| July 19, 2024 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Recent stories reported by FOW found in front of its paywall include the news that Cboe Clear Europe, in collaboration with ABN Amro, is exploring the use of distributed ledger technology (DLT) to deploy Central Bank Digital Currency (CBDC) as collateral for margin calls when the European cash settlement system is closed. Despite a recent Microsoft outage, European markets operated normally, with UK-based ICE Futures Europe and the London Metal Exchange reporting no disruptions, although the London Stock Exchange Group's Regulatory News Service was affected. Japan Exchange Group (JPX) achieved a record market share for mini-Nikkei 225 mini futures traded on its dark pool. Post-trade specialist OSTTRA has enhanced its network by adding SpectrAxe's central limit order book (CLOB) FX options offering, streamlining trading in the FX options market. Additionally, Hidden Road, launched in January, is eyeing opportunities in futures clearing with CME-listed futures and options, entering the largest US listed derivatives market. ~JJL
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Lex Luthringshausen Full Interview Part 2; Lex Talks Options Straddles With JLN's Alex Teng.
JohnLothianNews.com
In this Options Discovery interview, Lex Luthringshausen from Tradier sits down with Alex Teng to discuss the options straddle trading strategy as well as his personal experiences as a trader. Lex is also prominent in the world of options education. You can find him at OptionsBrewTV by Tradier on YouTube, where he creates content, holds workshops, and gives free seminars for options traders at all levels.
Watch the video »
| | | | | | Lead Stories | | | Are the Market's Expectations for Future Volatility "Too Low" or "Too High"? Here are Eight Charts
Matt Moran - LinkedIn
Some investors recently have inquired - is the VIX Index too low and is there too much complacency in the markets, particularly in light of factors such as wars, inflation, and geopolitical tensions? So far in 2024, the average daily closing level of the VIX Index is around 13.8, while the long-term average daily closing level for the VIX Index since the 1990 inception of its data history is 19.5. While the VIX Index is an important measure of the 30-day expected volatility of the S&P 500 Index, and it admittedly often has been below its long-term average in recent months, I suggest that investors look at skew, term structure, and other metrics to develop a fuller picture as to the extent of complacency, greed and fear in the financial markets.
/jlne.ws/4cRvsK3
Citi reaches settlement with Montreal Exchange on options reporting
Reuters
Citigroup reached an agreement with the Bourse de Montreal to resolve allegations that it failed to report positions on options contracts exceeding a certain threshold, the exchange said on Thursday.
The bank failed to establish and maintain a system to supervise employees to comply with reporting rules, the exchange said, adding that Citi will pay a $138,000 fine and $10,600 for related costs as part of the settlement.
/jlne.ws/3YdoWsy
Taming of the skew sparks new debate over 0DTEs; Some pin lower put premium on short-dated market-maker hedging; others cite fundamentals
Helen Bartholomew - Risk.net
A heated debate is breaking out over whether the surge in zero-day option trading is contributing to a sharp decline in the skew of S&P 500 options.
The difference in premiums paid for downside puts and upside calls, known as the skew, has fallen by around a half since Cboe went live with daily expiries for S&P 500 options in mid-2022.
/jlne.ws/3zMTmI2
CrowdStrike outage affects Schwab, E*Trade and other brokerages - preventing people from trading
Gordon Gottsegen and Steve Gelsi - MarketWatch
No trader wants to get hit with an error message when logging into their brokerage account at market open, but that's exactly what happened to some on Friday morning.
Global technology outages impacted all sorts of industries on Friday morning, due to an apparent issue with Microsoft Corp. MSFT and cybersecurity platform CrowdStrike CRWD. While CrowdStrike says it's working on a fix, the outage is preventing business as usual for many organizations.
/jlne.ws/4d9Z70I
Hedge Funds Have an Election Plan: Sell the Calm, Buy the Chaos
Natalia Kniazhevich - Bloomberg
How's this for an election trade? Sell your winners now so you have cash on hand this fall to do some aggressive buying as the political jockeying heats up.
That's precisely what hedge funds have been doing since May, even as the market continued to set records. Their net leverage, which is often viewed as a barometer of risk appetite, fell to 54% in early July, the lowest level since January, according to Goldman Sachs Group Inc.'s prime brokerage desk. Hedge funds are now underweight technology, media and telecom by the most on record after spending two months unloading the best performing stocks in the market.
/jlne.ws/3Y60WYo
Nervous About the Election? Here's What Financial Pros Have to Say About That.
Steve Garmhausen - Barron's
It's probably safe to say that emotions are running high when it comes to politics right now. The 2024 presidential election is less than 12 weeks away and the candidates offer vastly different visions for the country. One of them was nearly assassinated in recent days, and the other is facing pressure to drop out of the race.
/jlne.ws/3WuWSQ8
Here's how stocks performed the last time a president ended a re-election bid - in 1968
Mark Hulbert - MarketWatch
No one knows how the U.S. stock market will react if President Joe Biden withdraws from the 2024 presidential race. The only historical parallel is to former President Lyndon B. Johnson's decision to withdraw from the 1968 presidential race, and the differences between then and now outweigh any analogy.
/jlne.ws/3YbJ7Hf
'Greatest Bubble' Nearing Its Peak, Says Black Swan Manager; Universa's Mark Spitznagel, who has made billions from past crashes, sees last hurrah for stocks before severe reckoning
Spencer Jakab - The Wall Street Journal
Talk is cheap when it comes to where stocks are headed, but investors' ears perk up when Mark Spitznagel speaks.
One reason is that he has made some spectacular scores, including earning $1 billion in a single day, since setting up tail risk hedge fund Universa Investments in 2008. The other is that he steadfastly hasn't relied on any sort of short-term view to do so.
/jlne.ws/4dbi1En
| | | | | | Exchanges | | | Cboe Clear Europe successfully participates in ECB experiment on use of DLT
Cboe
Cboe Clear Europe, the largest pan-European clearing house, has successfully participated in the Eurosystem's recent exploratory work testing the use of new technologies for the settlement of wholesale transactions in central bank money. The experiments specifically aim to explore the potential of distributed ledger technology (DLT).
Cboe Clear Europe, working alongside ABN Amro Clearing Bank N.V., explored the use of Central Bank Digital Currency (CBDC) as collateral, with the intention of testing the viability of the solution for margin calls outside the opening hours of TARGET, the EU's cash settlement system.
/jlne.ws/4f7XT89
Eurex adds Ether to its crypto derivatives suite
Deutsche Borse Group
Eurex expands its crypto derivatives portfolio with the launch of FTSE Ethereum Index Futures and Options as of 12 August 2024. Following the launch of FTSE Bitcoin Index Futures and Options in 2023, this is another major milestone in Eurex's ambition to offer secure access to cryptocurrencies in a regulated market environment. Ethereum is the second largest cryptocurrency with a market capitalization of approximately USD 400 billion. There is significant trading and hedging demand from institutional and professional customers, as reflected in record trading volumes in derivatives and other investment products.
/jlne.ws/3WCMmGR
| | | | | | Education | | | How to Read an Option Chain for Beginners
Paul Kim - Business Insider
An option chain is a constantly updating chart that shows you information about a given option.
The price of an option is based on the underlying stock's price, implied volatility, and time value.
The most important information on an option chain is the bid and ask prices, which tell you at what price buying and selling requests are being filled.
An option is a contract that gives you the right - but not the obligation - to buy or sell 100 shares of a stock at a predetermined price, known as a strike price, regardless of the stock's price when you exercise the contract. That right gives the contract value, which can be traded as its own type of security.
If you decide to trade options, the first hurdle that you'll encounter is reading an option chain, a table that shows you all the relevant information - and it's a lot of information - you need to make investment decisions. This wall of numbers can be overwhelming, and it can be hard to know where to start. Here's a guide on what all the terms mean and what to look out for in an option chain.
/jlne.ws/3y50oY3
Put Option vs. Call Option: A Detailed Comparison
Robin Kavanagh - Business Insider
Investing is a risk, as you never know for sure what the market is going to do. Investors can use this to their advantage by buying and selling put and call options. These are contracts that give the option holder the right to buy or sell shares of stock at a set price during a specific period of time. Each type can result in earning profits or generating losses, depending on whether you're a buyer or seller - and how the market impacts a stock's price.
/jlne.ws/3YbMXQP
| | | | | | Miscellaneous | | | Fireside Friday with... Liquidnet's Jeff O'Connor; The TRADE sits down with Jeff O'Connor, head of market structure, Americas at Liquidnet, to discuss traditional asset managers reclaiming market influence, the impact this has had on market dynamics and how forthcoming regulations are set to influence this trend.
Wesley Bray - The Trade
What is driving the purported 'comeback' of traditional asset managers? Is it a trend that's set to continue in the long-term? To start, it is interesting to look at the transition of market conditions from 2022 to today. In 2022, the market saw the highest sustained real price volatility since the Great Financial Crises. This alone was enough to make institutional asset managers wary of making moves. The situation was exacerbated by historically high levels of correlations, which made the selection of fundamental winners and losers very unappealing. Non-traditional volume sources such as passive indexing, high-frequency trading, non-bank market making, and quantitative trading were gaining market share over institutional asset managers. The subsequent lack of continuous institutional volumes contributed to an unhealthy market backdrop in terms of liquidity, efficiency, and attractiveness, as evidenced by the highest levels of cash raises in over 20 years within the fund manager segment.
/jlne.ws/3y0sB2l
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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
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