| May 31, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | The FIA announced the application window is open for this year's FIA Innovators Pavilion & Pitch Competition at FIA's Futures and Options Expo. The deadline for applying is coming up quickly, it is June 30, so apply soon. If you think your startup has the stuff to be the "Innovator of the Year" or you just want the exposure of showing off on the stage at EXPO, then get signed up today at fia.org/fia/innovators.
| | | | | | Lead Stories | | | Stock Traders Turn to Options for Desperate Chase to Catch the Tech Rally
Bloomberg
Stock investors who planned for one thing in 2023 are getting something else entirely. Now, with the tech-obsessed market at risk of running away from them, the race is on to catch up.
Professional and retail traders alike are rethinking views on computer and software shares with the Nasdaq 100 up 31% since December. Among those stung into action are managers who earlier cut holdings in Apple Inc. and the six other biggest tech stocks by the most in almost three years. ETF investors are similarly wrong-footed after pulling about $3 billion in the past five months from the Invesco QQQ Trust Series 1 (ticker QQQ), the largest exchange-traded fund tracking the Nasdaq 100.
/jlne.ws/43DKoGR
Zero fear
Louis Ashworth - Financial Times
We've written a bit before about zero-day-to-expiry (0DTE) options, a newish set of financial instruments that have surged to popularity.
Back then, we were worried about Liverpool FC's current form, and Bank of America wasn't worried about 0DTE. Fast forward three months, and we feel a bit better about Liverpool, and BofA feels even more relaxed about 0DTE.
/jlne.ws/43zhOWR
Fed's Mester Sees No Reason to Pause US Rate Hikes, FT Says
Michael Heath - Bloomberg
Federal Reserve Bank of Cleveland President Loretta Mester said she sees no "compelling reason" to pause interest-rate increases, particularly in the wake of the debt-limit deal, the Financial Times reported.
Mester pushed back against the notion that further evidence is needed from economic data before hiking, the newspaper said, citing an interview with her. The only reason for skipping a rate increase when it is clear more tightening is necessary would be extreme market volatility or some other shock, she said.
/jlne.ws/3C10j6e
Erdogan's Win Brings Volatility Back to Long-Managed Lira (TRY/USD) Market
Netty Idayu Ismail - Bloomberg
Signs that Turkish President Recep Tayyip Erdogan is loosening his grip on the currency market following re-election have brought back the type of sharp lira declines not seen in almost a year.
The lira has weakened about 6% since the start of May and hit a new record above 20 per US dollar this week. The slump comes as a measure of historical volatility for the currency jumped to 19% from 3% before the first round of elections in mid-May. Looking forward, implied volatility in the lira is expected to surpass that of all major currencies tracked by Bloomberg in the coming months.
/jlne.ws/3WFFVB0
| | | | | | Exchanges | | | ETD Volume - April 2023
FIA
Worldwide volume of exchange-traded derivatives reached 8 billion contracts in April. This was down 24.3% from March 2023 but up 37.5% from April 2022.
Options continue to gain in popularity. Global trading of options reached 5.99 billion contracts in April, up by more than 62% from last year, with most of that trading taking place in the Asia-Pacific region. Global trading of futures reached 2.01 billion contracts in April, down 5.8% from the same month last year.
/jlne.ws/3IKbVOv
Cboe Data Reveals Intraday Option Trades are on the Rise
Press Release
Cboe Global Markets (BATS:CBOE) has reported an increase in intraday options trading, indicating a fundamental shift in how market participants engage with options.
Edward Tilly, the chairman and CEO of Cboe, stated that there has been a fundamental evolution in options trading, with many market participants now opening and trading positions on the same day that options expire. Cboe reported a 29% increase in total net revenue for Q1 for its derivatives business, driven by the strength of index options and volatility products and solid volumes in multi-list options trading.
/jlne.ws/3WJ4OMf
Eurex received CFTC approval for FTSE Bitcoin Index Futures
Eurex
Eurex FTSE Bitcoin Index Futures have been approved by the U.S. Commodities Futures Trading Commission (CFTC). Trading for US-based investors started on 29 May 2023.
The launch of FTSE Bitcoin Index Futures is an important milestone in Eurex's efforts to offer secure and trusted access to cryptocurrencies in a regulated market environment. Eurex is the first exchange in Europe to offer bitcoin index futures. US participants can now benefit from additional trading and hedging opportunities, with access to a wider range of participants and liquidity pools during Asian, European and US hours.
/jlne.ws/3N2Efyp
| | | | | | Regulation & Enforcement | | | CFTC's Division of Clearing and Risk Issues Staff Advisory on the Risks Associated with Expansion of Derivatives Clearing Organization Clearing of Digital Assets
CFTC
Today, the Commodity Futures Trading Commission Division of Clearing and Risk (DCR) issued a staff advisory on the risks associated with the expansion of Derivatives Clearing Organization (DCO) clearing of digital assets. In the past several years, DCR has observed increased interest by DCOs and DCO applicants in expanding the types of products cleared and business lines, clearing models, and services DCOs offer, including related to digital assets.
/jlne.ws/3WEDSxd
| | | | | | Strategy | | | How to Play Nvidia Without Buying the Stock
Steven M. Sears - Barron's
Artificial intelligence may destroy humanity, but not before creating enormous wealth. Such is the paradox that now confronts investors after Nvidia NVDA - 3.56% 's recent earnings report inadvertently created a large-scale ethics experiment on Wall Street.
On Tuesday, days after Nvidia (ticker: NVDA) stunned investors with a financial forecast that some have said augurs a new Industrial Revolution, AI experts released an ominous warning.
/jlne.ws/45BanQX
Options Traders Are Really Bullish on Nvidia
Gunjan Banerji - WSJ
Nvidia's meteoric rally has unleashed a burst of activity in the market for its stock options, with many turning to bullish bets.
Many traders have flocked to trades that would pay out if the stock keeps rising, driving up the price of call options. That has driven an options measure known as skew lower and lower, according to RBC Capital's Amy Wu Silverman. A lower skew typically signals that prices for calls are more expensive relative to put options.
/jlne.ws/3C4L4ch
FOMO Sweeps Market for Tech Stocks
Gunjan Banerji - WSJ
Traders are really bullish on tech.
A measure of volatility tied to the Nasdaq-100 index has notched gains this month, rising alongside the Nasdaq-100 index itself, which has gained around 8%. The lockstep moves show how the recent rally in tech stocks is upending traditional dynamics in the derivatives market. Typically, market volatility ebbs lower when stocks are rising, and vice versa.
/jlne.ws/3oCZEoi
The VIX Prints Reversal Candlestick Amid Key Discussions On Debt Ceiling: A Technical Analysis - ProShares Trust Ultra VIX Short Term Futures ETF (BATS:UVXY)
Melanie Schaffer - Benzinga
The CBOE Volatility Index (VIX), tracked by the ProShares Ultra VIX Short Term Futures ETF UVXY, closed near flat on Tuesday ahead of a key congressional vote on the tentative deal reached by President Joe Biden and House Speaker Kevin McCarthy to increase the debt ceiling, which set for a House Vote on Wednesday.
The price action on the VIX caused the index to print a doji candlestick on the daily chart. A doji is a transitional candlestick that suggests a change in direction could be on the horizon.
/jlne.ws/3MM81Ga
| | | | | | Miscellaneous | | | Hedge Funds Are Deploying ChatGPT to Handle All the Grunt Work
Justina Lee and Saijel Kishan - Yahoo Finance
The latest artificial-intelligence hype is powering a massive surge in the stock market on bets that a new era of innovation is nigh.
Yet for money managers who weaponize computing advances for an investing edge, the era of ChatGPT holds a less lofty promise for now: Automating the grunt work.
So-called generative AI is already helping to speed up mundane tasks known to crush the spirit of junior Wall Street employees, hedge funds say â from reviewing reams of market research to writing basic code and summarizing fund performance.
/jlne.ws/3OJJdkV
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