| July 19, 2021 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | 
The Spread - July 16, 2021
JohnLothianNews.com
Options traders torn between higher Inflation and steady Fed policy; June market share up at MIAX; John Lothian talks about a World of Opportunity; SEC charges binary options shop with fraud; Moscow Exchange set to offer quarterly options on U.S. stock index futures; and the Options Institute's Kevin Davitt talks about implied volatility in the "Term of the Week."
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| | | | | | Lead Stories | | | Record Stock Rally Ignores Wall Street's Phobia About Optimism; Warnings about overly bullish sentiment have been better left unheeded this year. Have times changed?
Caitlin McCabe - WSJ
The latest victim of the rampaging bull market in stocks is the Wall Street maxim that glowing investor sentiment is a sell signal. Throughout 2021, a range of surveys, fund-flow figures and options activity have shown investors big and small to be exceptionally bullish. Yet major U.S. indexes continue to rally to records, putting the Dow Jones Industrial Average up a healthy 13% for 2021.
/on.wsj.com/3itKGtR
Wall Street's New Fear Is That Economic Growth Has Peaked
Eric Lam and Sunil Jagtiani - Bloomberg
Investment strategists are starting to consider a new bearish scenario: the economy has already hit its speed limit.
With the ferocious spread of Covid-19's delta variant and central banks already talking about tighter monetary policy to bring inflation under control, there's a sense of worry that financial markets have become too optimistic.
/bloom.bg/3kARF70
Dow sinks 2% as virus surge stifles recovery hopes
Devik Jain - Reuters
The Dow sank more than 2% on Monday as investors sold off economically sensitive shares and travel stocks and sought the perceived safety of bonds on fears that a spike in COVID-19 cases would derail a broader economic recovery.
New infections surged in parts of Asia and England, while U.S. COVID-19 cases soared 70% last week, fueled by the Delta variant.
/reut.rs/3hRxj7M
Robinhood Warns That the Trading Frenzy Won't Last
Avi Salzman - Barron's
Robinhood is seeking a lofty valuation for its stock, even as the company is warning investors that the surge in new investors fueling its growth is likely to slow.
The commission-free broker plans to offer shares to the public next week for $38 to $42 each, valuing it at roughly $35 billion. That would give the company a valuation of about 16 times revenue, assuming that it can continue its current quarterly rate of revenue for the rest of the year. But there are already signs that activity is slumping.
/bit.ly/2VNwnbJ
Meme Stocks Are Mired in Longest Losing Run Since Frenzy Began
Bailey Lipschultz - Bloomberg
Retail investors who fueled a basket of meme stocks to meteoric heights are getting pummeled by a risk-off environment and waning enthusiasm for their favorite high-flying stocks.
The group of 37 so-called meme stocks tracked by Bloomberg fell as much as 4.4% on Monday, marking a sixth straight decline, after its worst week since late February. The basket's longest losing streak since taking Wall Street by storm comes as the spread of the delta variant sparks concerns about the future of global economic growth.
/bloom.bg/3iq0TjD
Column-Lower oil prices prompt hedge fund short-covering
John Kemp - Reuters
Faltering oil prices, triggered by concern over a third wave of the novel coronavirus and increased confidence OPEC+ would boost production, gave portfolio managers a chance to book profits on tactical short positions.
Hedge funds and other money managers purchased the equivalent of 24 million barrels in the six most important petroleum futures and options contracts in the week to July 13
/reut.rs/3rjyOi1
How Derivatives Amp Up Already Heady Crypto Markets
Justina Lee - Bloomberg
Bitcoin has long been known for its violent swings in price. But the volatility isn't just driven by tweets from Elon Musk or warnings from Chinese regulators: It's also fed by a massive derivatives industry that has boomed on the back of voracious demand for leverage and speculative tools in cryptocurrency markets. In some ways it's a tale as old as Wall Street, but now in a new digital wrapper. For instance, when Bitcoin plunged as much as 30% in a day in May, leveraged-up positions in futures and options were wiped out, with the expected consequence of amplifying the sell-off as they had boosted the rally earlier.
/wapo.st/2VZH1MP
| | | | | | Exchanges | | | Whitepaper: valuable insights into Eurex Passive Liquidity Protection (PLP)
Eurex
The planned rollout of Passive Liquidity Protection (PLP) into further Eurex index option products in September 2021 is a welcome opportunity to provide our customers with further comprehensive background information on PLP.
Accompanied by a case study, the new whitepaper provides in-depth insights into how Eurex has pioneered the provision of a functional solution to level the playing field for trading participants when trading in the Central Limit Order Book.
/bit.ly/3kAhqEw
Cboe Global Markets, Inc. (NASDAQ:CBOE) Expected to Announce Quarterly Sales of $344.88 Million
MarketBeat
Equities research analysts expect Cboe Global Markets, Inc. (NASDAQ:CBOE) to report sales of $344.88 million for the current quarter, Zacks reports. Five analysts have made estimates for Cboe Global Markets' earnings, with estimates ranging from $341.00 million to $348.40 million. Cboe Global Markets reported sales of $296.90 million during the same quarter last year, which would suggest a positive year over year growth rate of 16.2%. The firm is scheduled to report its next quarterly earnings report before the market opens on Friday, July 30th.
/bit.ly/3wT2LGR
| | | | | | Regulation & Enforcement | | | In a case before the SEC in the matter of S&P Dow Jones Indices, Inc., the SEC is requesting more time to submit a plan of distribution of funds to investors hurt by a feature in the reporting of the VIX where some prices were static during times of high volatility. --SEC
UBS brokerage pays $8 million to settle U.S. SEC charges, SEC says
Chris Prentice and Lisa Lambert - Reuters
The brokerage arm of UBS Group AG agreed to pay $8 million to settle charges made by the U.S. securities regulator over compliance failures related to the sales of a volatility-linked, exchange-traded product, the regulator said on Monday.
The U.S. Securities and Exchange Commission (SEC) charged UBS with failing to restrict its advisors from selling a complex product, which was not suitable to be held for extended periods, for two years beginning in January 2016.
/reut.rs/3wT1P5j
SEC Delays $9M Payout for Investors Harmed by VIX Futures Mispricing
Bernice Napach - ThinkAdvisor
The SEC created a Fair Fund so the penalty could be distributed to investors that were harmed by the mispricing, but its Division of Enforcement needs more time to to locate and verify contact information for investors, compile investor records, complete the fund administrator solicitation and appointment process, and then develop its plan, according to the agency.
/bit.ly/3hPpxen
| | | | | | Strategy | | | 22 stocks, including Carnival and Zoom, that are down 30% or more from 52-week highs
Philip van Doorn - MarketWatch
You would think that with the broad stock indexes doing so well in 2021, after what may have been surprising gains in 2020, that investors would be in a pretty good mood.
But check out this Twitter posting from July 19:
Tobias Carlisle was referring to CNN's Fear & Greed Index which fell to 17 later in the morning on July 19. The index incorporates momentum, junk-bond demand, stock-market volatility, options trading patterns and other indicators.
/on.mktw.net/3zbdjTe
Volatility Gauge Suggests Tactical Trading During Summer Doldrums
Nasdaq
With July options expiration now behind us, we head into some of the tougher few weeks for the market. We've been alluding to a possible uptick in volatility over the last few weeks, so I wanted to put some data behind it for our readers. In simple terms, we seasonally see an increase in volatility following the standard July expiration week, which commonly leads to temporary price declines.
/bit.ly/3evCpEs
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