| October 24, 2022 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Options Traders Bet on More Volatility in a Bad Year for Tech Stocks
Gunjan Banerji - The Wall Street Journal
Large swings for big technology stocks have been common this year during a head-spinning stretch that has dragged the group down. Some of the biggest one-day changes in market value in history have happened in 2022 after big tech companies' earnings. In February, a big drop in Amazon.com's shares shaved $191 billion from its market value, the most ever for a company in a single day. Options traders appear to be betting the volatility will continue over the next week, when several big tech companies report their earnings results. (Their forecasts don't indicate the direction of the move, only the size.)
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A legendary options trader who banked 70 consecutive months of profits above 6 figures shares the spread he would use in the current stock market environment and explains why it's optimal
Laila Maidan - Insider
Tony Saliba is an options trader known for maintaining a winning streak by having 70 consecutive months of profits that exceeded $100,000, beginning in the summer of 1982. He began his career in 1979 on the floor of the Chicago Mercantile Exchange. Options trading grabbed the then 23-year-old's attention because it had nonlinear payout opportunities. He could create options spreads, which are contracts to buy and sell a security at different strike prices. This type of trade takes into account dynamic factors beyond just the price of a stock, including the time decay of contracts and the implied volatility of the underlying security.
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Yellen 'Closely Monitoring' Financial Markets as Volatility Rises; Treasury chief 'closely monitoring' financial sector for risks
Christopher Condon - Bloomberg
Treasury Secretary Janet Yellen cautioned that stresses in the global economy and markets hold the potential to disrupt a US financial system that has so far proved resilient in the face of those shocks. The world faces a "dangerous and volatile environment" for the global economy, including the surge in energy prices and increased volatility in financial markets, Yellen said in answering questions after a speech in New York Monday. In such a situation, "financial stability risks could materialize" in the US, she said.
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After $13 Trillion Stock Crash, Signs of a Turn Are Now Mounting; Bullish bets on the up, with inflation and Fed hikes priced in; Demand for bearish options looks muted all things considered
Elena Popina - Bloomberg
Judging by the ominous pronouncements from Wall Street luminaries, every trader under the sun should be prepping for fresh turmoil in the world's biggest stock market. Yet hedging for doom and gloom is falling out of fashion fast, thanks to a historic equity rout that's already erased $13 trillion in market value this year and flushed out both retail and institutional investors.
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Stock Manager Paranoia Is Only Thing the Market Has Going for It; Seasonal pattern puts equity bears on alert for year-end rally; Active-manager poll, options activity show fear of missing out
Lu Wang and Vildana Hajric - Bloomberg
Another week of gloom on the inflation and central bank fronts turned into a positive one for the equity faithful. Shares surged the most in four months as evidence built that active fund managers are getting worried about missing a winter rally. It's an old investment saw that cuts surprisingly well: the idea that institutional investors -- alert to catastrophe in the closing stretch -- bid up markets in November and December. The case is stronger in 2022 with midterm elections approaching, traditionally a pressure-reliever for bulls that on average gives rise to more gains.
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Traders brace for further volatility as bond markets turn bearish
Laurence Fletcher - Financial Times
A four-decade bull run in developed-market government bonds has come to an end â leaving traders to deal with the impact of huge planned bond sales by central banks into volatile markets.
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Price Action Is Always Telling You Something; Why is the VIX not moving much with the markets these days?
Bob Lang - Real Money
This past month has seen some very sharp moves in the markets. No doubt that is due to elevated volatility. The VIX, or the fear gauge has spent a generous amount of time above the 30% area. In fact, over the last 20 periods the index has not been under 30% for 15 sessions. That is a big number when you realize the VIX historically trends lower - with the occasional bounce to scare everyone. This elevated condition has created quite a quandary for market participants. As we have seen the big moves back n' forth, volatility has seemingly gone nowhere as a market measure.
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| | | | | | Exchanges | | | Leaders in Trading 2022: Meet the nominees for.... Outstanding Equities Trading Venue; Learn more about the five firms shortlisted for our Editors' Choice Award for Outstanding Equities Trading Venue this year: including Aquis Exchange, Cboe Europe, Euronext, Nasdaq European Markets and Turquoise.
Laurie McAughtry - The Trade
The TRADE is delighted to introduce the illustrious shortlist for one of the biggest awards of our Editors' Choice range: the closely fought category of Outstanding Equities Trading Venue. In a competitive and crowded landscape, numerous players stand out and this year it was particularly hard to whittle down the longlist. The nominated venues have all stood out over the past year for their innovative approach and outstanding performance: read on to learn more about Aquis Exchange, Cboe Europe, Euronext, Nasdaq European Markets and Turquoise.
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Cboe Digital Aims to Launch Margin-Based Crypto Futures
Shanny Basar - MarketsMedia
Cboe Digital has applied for regulatory approval to launch margin-based futures on crypto assets, which it is hoping to introduce in 2023. In May 2022 Cboe Global Markets completed its purchase of Eris Digital Holdings (ErisX), an operator of a US-based digital asset spot market, a regulated futures exchange and a regulated clearinghouse, which is the cornerstone of the new Cboe Digital business. John Palmer, president of Cboe Digital, told Markets Media that since the acquisition closed the two teams have been building and integrating to leverage Cboe's global brand and assets, which has been a huge effort.
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MIAX Options Exchange - AIS and MEI System Enhancements Reminder
MIAX
As previously announced in the August 29th and September 29th Alerts, MIAX Options will be implementing the following system enhancements: Mandatory change effective November 16, 2022: Administrative Information Subscriber Feed Specification (AIS) - Version v2.5 Added 2 new messages to support Settlement Reference Price and Settlement Price, publication via AIS during pre-open on the Settlement Day. Theoretical Settlement Price (Message Type = "N") using Theoretical Reference Prices Theoretical Settlement Reference Price (Message Type = "M") for each Option involved in settlement. Note: All AIS subscribers must accommodate the new message types prior to November 16, 2022.
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Beyond Ordinary ETFs: An Alternative Way of Investing, an Alternative Way to Generate Income from Global X Japan
Nasdaq
Global X Japan, the country's first global innovative ETFs provider, is launching the Nasdaq-100 Covered Call ETF ("2865") aiming to offer another source of high-income potential and effective options execution to local investors. Established in 2019 in Japan, Global X Japan is one of the asset managers specializing in ETFs in the local market that has enjoyed stunning business growth and success, showcased by its growth of assets under management, with 97% per annum. Its innovative range of ETFs centered around thematic growth, income and core strategies has enabled Global X to thrive despite the uncertainties brought on by the pandemic.
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Shanghai Futures Exchange to Launch Container Freight Rate Futures
YICAI Global
The Shanghai Futures Exchange is preparing to introduce a container freight index futures product that will help Chinese importers and exporters hedge against big swings in transportation costs. The Shanghai Export Containerized Freight Index Futures will use the Shanghai Export Containerized Freight Index as its settlement index, Yicai Global has learned. It will apply to the trading route between Shanghai and the European ports of Hamburg, Rotterdam, Antwerp, Felixstowe and Le Havre.
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| | | | | | Strategy | | | Investors are Bidding Up 'Rally Protection' to Multiyear Highs
Eric Wallerstein - The Wall Street Journal
Investors are typically fearful of a downturn, turning to the options market for protection against a selloff. That's not the case right now. The Nations SkewDex, an index that tracks the cost of protective put options on the SPDR S&P 500 ETF that would pay out in the event of a large market decline, recently fell to 55.53, its lowest level in over four years. Puts give the right to sell shares at a specific price over a certain period of time. They can be used to hedge a portfolio or speculate that prices will drop. Rather than using bearish puts to protect their portfolios, investors are piling into bullish calls.
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As Investors Flee, Options Traders Circle Popular China ETF
Eric Wallerstein - The Wall Street Journal
Investors are fleeing Chinese stocks, but options traders are stepping up. The KraneShares CSI China Internet ETF touched a new 52-week low Monday after President Xi Jinping consolidated power for a third term. Meanwhile, options bets on the popular fund, which comprises primarily software and service stocks, are surging: Trading volumes are three-times usual levels, according to Cboe Global Markets. More than 286,000 contracts had exchanged hands by early afternoon, on track for one of the busiest days of the year. The contracts seeing the most activity are bullish wagers that give the right to buy the ETF at prices ranging from $21 to $24 over the next two to three weeks.
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Analysis: Options trades, lockstep moves fuel U.S. stock swings
Saqib Iqbal Ahmed and Carolina Mandl - Reuters
A surge in short-term options bets, rock-bottom equity allocations and tandem moves in individual stocks are exacerbating swings in U.S. equity markets that have surprised bulls and bears alike in recent weeks.
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BofA highlights ten stock options overwriting possibilities
Jason Capul - Seeking Alpha
Market participants that are in search for further premiums on a long stock position may choose to evaluate a handful of covered calls strategies, according to members of BofA's equity derivatives team. BofA equity-linked analyst Gonzalo Asis highlighted in an investor note: "The strategy is best suited for names the call seller has a neutral short-term view on, as a call sells the right to upside participation beyond the call strike for a fee."
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| | | | | | Events | | | Tradier is holding an Options Summit in partnership with the Cboe on October 26, 2022, from 11 a.m. to 4:30 p.m.
| | | | | | Education | | | Why Trade Crypto Derivatives When You Can Trade Spot? Derivatives let you trade contracts about an asset like bitcoin without actually holding a single coin yourself.
Robert Stevens - CoinDesk
Crypto's spot trading markets are simple. Buy or sell bitcoin at the market price, whenever and wherever you want, no funny business. However, yet more money can be made (or lost) through derivatives trading. Crypto derivatives trading refers to the buying and selling of financial contracts that relate to cryptocurrencies, such as futures and options. This article is part of CoinDesk's Trading Week.
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| | | | | | Miscellaneous | | | Bitcoin Is Usually Volatile. One Reason Why the Price Is Stuck.
Jack Denton - Barron's
Bitcoin has become boring, an uncharacteristic shift for an asset that was once a byword for volatility. At least, that is how it seems, with prices for the largest cryptocurrency mostly flitting between $19,000 and $20,000 since early September.
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The Bitcoin Futures ETF at 1: $1.8 Billion Lured, Over Half Lost; Poorly timed launch has seen fund's price plunge more than 70%; Despite drop ETF saw inflows in all but two months since debut
Vildana Hajric and Katherine Greifeld - Bloomberg
A year on from its blistering debut, America's first Bitcoin futures ETF has been an almost unqualified success, unless of course you're invested in it. Operationally speaking, it's performance has been near-flawless. A slew of worries over cryptocurrency volatility, the depth of the market for futures and the cost of rolling its underlying contracts have all fallen by the wayside in 12 months of solid functioning for the ProShares Bitcoin Strategy ETF (ticker BITO).
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
Publisher | | | Sarah Rudolph
Editor-in-Chief
| | | Jeff Bergstrom
Editor
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Disclaimer: All John Lothian Newsletters, JohnLothianNews.com, MarketsWiki.com and MarketsReformWiki.com are products of John Lothian News, a division of John J. Lothian & Company, Inc. The opinions expressed in all John J. Lothian & Company, Inc. publications are strictly those of their respective editors. They are intended solely for informative purposes and are not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Security futures are not suitable for all customers. Futures and options trading involve risk. Past results are no indication of future performance. Nothing on any John J. Lothian & Company site should be considered an endorsement by any sponsor of any website or newsletter content.
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