| August 10, 2022 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
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| | | | | | Lead Stories | | | Retail Traders Push Meme Strategies Into Stock Options, Worrying Pros; August has seen a surge in call buying by retail investors; Jump in options trading typically followed by stock declines
Natalia Kniazhevich - Bloomberg
Retail traders are splashing around in the options market again, in what has historically been a bad omen for stocks. Day traders who have driven outsize gains in the likes of Bed Bath & Beyond Inc. and AMC Entertainment Holdings Inc. in recent weeks have also been piling into calls -- bullish bets that can amplify returns on individual stocks. For professional traders, the uptick in call buying by the retail set is yet another warning that the surge in stocks since late June might not last. Since 2006, there have been six jumps in speculation by small options traders during period of limited stock rallies, followed by declines over the next three and six months every time but one, according to the latest research from SentimenTrader.
/jlne.ws/3JGK2GA
Latest Meme-Stock War Is Hedge Fund Versus Hedge Fund
Jared Dillian - The Washington Post
Meme stocks have enjoyed something of a renaissance in recent days. A prime example is Bed Bath & Beyond Inc., which soared as much as 75% between Friday and early Tuesday for no apparent reason. AMC Entertainment Holdings Inc. and GameStop Corp., two other meme stocks, also saw big gains. This latest episode is more evidence that the meme-stock phenomenon just won't die, completely ignoring any semblance of fair value and continuing to frustrate short sellers. Then again, maybe the problem is short sellers.
/jlne.ws/3p881EX
Demand for FX derivatives jumps as central banks prep rate rises - CME Group
Reuters
Demand for currency derivatives has shot up this year, data from CME Group showed on Wednesday, in a sign investors are positioning for hefty interest rate hikes from the U.S. Federal Reserve and other big central banks. "Open interest" -- the number of outstanding futures and options -- was at $272.5 billion at the end of July, up 8.8% year-on-year, according to CME, the world's largest financial derivatives exchange.
/reut.rs/3SHwRJC
US stocks and bonds rally after lower-than-forecast inflation data
Ian Johnston and William Langley - Financial Times
US stocks and government bonds rallied on Wednesday after data showed inflation in the world's largest economy had steadied, raising hopes that the Federal Reserve may temper its aggressive rate rises to subdue soaring prices.
The consumer price index data published on Wednesday showed that prices in the US rose 8.5 per cent year on year in July, a slower increase than in June and below economists' forecasts of 8.7 per cent. The figures also showed that on a month-on-month basis, there was no increase in the CPI in July compared with a 1.3 per cent rise in June.
/jlne.ws/3p8qYr4
Injective Raises $40M from Jump Crypto and BH Digital to Accelerate Growth
Injective
Injective, a blockchain built for finance, today announced a new $40 million funding round led by Jump Crypto. BH Digital, the crypto arm of famed hedge fund manager Alan Howard, has also joined the round. Injective is the first fully decentralized smart contracts platform optimized for building decentralized finance applications such as exchanges, derivatives, prediction markets, and options. Finance dApps, such as Injective Pro and Frontrunner, leverage Injective's interoperable blockchain alongside its out-of-the-box cross-chain primitives, such as an on-chain order book and binary options module, to power a new ecosystem of connected DeFi applications.
/jlne.ws/3dkMczF
Fed seen delivering half-point rate hike in Sept as inflation eases
Ann Saphir - Reuters
Slowing U.S. inflation may allow Federal Reserve policymakers to downshift their most aggressive round of monetary policy tightening in decades when they meet next month, though data on tap in coming weeks could still change the picture.
After a U.S. Labor Department report Wednesday showed consumer prices didn't rise at all in July compared with June, traders of futures tied to the Fed's benchmark interest rate on Wednesday slashed bets the central bank would enact a third straight 75-basis-point hike at its Sept. 20-21 policy meeting, and instead would opt for a half-point increase.
/jlne.ws/3dgaESB
| | | | | | Exchanges | | | SOFR Options Open Interest Surpasses 10 Million Contracts as Liquidity in SOFR Deepens
CME Group
CME Group, the world's leading derivatives marketplace, today announced that open interest (OI) in SOFR options reached a record 10.36 million contracts for the first time on August 9. The single-day OI in SOFR futures and options hit a record 17.66 million contracts, as ADV for SOFR futures and options reached a record 2,456,246 in August.
/jlne.ws/3vUKYBs
Robinhood suffers harshest hangover after pandemic stock trading boom
Madison Darbyshire - Financial Times
Robinhood, the retail broker whose growth reached the stratosphere as stock trading boomed in the coronavirus pandemic, has fallen back to earth.
Active users have fled the platform. The number of funded accounts has levelled off. Robinhood's market capitalisation has dropped by two-thirds since it went public last summer. Last week it announced lay-offs for nearly a quarter of its staff.
/jlne.ws/3SEUtOY
| | | | | | Regulation & Enforcement | | | SEC approves MEMX's rule filing to trade listed options; The US options exchange is expected to launch early next year.
Wesley Bray - The Trade
MEMX, the member's exchange, has received approval from the Securities and Exchange Commission (SEC) to launch a platform for trading listed options. MEMX Options, the US options exchange, is expected to launch early next year and will use a price time-model, leveraging the strengths of MEMX's data-centric exchange architecture and infrastructure.
/jlne.ws/3zM4gu3
CFTC Deals Blow to Betting Markets With PredictIt Shutdown
Matt Grossman - WSJ
One of the highest-profile efforts to put markets' predictive capabilities to the test might be nearing the end of the line in the U.S.
PredictIt, a website that allows users to profit by forecasting future events, said last week that its regulator, the Commodity Futures Trading Commission, will withdraw PredictIt's authorization to operate as of early next year.
/jlne.ws/3dmlo1D
| | | | | | Strategy | | | How Hedging Strategies Enhance Diversified Portfolio
Spencer Simpson - Cboe
Since the beginning of 2022, a weaker macro-economic backdrop for both fixed-income and equity markets has resulted in relative poor performance of a traditional diversified portfolio of 60% U.S. equity and 40% U.S. bonds (60/40), with such a portfolio yielding -18.4% YTD (7/29/2022). Future economic events, such as interest rate volatility, quantitative tightening and slowing credit markets could spell more pain for debt and equity valuations.
Many investors follow the cornerstone of modern portfolio theory, diversifying a portfolio across multiple asset classes, as integral to managing portfolio risks and achieving enhanced risk adjusted returns. Alternatively, a portfolio's risk can be managed using a hedging strategy with an allocation to an options-based strategy on the existing equity components.
/jlne.ws/3bG4I56
CBOE Introduces Flex Options - Could They Be One Of Retail's New Favorite Hedging Tools?
Jad Malaeb - Benzinga
Following the introduction of Cboe Nano options and Cboe Mini Options earlier this year, Cboe Global Markets Inc. has added FLEX Micro options to its repertoire of options tailored to the retail community.
FLEX Micro options are derived from FLexible EXchange options (FLEX), which are powerful, customizable portfolio-management tools that allow users to specify key contract terms â like exercise prices, exercise styles and expiration dates â on major stock indexes and individual equities. FLEX options have been around since 1993 and have granted portfolio managers several benefits:
/jlne.ws/3dopjLG
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