative voices. "We believe conservatives either unwittingly or begrudgingly support the woke liberal agenda with their current investments," its website states.
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