| November 08, 2022 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Binance to Buy FTX in Megadeal of Crypto Exchanges
David Yaffe-Bellany - NY Times
The cryptocurrency world was rocked on Tuesday as one of the largest exchanges for digital currencies, which appeared to be on the verge of collapse, was bailed out by a major rival in a deal that underlined the perils of the industry's volatility.
Binance, the world's largest cryptocurrency exchange, said that it had reached an agreement to buy its competitor FTX, which struggled to meet a surge of withdrawal requests in recent days as the crypto market teetered on the edge of another meltdown. The size of the acquisition couldn't immediately be determined, but the privately held FTX had once been valued at $32 billion.
/jlne.ws/3EgkGy7
Correlation breakdown - stocks, volatility links crack
Jamie McGeever - Reuters
The traditional inverse relationship between stocks and options -based measures of implied volatility has broken down in recent weeks, and in some cases is now the weakest in years.
What this portends for stocks going into year end is unclear, but given how low volatility is just now it is reasonable to assume investor demand for protection and hedging will rise.
/jlne.ws/3TlM2Y7
Wall Street's Alchemists Turbocharged Wild Swings in Treasuries; Placid financial markets fueled surge in low-volatility wagers; Scramble to hedge exposures is exacerbating rates swings
Justina Lee and Liz McCormick - Bloomberg
Over the last decade, as rock-bottom interest rates depressed returns on fixed-income assets, the alchemists of Wall Street came up with a solution for investors who needed fatter yields: a whole series of complex products that spun extra basis points out of comatose markets. Now, amid the worst bond rout in at least five decades, firms have been scrambling to hedge their positions, piling into derivatives that benefit from higher volatility as they seek to limit the damage.
/jlne.ws/3FYzIdh
Hedge Funds Slash Risky Bets Ahead of US Midterms, CPI Data
Lu Wang and Melissa Karsh - Bloomberg
Big speculators, a year along in a frantic campaign of risk reduction, are getting even more cautious ahead of a duo of potential make-or-break market events this week: midterm elections and the government's inflation report.
Hedge funds that make both bullish and bearish equity wagers just unwound bets at a rate that was in line with the fastest this year, according to data compiled by JPMorgan Chase & Co.'s prime broker using a 20-day rolling window.
/jlne.ws/3zSgkuj
Big hedge funds shop for bargains in corporate debt markets
Laurence Fletcher - Financial Times
Big-name hedge funds are snapping up bargains in junk bonds and other corners of the corporate debt market, as they bet a sell-off sparked by the darkening global economic outlook has gone too far.
Corporate debt has been hard hit this year by fears that steep increases in borrowing costs will lead to a wave of defaults at groups that have grown accustomed to years of easy money. Interest rates for risky borrowers have soared.
/jlne.ws/3fMIekR
Global hedge funds advance in October amid stocks rally
Reuters
Global hedge funds posted a 2% gain in October, helped by a rally in stock markets and a combination of higher inflation and interest rates, data provider HFR said in a statement on Monday.
Equities, event-driven and macro hedge fund indexes went up last month, according to HFR, adding two-thirds of all hedge funds posted gains.
Only macro hedge funds, however, delivered positive returns to investors in the first 10 months of 2022.
/jlne.ws/3TfYBnv
ETF investors turn bullish in October
Financial Times
Exchange traded fund buyers turned bullish in October, suggesting some investors believed global equity and bond markets may be approaching their nadir after 12 months of painful losses.
Net inflows to ETFs surged to $111.5bn globally, according to data from BlackRock, triple that of September and the highest reading since March.
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| | | | | | Exchanges | | | Hong Kong Exchanges and Clearing Limited (HKEX) published a video on LinkedIn celebrating the fact that "HKEX's HSI and HSCEI Options on Futures (#OOFs) hit a major #milestone on 7 November with open interest surpassing *1 million* contracts for the first time, translating to a notional value of US$44 billion."
| | | | | | Strategy | | | China Bullish Call Options Are Best Way to Bet on Foreign Flow, JPM Says
Abhishek Vishnoi - Bloomberg
Bullish call option strategies are the best way to benefit from foreigners potentially joining China's epic equity rebound that started last week, according to JPMorgan Chase & Co.
"Investors can consider buying Mar23 expiry call ladders on H-shares or Hang Seng Tech" in an option strategy that locks in partial profits once the underlying asset reaches predetermined price levels, the firm's strategists including Tony Lee wrote in a note. The odds for gains may rise when China's Central Economic Work Conference provides clarity on the nation's policies in December, they added.
/jlne.ws/3NPgngk
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| | | Jeff Bergstrom
Editor
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