| | | | | | | | December 06, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | This evening (12/6/2024) is the last chance to register for the Take WILD to Work Tour: Akuna Capital on Tuesday, December 10, from 04:30 p.m. - 06:30 p.m. Central Time, at 333 South Wabash Avenue, 26th Floor, Chicago, IL 60604. Women In Listed Derivatives (WILD) Members and Non-Members are welcome! The presentation, titled "Women at Akuna: The New Wave in Tech and Trading" will be led by some of Akuna's women in Quant, Trading and Technology, who will discuss the role of women shaping the future of technology, specifically aimed for those in Quant, Technology and Trading. It will be followed by a happy hour and networking event in Akuna's OTC Coffee Bar from 5:00-6:30 p.m. Go HERE for more information and to register.~SR
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Don Morton, My Second Client as a Full-service Broker, Has Passed Away at Age 89
JohnLothianNews.com
His Highly Complex Bond Option Position Helped Get Me Fired From First American, But It Was Not His Fault
Don Morton, the second futures brokerage account I ever opened as a full-service futures broker, passed away on Monday, December 2, 2024, at the age of 89. Don was a brilliant options trader who served as the executive director of the Tennessee Legislature's Fiscal Review Committee. He was also a U.S. Army veteran of the Korean War and a certified public accountant.
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| | | | | | Lead Stories | | | Bitcoin Options Shows Traders Are Already Hedging After Record Rally to $100,000
David Pan - Bloomberg
Bitcoin pulled back a record high with some traders already seeking to hedge against a deeper retreat after the original cryptocurrency surged to more than $100,000 for the first time. There has been an uptick in demand for put options, or contract that gives the buyer the right to sell an asset at a predetermined price within a set tie period. Puts with strike prices of $95,000 and $100,000 have seen the largest open interest positions over the last 24 hours, according to Amberdata, which tracks digital-asset market data. Demand for puts in the $75,000 and $70,000 range has also increased.
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The stock market's 'fear gauge' is trading at lows. Why retail investors should take note.; The Cboe Volatility Index hasn't been this low in months - which means it may be a good time for investors to hedge against future volatility
Gordon Gottsegen - MarketWatch
The stock market has been acting jubilantly over the past month, with the S&P 500 up about 6% since the U.S. election and all three major U.S. stock indexes trading near all-time highs. Throughout the optimism, Wall Street's so-called "fear gauge" has been trading near lows for the year.
The Cboe Volatility Index was trading at around 12.9 on Friday, which is near the index's six-month low. The VIX measures expected S&P 500 volatility over the coming 30-day period by looking at options data. While it doesn't directly measure investor sentiment, it's often used to gauge how investors are positioning themselves against expectations of market volatility.
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Jane Street, Millennium End India Options Trade Secrets Case; Legal fight pitted two Wall Street giants against each other; Case settled on 'mutually agreeable terms,' Jane Street said
Chris Dolmetsch - Bloomberg
Jane Street Group and Millennium Management agreed to settle a legal dispute over two former traders' alleged theft of a secret billion-dollar India options trading strategy. In a filing Thursday in Manhattan federal court, the two firms said they had agreed to dismiss the case. Terms of the settlement were not disclosed. The resolution ends a case that had pitted two of Wall Street's biggest names against each other and raised the question of whether a trading strategy could be protected as a trade secret. The court fight also spotlighted international firms' growing interest in the Indian securities market.
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Hedge Fund All-or-Nothing Trades Gain Traction in Options Market
Christian Dass - Bloomberg
With events from elections to central-bank rate moves to wars threatening upheaval in the markets, investors are increasingly seeking a pre-determined payoff if they bet right.
While many traders - from mom-and-pops to systematic hedge funds - are using zero-day-to-expiry listed options, large investors have increasingly turned to over-the-counter binary contracts that can hedge tail risks across multiple assets.
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Cboe Europe Derivatives hits volume, open interest records
Radi Khasawneh - FOW
Cboe Global Markets has hit single day trading and open interest high at its European equity derivatives exchange, as it continues to gain traction after connecting its first retail broker in the summer.
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FX Reactions to 2024 Global Elections
Cboe
In today's interconnected world, foreign exchange (FX) markets play a pivotal role in shaping economic conditions and investor sentiment. In a year where nearly half the world's population live in countries that are holding or have held elections, understanding the impact elections can have on FX markets is key. For domestic consumers, the local currency means purchasing power; to foreign investors, currency is an added risk exposure; to traders, currencies offer innumerable speculative opportunities.
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Market Frenzy Fuels $1 Trillion ETF Rush to Break Annual Records; November's historic ETF haul was led by equity funds demand; 'Trump bump' fueled rise, year inflows may be hard to beat: BI
Isabelle Lee - Bloomberg
The optimism sweeping Wall Street has spurred investors to plow a record $1 trillion into US exchange-traded funds so far in 2024, racking up yet another milestone for the industry. With some 16 trading days left to go, this year's net inflows have already surpassed the $903 billion high in 2021. Investor appetite for assets ranging from staid fixed income to speculative leveraged bets in an easy-to-trade ETF wrapper has helped fuel the boom. The market frenzy reached a fever pitch in November as stocks soared to new peaks on the conviction that President-elect Donald Trump's incoming administration and his support for tax cuts would spark further gains. It marked the best month for the S&P 500 this year while ETFs of all stripes saw a record $155 billion pour in, averaging inflows of around a $7.3 billion a day, data compiled by Bloomberg Intelligence show.
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A $500 Billion Haul Reignites Passive Controversy on Wall Street; Apollo, Citadel have issued warnings on indexing amid ETF boom; Goldman, Citi say fundamentals, active funds hold bigger sway
Lu Wang - Bloomberg
The passive-investing juggernaut is picking up speed - and it's stirring up fresh angst about the dangers posed by the index-tracking boom across Wall Street. With almost a month still to go in 2024, index funds have raked in some $500 billion in fresh cash, while their active counterparts are set for outflows. In recent weeks, that growing dominance prompted outcry from active manager behemoths Apollo Global Management and Citadel, who have blamed the surge in index-following cash for derailing the crucial role of stock pickers as drivers of market efficiency, among other charges.
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Ether Gets the Limelight as Record-Chasing ETF Investors Pile In
Sidhartha Shukla - Bloomberg
In the shadow of Bitcoin topping $100,000, a rally in Ether is building steam, with investors betting the second-biggest cryptocurrency will surpass the record it reached three years ago. Ether exchange-traded funds listed in the US saw a record daily inflow of $428 million on Thursday, data compiled by Bloomberg show. The token has soared 61% to outperform Bitcoin since Donald Trump's Nov. 5 election victory, which touched off a crypto rally on expectations of friendlier regulations.
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Roaring Kitty Sparks Meme Rally With Post of Time's 'You' Cover; GameStop was briefly halted for volatility after the post
Carmen Reinicke - Bloomberg
Animal spirits in the US equity market rampaged into a handful of meme stocks after a cryptic afternoon X post from Keith Gill, the online persona known as Roaring Kitty who rose to fame in 2021's meme-stock mania.
Shares of GameStop Corp., one of Gill's original favorites in the January 2021 meme frenzy, spiked as much as 14%, triggering a volatility halt, before paring most of the gain to end the day up 5.9%. AMC Entertainment, another darling from that era, also erased some of a spike to close 5.9% higher.
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Bitcoin Stabilizes Just Below $100,000 After Short-Lived Dive; Speculators seek protection after a record-breaking rally; eToro's Josh Gilbert says profit-taking is to be expected
Sunil Jagtiani - Bloomberg
Bitcoin stabilized just below the $100,000 level it topped for the first time this week after briefly diving almost 7% earlier in the day, underscoring rising volatility following the past month's rally.
The digital asset fell as low as $92,144 before rebounding to around $99,500 as of 11:15 a.m. in New York. Ether, the second largest cryptocurrency, surpassed the $4,000 mark for the first time since March. Volatility has plagued the wider crypto market amid a hiatus in a rally fueled by President-elect Donald Trump's embrace of the sector.
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| | | | | | Exchanges | | | CME Group Announces $2.1B Annual Variable Dividend and $3B Share Repurchase Program
CME Group
CME Group, the world's leading derivatives marketplace, announced that its Board of Directors approved two initiatives to return capital to shareholders. The Board declared the company's 2024 annual variable dividend, amounting to $5.80 per share. The dividend is payable January 16, 2025, to shareholders of record on December 27, 2024, and totals approximately $2.1 billion. In addition, the Board authorized a share repurchase program of up to $3 billion of CME Group Class A common stock, subject to market conditions.
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OIC Attends Benzinga Fintech Event and Receives 2024 'Best in Financial Education' Award
OIC
OCC (The Options Clearing Corporation) / The Options Industry Council (OIC) attended the 2024 Benzinga Global Fintech Deal Day and Awards and was selected as winner of the "Best in Financial Education" award.
Lindsay Burke, Director, Investor Education, OCC, Accepts "Best in Financial Education" Award
The event gathers fintech investors and industry leaders and recognizes innovators who create positive and diverse changes in the financial services space.
The award acknowledged OCC/OIC's continued dedication to providing engaging and practical educational resources about the risks and benefits of exchange-listed equity options to a global audience of market participants.
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| | | | | | Regulation & Enforcement | | | EC Obtains Final Judgment Against Jordan Qsar, Austin Bernard, and Grant Witherspoon in Connection with Insider Trading
SEC
On November 18, 2024, the Securities and Exchange Commission obtained a final judgment against Jordan Qsar. Austin Bernard and Grant Witherspoon, all former minor league baseball players the SEC charged with insider trading in advance of the December 6, 2021 announcement that Jack in the Box Inc. would acquire Del Taco Restaurants, Inc. The complaint alleges that Jordan Qsar learned about the acquisition from a friend and former teammate who was working on the acquisition at Jack in the Box. Qsar traded on the inside information and tipped Bernard and Witherspoon, who used the information to purchase Del Taco call options. According to the complaint, Qsar made about $56,500 in illegal trading profits, Bernard made approximately $64,700 and Witherspoon made approximately $42,800.
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Statement of Chairman Rostin Behnam on the Staff Advisory Related to the Use of Artificial Intelligence by CFTC-Registered Entities and Registrants
CFTC
Today's staff advisory on the use of artificial intelligence by CFTC registered entities and registrants is the product of months long action by the staff AI task force[1] that I created to engage with market participants, AI technology providers, domestic and international regulators, and other stakeholders to understand existing and potential AI uses cases and risks in the derivatives markets. The advisory is also informed by public comment on staff's Request for Comment on the Use of Artificial Intelligence in CFTC-Regulated Markets. Given the dynamic nature of artificial intelligence and the growing integration of AI in derivatives markets, the advisory is a measured first step to engage with the marketplace and ensure ongoing compliance with the Commodity Exchange Act and the CFTC's regulations. The advisory is emblematic of the CFTC's technology-neutral approach, which balances market integrity with responsible innovation in the derivatives markets. As firms may thread AI into the fabric of nearly every aspect of their operations, staff intends to monitor for any risks from AI that may merit policy or regulatory consideration. Staff encourages a continued dialogue with all stakeholders about the risks and benefits of AI use cases in the derivatives markets.
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Statement of Commissioner Kristin N. Johnson on Future-Proofing Financial Markets: Assessing the Integration of Artificial Intelligence in Global Derivatives Markets
CFTC
Today, the Commodity Futures Trading Commission (CFTC or Commission) issued a Staff Advisory to CFTC-Registered Entities and Registrants on the Use of Artificial Intelligence in CFTC-Regulated Markets (Staff Advisory) which reminds CFTC-regulated entities that their obligations to comply with Commission regulations are technology neutral, meaning these obligations apply broadly to market transactions and conduct without regard to the sophistication of underlying technology. During my term as a Commissioner and in the decade prior to my appointment, I have advocated for market and prudential regulators to have clear visibility into the diverse technologies that increasingly define the infrastructure of our markets. Working in partnership with market participants, we are able to enhance our ability to accomplish our mission of ensuring market stability and market integrity. Technological innovation will indisputably characterize the future of finance. The question for our Commission and other market and prudential regulators is how best to ensure that we integrate responsible innovation that reflects our regulatory values, protects customers, and preserves investors' capital.
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| | | | | | Strategy | | | Mastering Options in Low Volatility Markets
tastylive (Video)
Nick Battista and Mikey Butler discussed trading strategies and market movements. They highlighted recent successful trades, including a lucrative Lulu trade for earnings, and analyzed price volatility in various stocks, with a notable rise in NASDAQ, driven by gains in Amazon, Tesla, and Meta. They examined options positions, such as diagonal spreads and iron condors, particularly in Nvidia and other tech stocks, while considering low implied volatility environments.
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MicroStrategy's secret sauce is volatility, not bitcoin; Self-reinforcing market forces are creating demand for Michael Saylor's 'lottery ticket' convertible bonds
Craig Coben - Financial Times
The saga of MicroStrategy reads like financial fiction brought to life. Its improbable resurrection from near-bankruptcy, its audacious pivot in August 2020 from software vendor to bitcoin maximalist, the thorny legal entanglements, its messianically charismatic leader, its once-in-a-generation stock price performance - all of it defies belief.
Lay on its issuance of prodigious amounts of stock and convertible debt, and the tsunami of stock selling by insiders, and the story gets even wilder. See our previous coverage for a recap.
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The VIX Index Falls To 4-Month Low As Equities Set Record High
Seeking Alpha
Cross-Asset Volatility: Cross-asset volatilities declined across the board on the back of President-elect Trump's nomination of Scott Bessent, a fiscally conservative, pro-business, hedge fund executive as Treasury secretary. The largest mover was rate volatility, which declined from 70th percentile highs to 35th percentile levels following sharp declines in US government bond yields (e.g., 10-year treasury yields slid 25bps to 4.17% w/w). Interestingly, despite Trump's Truth Social declaration to implement tariffs on China, Mexico, and Canada after taking office on Jan 20, FX volatilities have been relatively stable and remain at 93rd percentile highs. Since Trump's tariff announcement last Monday, the dollar has strengthened 67bps vs the Mexican peso, +41 bps vs the Canadian dollar, and is flat vs the Chinese renminbi.
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| | | | | | Miscellaneous | | | Wall Street's Bond Sellers Look Toward Bigger 2024 Bonus Rewards; Debt capital markets pay up 23% after falling by more in 2023
Will Kubzansky - Bloomberg
Wall Street bankers who help companies sell debt are poised to get bigger bonuses for their work in 2024 and may collect even higher rewards next year if issuance trends continue, according to recruiting and compensation specialists. Search firm Options Group predicts US debt capital markets professionals will get a 23% increase in total pay compared with 2023. Compensation consultant Johnson Associates Inc. forecasts an even bigger 25% to 35% rise for bond underwriters. Next year could be even better.
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