| September 15, 2022 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | A $3.2 Trillion Option Expiration Seen Worsening Post-CPI Rout
Lu Wang - Bloomberg
Another wrinkle in a chaotic stock market where everything from the frenetic activity of quant traders to an ever-hawkish Federal Reserve is making investing harder than usual: A looming $3.2 trillion options expiry played a notable role in the Tuesday selloff. As a hotter-than-expected inflation reading rocked Wall Street, a slew of bearish options that had become worthless during last week's rally jumped back in the money, forcing market makers to sell underlying stocks to hedge their positions. With those put contracts expiring Friday, the activity of dealers turned more sensitive to the movement in the cash market. After the S&P 500 fell below 4,000 -- an area that harbors one of the highest open interest to roll out -- selling intensified, according to Steve Sosnick, chief strategist at Interactive Brokers LLC.
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Why Volatility Barely Budged During The Largest Market Drop in Two Years
Eric Wallerstein - WSJ
Tuesday's 4.3% decline in the S&P 500 was an outlier - something that should only occur less than 0.1% of the time, per Susquehanna International Group's co-head of derivative strategy, Christopher Jacobson.
It was also the worst-ever, single-day loss at a time when the Cboe Volatility Index, or VIX, was below 30, according to research firm Tier1 Alpha.
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Wall Street's fear gauge is too low after Tuesday's brutal sell-off, signaling stocks haven't yet hit bottom
Matthew Fox - Business Insider
Tuesday's brutal 4% sell-off in the S&P 500 was unable to nudge the VIX to levels often seen during stock market bottoms."A VIX below 28 in the current macro environment seems like the wrong price to us," DataTrek said.
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Ethereum traders shorted ETH price in record numbers during the Merge â 50% crash ahead?
Yashu Gola - CoinTelegraph
Ethereum successfully completed its long-awaited transition to proof-of-stake via "the Merge" on Sept. 15, while traders have been increasingly shorting Ether (ETH) in anticipation of a sell-the-news event.
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Apple has unseated Tesla as the most-shorted US stock - after Elon Musk's EV company held the title for 864 days
Theron Mohamed - Business Insider
Elon Musk's automaker held the title for 864 days, or more than two years.Short interest in Apple stock is $18.4 billion, compared to $17.4 billion in Tesla stock.
Investors are betting more money against Apple than Tesla for the first time since April 2020, S3 Partners revealed in a report titled "Apple is the New #1 Short" on Wednesday.
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T. Rowe, JP Morgan AM defy equity index options retreat
Samuel Karasek - Risk.net (Subscription)
T. Rowe Price and JP Morgan Asset Management added to their equity index options positions in the second quarter of the year, mostly buying protection on the downside, as most other managers cut the size of their books.
The overall market for US mutual funds contracted by $15.4 billion in Q2, settling at $116 billion, according to data from filings submitted to the US Securities and Exchange Commission that was collected and analysed by Risk.net's Counterparty Radar service.
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When Will Inflation Go Down? Why a Big Fed Rate Hike Will Happen First
Claire Ballentine - Bloomberg
The battle against inflation is going to take a while.
Market watchers and economists hoped the latest consumer price reading would show inflation on a downward trajectory, providing an indisputable signal that the peak is behind us.
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Shaken Wall Street awaits final capitulation to greenlight buying
Alden Bentley - Reuters
Even as investors crowded the exits on Tuesday, Wall Street's steepest one-day shake out since early in the pandemic in June 2020 carried few of the hallmarks of capitulation that analysts want to see before calling a bottom.
While the S&P 500's (.SPX) 4.3% slump on Tuesday extended fractionally in early trade Wednesday, it held about half a percent above the 3,900 technical area that looks pivotal to buffering a decline to the June bear market low around 3,666.
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Top Brazil Hedge Fund Is Wary of Bets on Aggressive Interest Rate Cuts
Rachel Gamarski and Felipe Saturnino - Bloomberg
Brazil's traders may have gotten ahead of themselves in pricing in interest-rate cuts next year, according to one of the country's top-performing hedge-fund firms.
Felipe Tamega, the head of research at Absolute Investimentos in Sao Paulo, is skeptical that the central bank will cut rates as quickly and aggressively as implied in the swap rates market. Defying the consensus, he forecasts another 25 basis points next week and says borrowing costs will remain high for longer as the global fight against inflation is far from over.
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| | | | | | Exchanges | | | Crypto Exchange Bybit Halts Derivatives Trading in Brazil After Exchange Commission Ban
Paulo Alves - Coindesk
This article is adapted from CoinDesk Brasil, a partnership between CoinDesk and InfoMoney, one of Brazil's leading financial news publications. Follow CoinDesk Brasil on Twitter. Singapore-based cryptocurrency exchange Bybit will stop offering crypto futures and options in Brazil on Thursday after a ban was imposed on Bybit by Brazil's Securities and Exchange Commission (CVM) last week.
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| | | | | | Regulation & Enforcement | | | SEC backs fresh push to shore up $24tn Treasury market
Kate Duguid and Stefania Palma - Financial Times
Wall Street's top regulator has advanced new rules to push more Treasury bond deals by high-speed traders and hedge funds through clearing houses, in one of its most assertive attempts to shore up the $24tn market.
Clearing houses stand between trading counterparties and require insurance, or margin payments, to prevent a default from cascading through the market. Requiring their broader use is an attempt to add safeguards to cash and repo markets, which trade billions of dollars a day to set the price of US government debt but have been tested repeatedly over the past decade.
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| | | | | | Strategy | | | Options Dealers Draw Line in the Sand for S&P 500 Around 3,900
Lu Wang - Bloomberg
Traders watching price action in stocks might have noticed that the S&P 500 has slid toward the 3,900 level three different times Thursday, before holding its ground. The resilience can be attributed to Friday's $3.2 trillion option expiration, one theory holds.
As of midday, roughly 13,000 puts expiring Friday linked to the equity index with a 3,900 strike price have changed hands, with the cost, or implied volatility, falling almost 2 points over a span of two hours, according to Cantor Fitzgerald LP.
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The Best Volatility Options Strategies for Choppy Markets
Schaeffer's Investment Research
Finding optimal swing trades can be tricky when the stock market is chopping in a range. However, volatility option strategies that benefit from time decay can be a great choice, especially if implied volatility (IV) is high.
Various option selling strategies can do well in a choppy market because options sellers make money even when the underlying stock is going sideways. On the other hand, equity traders can easily get stopped out of trades and fail to time the sideways action efficiently enough to make a profit.
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| | | | | | Events | | | Cross Border: The Asia-Pacific Trading & Execution Landscape
FIA
The exchange-traded derivatives industry has been influenced and shaped by various dynamics, regionally and globally. This has created new opportunities for the APAC market while also presenting myriad challenges. Regulatory changes, geo-political issues, diversified trading products and an increased dependence on technology have all complicated cross border trading. We've gathered a broad spectrum of industry experts to discuss how they are adapting to these forces and to share their views on future developments.
Wed, Sep 28, 2022 8:00 PM - 10:00 PM CDT
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| | | | | | Miscellaneous | | | 'Tumors Like Bitcoin' Created by Years of 0% Rates: 'Black Swan' Author
Carla Mozée - Markets Insider
Years of US interest rates sitting at zero have damaged the world's largest economy and created speculative bubbles such as bitcoin, "The Black Swan" author Nassim Nicholas Taleb told CNBC on Thursday.
"We've had 15 years, 14 and a half years of Disneyland that basically has destroyed the economic structure. Think about it. No interest rates," said Taleb.
/jlne.ws/3UcNygE
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