| April 03, 2018 | | | | | Spencer Doar
Associate Editor
John Lothian News | |
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| | | | Observations & Insight | | | March 2018 Options Exchange Marketshare via OCC
| | | | | | Lead Stories | | | OCC Cleared Contract Volume Up 15 Percent in March
OCC
OCC, the world's largest equity derivatives clearing organization, announced today that total cleared contract volume in March reached 442,945,572 contracts, a 15 percent increase from March 2017. OCC's year-to-date volume is up 32 percent with 1,400,345,396 cleared contracts in the first quarter of 2018, compared to 1,058,670,212 contracts in the first quarter of 2017.
/jlne.ws/2GJUrmT
****SD: It will be nice to have volatility and increased activity to talk about at OIC this year.
Volatility's Bite Returns
Ginger Szala - ThinkAdvisor
On Feb. 5, 2018, the S&P 500 stock market index fell 113 points, or 4.10%, to 2,648.94, while the VIX index that tracks changes in underlying market moves jumped to a stunning 37.32, up a historic 116%. That same day, the Dow Jones Industrial Average crashed 1,175 points to hit 24,345.75.
/jlne.ws/2uGHvcn
Goldman Sachs Sees Equity Volatility Spillover, Urges Hedging
Lu Wang - Bloomberg
Equity volatility is elevated but options trading shows investors' appetite for protection hasn't picked up, indicating hedging is needed, according to Goldman Sachs Group Inc.
Strategists led by John Marshall observed that "a large number" of S&P 500 hedges expired over the past three weeks, leaving the average investor more exposed to stock swings. Meanwhile, the Cboe Volatility Index almost doubled in the first quarter as concerns over global trade tensions and the Federal Reserve's monetary policy stirred up market turbulence. The options gauge, known as VIX, jumped 20 percent to 23.89 as of 12:11 p.m. in New York.
/jlne.ws/2GxwQX5
****SD: Didn't (or, at least, hasn't) hit FX.
The Bull Market in Stocks Reaches Inflection Point
Nicholas Colas - Bloomberg
There is much more to the first-quarter drop in the S&P 500 Index than its modest 1.22 percent decline suggests. Everything from changing narratives in technology stocks to higher asset price correlations reveals a watershed moment for a bull market that has been underway since 2009. That was on display Monday, with the benchmark posting its worst April start since 1929.
Below is a list of what the first quarter taught us about current market dynamics, and how they may inform investor psychology going forward.
/jlne.ws/2GvPYVB
****SD: Nicholas Colas' new operation after leaving Convergex is called DataTrek Research and the morning briefings are still worth it. The DataTrek blog has frequent free posts with snippets from the briefings.
Volatility's Comeback Unleashes Best Fund Returns of 2018
Cecile Vannucci - Bloomberg
In the world of passive investing, betting on equity swings is one of most lucrative trades on Wall Street once again -- but now it's for long wagers.
Securities linked to volatility are the best performers among U.S. exchange-traded products this year. While in 2017 it was those wagering on calmer days that did the best, now it's the ones that gain with the VIX index that are rallying the most.
/jlne.ws/2GSOVys
Seven Charts for the 25th Anniversary of VIX Index
Matt Moran - Cboe Blog
...The creation of the VIX Index is one of the most significant innovations of the modern financial marketplace. Over the last 25 years, the VIX Index has grown to become the world's accepted measure of market volatility, a gauge that is accessed day and night by investors worldwide. Below are seven charts that provide some key points to know about the VIX Index, VIX futures and VIX options.
/jlne.ws/2GUaEWN
Phase Transitions and the Rise in Market Volatility (PODCAST)
Blu Putnam - CME Group
Off The Charts! examines the pertinent economic issues of the day, providing a deeper dive into complex topics and framing the issues in a way that can lead to a better understanding of the financial and commodities markets.
/jlne.ws/2GykuOA
| | | | | | Exchanges and Clearing | | | CME Group Reaches Highest-Ever Quarterly Average Daily Volume Of 22.2 Million Contracts For First-Quarter 2018
CME Group, the world's leading and most diverse derivatives marketplace, today announced it reached an all-time high quarterly average daily volume (ADV) of 22.2 million contracts during first-quarter 2018, up 30 percent from first-quarter 2017. CME Group first-quarter 2018 saw record options volume, averaging 4.9 million contracts per day, up 31 percent versus first-quarter 2017, with electronic options averaging a record 3.1 million contracts per day, up 45 percent over the same period last year.
/jlne.ws/2Gu1PU1
****SD: Thinking of records, I listened to a Planet Money podcast about Guinness World Records a bit ago. Since the books themselves are no longer the moneymakers they used to be for the company, Guinness pivoted to making money off the marketing and the record-setting events themselves - charging to put them on, have officials on site, get a certificate, etc.
Cboe Global Markets to Celebrate 25th Anniversary of Cboe Volatility Index (VIX) Throughout April
Cboe
Cboe Global Markets, Inc., one of the world's largest exchange holding companies, today kicked off a month-long celebration of the 25th anniversary of the Cboe Volatility Index (VIX Index), which Cboe began publishing in April 1993.
/goo.gl/KMhTy3
****SD: The volatility website got a slick makeover.
Singapore SGX Mar iron ore fines derivatives contracts traded volume rises 47% on month
Platts
The volume of iron ore fines derivatives contracts which traded on the Singapore Exchange in the month of March climbed 47.2% month on month to 137.6 million mt, from 93.5 million mt in February, according to SGX data released Monday.
/jlne.ws/2GvNnuV
****SD: Iron ore fines are a different size of iron ore with different properties when used in the production of steel.
| | | | | | Regulation & Enforcement | | | New rules for high-frequency trading
NKH World
Japan is placing more regulations on high-frequency trading, or HFT. Many brokerages use this system which is capable of executing massive buy and sell orders at extremely high speeds.
/jlne.ws/2Gs3r0q
| | | | | | Strategy | | | Delta Neutrality: The Hard Numbers
Sage Anderson - tastytrade blog
If I've learned anything trading volatility the last 12 years, it's that high probability exposures are more reliable than my emotional instincts (i.e. "gut feel").
After trading literally hundreds of thousands of options contracts, there have been more than a few days when my delta leans paid off handsomely. This was especially true during the Financial Crisis - which is starting to feel like eons ago.
/jlne.ws/2GKzx70
JPMorgan Recommends Tesla 'Crash Puts' With Tail Risk Rising
Cecile Vannucci - Bloomberg
Things may just keep on getting worse for Tesla Inc.
Irrespective of first-quarter production results, shares of the electric-car maker -- already down 27 percent in just three weeks -- may have more to lose, according to JPMorgan Chase & Co. Quantitative and derivatives strategists at the bank including Shawn Quigg and Marko Kolanovic recommend to hedge against further declines, saying the market is underpricing tail risk.
/jlne.ws/2GvRrvb
****SD: The fall in Tesla is this week's Facebook. Tesla options have some activity at (relatively speaking) crazy low strikes. Its implied volatility blows Amazon's out of the water. From the WSJ - Options Traders Brace For More Turmoil in Tesla
| | | | | | Miscellaneous | | | What is SOFR? The new U.S. Libor alternative
Karen Brettell - Reuters
The New York Federal Reserve on Tuesday will begin to publish the Secured Overnight Financing Rate (SOFR), a rate that regulators hope will eventually be adopted to back U.S. dollar-based derivatives and loans. The aim is that the new rate will eventually reduce markets' dependence on Libor.
Following are some facts about the rate.
/jlne.ws/2Guat4R
****SD: CME's SOFR futures begin trading in early May.
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