| February 26, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | The full agenda for the Options Industry Conference to be held on April 30 to May 2, 2024 in Asheville, NC has been released. You can find it HERE. John Lothian News is a media sponsor of the Options Conference and will be there again to conduct video interviews. If we missed you at FIA Boca, OIC is your chance to grab an interview with us. Email me at johnlothian@johnlothian.com if you are interested in an OIC interview. ~JJL
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Term of the Week - To Be Paid By the Buyer to the Seller
JohnLothianNews.com
In addition to their potential intrinsic value, options also have another element of value: the option premium. The premium has to be paid by the buyer, which is then transferred to the option seller. To a certain extent, the purchase of an option contract can be compared to the acquisition of an insurance policy, where a premium is charged by the insurance seller. The insurance buyer pays the premium in advance of the period during which the insurance agreement is valid. The contract embeds a potential claim, which will only be lifted if certain conditions are met.
Watch the video »
| | | | | | Lead Stories | | | Nvidia bets dominate US options market as AI fervor grows
Saqib Iqbal Ahmed - Reuters
Investors' fervor for all things AI-related is leaving its mark on the U.S. options market, as traders pile in to derivatives bets to gain exposure to the red-hot investing theme.
Options on artificial-intelligence darling Nvidia (NVDA.O), opens new tab accounted for 25 cents of every dollar of premium - the price of contracts - traded in U.S. single-stock options over the past month, nearly $3 billion in options premium traded in the chipmaker's options every day on average, a Reuters analysis of Trade Alert data showed. During several recent sessions, Nvidia surpassed Tesla (TSLA.O), opens new tab as the option market's most heavily traded name for the day.
/jlne.ws/49O2TLB
Hedge funds are dumping tech stocks at the quickest pace in 7 months after Nvidia's wild earnings report
Yuheng Zhan - Business Insider
Nvidia's blockbuster earnings last week have been followed by big outflows from the tech sector among hedge funds as they look to take some chips off the table after piling in ahead of the chip maker's results.
Goldman Sachs' prime brokerage unit said hedge funds have been selling tech at the fastest pace in seven months after a six-week period of buying before Nvidia reported results last Wednesday.
/jlne.ws/3uMZgXv
China's Quant Clampdown Risks Damaging Fragile Markets for Years; A sudden crackdown has sparked a frenzy as quant funds suffer losses.
Bloomberg News
Chinese hedge funds were looking forward to a holiday break from the market turmoil when trouble started brewing last month. One manager had his short-selling orders abruptly rejected by brokers. Another was cut off from the stock market completely. Regulators turned up on trading floors at multiple funds to monitor transactions in person. As one fund put it, three sessions of chaotic trading "felt like a whole year to us." The scenes, extraordinary even by the standards of a market that has long operated under the Communist Party's shadow, played out in recent weeks in a clampdown that's rewriting the rules of computer-driven trading in China. The country's once-booming quant industry has become the latest casualty of Beijing's campaign to stop a $4 trillion selloff in stocks. While the measures have helped prop up share prices at least temporarily, they raise bigger questions of how far Xi Jinping's government will go to meet short-term goals at the expense of maintaining some pretense of a free market that's attracted billions of dollars from Wall Street firms in recent years.
/jlne.ws/4bU4NvZ
Risk Models Behind World's Best Hedge Fund Strategy Are Getting a Lot Harder to Crack; Insurance-linked securities drove best 2023 hedge fund bet; Market faces new loss risks as 'secondary perils' upend models
Gautam Naik and Sheryl Tian Tong Lee - Bloomberg
As the best hedge fund strategy of 2023 becomes a magnet for mainstream investors, the risk models it relies on are getting a lot tougher to crack. The strategy in question is tied to insurance-linked securities, which are dominated by catastrophe bonds (often dubbed cat bonds). In 2023, no other asset class produced a better-performing bet for hedge funds, with firms including Fermat Capital Management and Tenax Capital booking their biggest-ever returns.
/jlne.ws/3T9uJfW
How the Rise of 'Pod Shops' Is Reshaping the Way Markets Trade; Understanding the evolution of the hottest hedge funds.
Joe Weisenthal and Tracy Alloway - Bloomberg
The hedge fund industry has gone through multiple evolutions. Investing styles go in and out of fashion as market conditions change. Strategies that work become crowded with investors, which can mean they stop working as well. The hottest thing these days are so-called multi-strategy funds or "pod shops" that employ multiple distinct teams, each with a specific mandate, style and edge. In theory, with good risk management and internal capital allocation, this can produce robust results across many cycles. So how do these funds work, how are they making money, and what does the expansive growth of this new style of fund mean for markets? In this episode, we speak with Krishna Kumar, a portfolio manager at Goose Hollow Capital Management, about the rise of multi-strategy hedge funds, why they're so popular, and how the increasing amount of money deployed by these firms is changing the way that markets trade.
/jlne.ws/3wvpFtz
| | | | | | Exchanges | | | Euronext launches daily options on the CAC 40 index for short-term trading strategies; Development builds upon daily options on the AEX index launched by Euronext in 2008, meeting demand for investors looking to respond quickly to market fluctuations.
Wesley Bray - The Trade
Euronext has launched daily options on the CAC 40 index, allowing investors to execute short-term trading strategies and gain exposure to the main index of Euronext Paris.
The new offering builds upon Euronext's launch of daily options on the AEX index in 2008.
/jlne.ws/3Tdq9gz
NYSE Options: Proprietary Market Data Feeds Changes
NYSE
NYSE will implement changes to the NYSE Pillar Proprietary Market Data Feeds across all NYSE Group options markets. These changes will be available for testing on select Exchange Certification environments beginning February 27, 2024.
/jlne.ws/48s8Tsf
| | | | | | Regulation & Enforcement | | | Under the Regulatory Microscope: Tips and Considerations for Chief Compliance Officers of FCMs, SBSDs, and SDs Submitting FY 2023 Annual Compliance Reports
Steptoe
Recent actions by the Commodity Futures Trading Commission (CFTC) division of enforcement, coupled with statements made by both the CFTC and Securities and Exchange Commission (SEC) leadership, reflect close scrutiny of chief compliance officer annual reports and demonstrate why this year's filing is no ordinary exercise. With the CFTC and SEC increasingly focused on the comprehensiveness of compliance programs and levying higher monetary penalties and stricter sanctions, responding to FY 2023 chief compliance officer annual reports will require special attention and experienced, probing review to help firms keep these reports out of regulators' cross-hairs.
/jlne.ws/3uM99EN
| | | | | | Technology | | | Webull Launches in Canada; The entrance of the fintech firm broadens the options for ETF investors.
Kyle Anthony - ETFMarket Canada
If variety is the spice of life, then things just got a little bit sweeter for Canadian investors, as WeBull, an online brokerage platform for trading stocks, exchange-traded funds (ETFs), options, and other financial instruments has launched in Canada. WeBull has received notable recognition in the financial industry, including winning the "Best Brokerage App" at Benzinga's 2022 Global Fintech Awards, highlighting its commitment to superior mobile trading. It was also honoured as the "Best Options Trading Platform" at the Finder Stock Trading Platform Awards and recognized as the "Best in Class" for the investor community at the Stockbrokers Annual Review 2023. These accolades showcase the company's dedication to providing innovative and exceptional services to all its users.
/jlne.ws/42Vf4Uw
| | | | | | Strategy | | | Big Yen Shorts Get Support From Waning Global Financial Stress; A BofA gauge for global financial stress fell to four-year low; Bets on yen carry trades may be building: SMBC Nikko's Noji
Masaki Kondo and Ruth Carson - Bloomberg
Easing financial stress globally has boosted the allure of yen-funded carry trades, adding to depreciation risks for the currency that would raise the chances of intervention from Japanese authorities. Bank of America's Global Financial Stress Indicator dropped to a four-year low last week, signaling buoyant investor appetite for higher-yielding riskier assets. The yen, the currency of the world's only remaining economy with negative interest rates, posted its eighth weekly decline against the dollar on Friday. That was the longest losing streak since October 2022.
/jlne.ws/3uOgDXT
Beta Weighted Delta and Delta Neutrality
Tastytrade (Video)
In this video, Nick and Mikey discuss various topics including market updates, trade ideas, and concepts related to delta neutrality. They talk about the crypto market, and specific stock trades. They also provide insights into managing delta and maintaining a balanced portfolio. Mikey discusses a profitable trade in PANW and closed out of it, while Nick mentions a micro Euro contract trade. They also discuss beta-weighted delta and the importance of staying within a desired delta range based on one's risk tolerance and capital. They emphasize the need to be flexible and adapt to changes in delta based on market movements. They also answer viewer questions and provide trade opinions for specific stocks including CRM, MARA, and ZM. Overall, the video provides market updates, trade ideas, and insights into managing delta in an options trading portfolio.
/jlne.ws/3URihm7
200-Strike Calls
Cboe (Video)
In #Vol411, Joel Hawthorne @louiswinthrop recaps Friday's trading action, lets us know economic data to look out for this week and more.
/jlne.ws/49tT31F
| | | | | | Miscellaneous | | | On the Galaxy Research Galaxy Brains podcast, Cboe Digital's John Palmer joined Alex Thorn to discuss bringing traditional finance market structure to crypto, what could be ported from crypto to traditional finance, and institutional participation in the space. Don't miss Alex Thorn's rapping the intro of the podcast. ~JJL
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