| July 23, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | FOW published the following stories in front of its paywall on July 22, including that Abaxx Exchange recently launched a new commodity venue in Singapore, culminating a multi-year development effort with a robust technology infrastructure poised for rapid growth. Meanwhile, the Financial Stability Board (FSB) released a report emphasizing the increasing significance of non-bank financial institutions (NBFIs) in global finance. Cboe Global Markets is set to relaunch its redesigned S&P 500 variance futures contract in September, pending regulatory approval. A study by Invesco highlights that geopolitical tensions, particularly between the US and China, are prompting sovereign investors to diversify geographically and seek "safe haven" assets. In another development, the UK Chartered Institute for Securities and Investment (CISI) has partnered with the Institute and Faculty of Actuaries (IFoA) to help actuaries address ethical issues in using AI for risk management. Additionally, in a story fully available on FOW, the emergence of US spot ETFs and corresponding futures has facilitated basis trading among institutional investors, leading to increased short positions by hedge funds and leveraged funds exploiting "positive basis" opportunities. ~JJL
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Options Discovery Episode 9: Protective Put Basics; Michael J. Oyster Breaks Down How to Use Options to Manage Risk With JLNâEURâ¢s Alex Teng
JohnLothianNews.com
In this episode of Options Discovery, JLNâEURâ¢s Alex Teng breaks down the basics of a protective put strategy where an investor is long a put option while owning the underlying asset. Alex also gets a chance to sit down with the chief investment officer of Options Solutions, Michael Oyster. In this Options Discovery interview, Oyster discusses how options can be used for risk management and navigating a declining stock market.
Watch the video »
| | | | | | Lead Stories | | | BTC options implied volatility is surging ahead of Trump's upcoming appearance at Bitcoin 2024: analysts
Brian McGleenon - The Block
Donald TrumpâEURâ¢s upcoming appearance at the Nashville Bitcoin conference this weekend is one factor driving current bitcoin market volatility, analysts said.
"Prices for out-of-the-money options have increased significantly, indicating expectations for more extreme market movements," QCP Capital analysts said. The increased demand and higher prices for these options reflect a broader sentiment of anticipation among market participants.
/jlne.ws/3xXItmk
Cracks in US stock market calm boost allure of portfolio protection
Saqib Iqbal Ahmed - Reuters
Bets in options markets show investors expect that calm to be tested in coming weeks. The Cboe Volatility Index (.VIX), opens new tab, known as Wall StreetâEURâ¢s fear gauge because it measures demand for protection against market swings, jumped to its highest level since late April last week following a selloff in technology stocks that dealt the S&P 500 its second largest weekly drop of 2024.
/jlne.ws/3A3l5Eh
'Modi Stocks' Face Investor Caution Before Budget
Ashutosh Joshi - Bloomberg
Good morning, this is Ashutosh Joshi, an equities reporter in Mumbai. Stocks seem poised to start trading on a firm note on the federal budget day, buoyed by gains in the rest of Asia. Although sentiment remains positive, one can expect increased volatility during the course of Finance Minister Nirmala Sitharaman's speech. The India VIX, known as the fear gauge, has risen for five straight days leading up to the event, marking its longest run in over two months.
/jlne.ws/4bVgTDO
Leverage Shares launches single-stock covered call ETPs in Europe; The products, based on Nvidia, Tesla and GLD, provide premium income, limit capital gain, but cushion losses
Steve Johnson - Financial Times
Leverage Shares has launched Europe's first "covered call" exchange traded products based on single stocks. The initial batch of three ETPs are centred on technology stocks Nvidia and Tesla, as well as the SPDR Gold Shares ETF (GLD), which tracks the price of the metal. Covered call ETFs involve selling call options on the underlying index or stock. This limits an investor's potential upside capital gain but provides a stream of premium income instead - augmenting a limited capital gain or, in the worst-case scenario, cushioning losses if the price of the underlying asset falls.
/jlne.ws/4c1csaB
US spot ether ETFs set to make market debut in another win for crypto industry
Hannah Lang and Suzanne McGee - Reuters
The first U.S. exchange-traded funds (ETFs) tied to the price of ether, the world's second-largest cryptocurrency after bitcoin, are due to begin trading on Tuesday, in another watershed event for the crypto industry's push to go mainstream. Ether ETFs from VanEck, Franklin Templeton, Fidelity, 21Shares and Invesco will begin trading on Cboe, the exchange said in a Friday notice, while one from BlackRock will begin trading on the Nasdaq, according to an exchange notice. Products from Bitwise and Grayscale Investments will also trade Tuesday on the New York Stock Exchange, the exchange said.
/jlne.ws/3WwJTh0
US spot ETF markets driving crypto basis trades
Radi Khasawneh - FOW
The emergence of US spot exchange-traded funds (ETFs) and futures referencing the same rate has made it easier institutional investors to make trades designed to benefit from divergence in prices between the markets. Increased interest in basis trades - a strategy involving long and short positions across spot and futures on the same asset - can be inferred from the increase in short positioning by hedge funds, according to specialist benchmark provider CF Benchmarks. Proprietary traders and leveraged investors looking to benefit from "positive basis" opportunities since the launch of US regulated spot ETFs earlier this year. There has been an increase in net short positioning by "leveraged funds" as reported to the Commodity Futures Trading Commission (CFTC).
/jlne.ws/3Wyw7KI
| | | | | | Exchanges | | | DeFi Exchange DYdX in Talks to Sell Derivatives Trading Software; Wintermute, Selini among potential buyers, people familiar say; Futures exchange shifted to open-source blockchain last year
Muyao Shen - Bloomberg
DYdX Trading Inc., the developer of the namesake decentralized finance exchange, is in talks to sell some of its derivatives trading software for an undisclosed amount to a consortium that includes some of the biggest market makers in crypto, according to people with knowledge of the matter.
Wintermute Trading Ltd. and Selini Capital are among the potential buyers of the dYdX v3 software, said two of the people, who asked for anonymity because the talks havenâEURâ¢t been made public. Perella Weinberg Partners is advising New York-based dYdX Trading, they said.
/jlne.ws/3y0IN3I
| | | | | | Regulation & Enforcement | | | SEC Extends Review Period for Bitcoin Trust Options Trading Proposals
Bitcoin.com
The U.S. Securities and Exchange Commission (SEC) has announced an extension for its decision on proposed rule changes from various self-regulatory organizations regarding the listing and trading of options on trusts holding bitcoin.
/jlne.ws/46jIuxw
| | | | | | Strategy | | | Option traders underestimating big tech share moves around earnings says BofA.
Jamie Chisholm - MarketWatch
The first of the big tech second-quarter earnings reports will be released after the closing bell on Tuesday, when Alphabet and Tesla deliver their numbers and forecasts.
But Bank of America's equity derivatives team warns that traders may be too sanguine about possible sharp moves in such tech behemoths around their results.
/jlne.ws/3LDFlPq
FX HedgePool extends credit intermediation beyond FX swaps; New service lets buy side trade spot and forwards with LPs without prior credit ties, including non-banks
Cole Lipsky - Risk.net
FX HedgePool is expanding its flagship credit-as-a-service matching model to cover all foreign exchange instruments, potentially opening up a range of new counterparty relationships for buy-side firms. The platform started off in 2020 with FX swaps, allowing asset managers and corporates to match off predictable hedging flows with their peers via credit-intermediating banks willing to provide balance sheet in exchange for a fee, later extending this to an all-to-all functionality.
/jlne.ws/3WgnJy3
Ethereum ETFs are live. HereâEURâ¢s what you need to know before trading.
Frances Yue - MarketWatch
Issuers received approval from the U.S. Securities and Exchange Commission on Monday to launch nine exchange-traded funds investing directly in ether, the first such products in the market.
It is the final procedure in a two-step process, after the SEC in May, following a sudden change in stance, approved the so-called 19b-4 filings from several stock exchanges requesting rule changes that would enable them to list ether ETFs.
/jlne.ws/3WfGMsk
August September
Cboe
Tim Biggam @delta_desk gives market updates in #Vol411, covering the #VIX futures term structure, the 15-day straddle, upcoming earnings (like $GOOG and $TSLA) and more.
/jlne.ws/3zRepZT
| | | | | | Education | | | Risk vs. volatility: What's the difference?
Tessa Campbell - Business Insider
While "risk" and "volatility" are sometimes used interchangeably, they don't mean the same thing. Understanding the difference between risk and volatility is crucial for investors to make smart decisions.
Defining how risk affects certain investable assets can help you recognize your risk tolerance (conservative, aggressive, or moderate) and contextualize market volatility in your investment portfolio.
/jlne.ws/4bUI0PA
The Sharpe Ratio and Options Trading
tastytrade
Tom Sosnoff and Tony Battista discuss the Sharpe ratio, an important metric for evaluating risk-adjusted returns in options trading. By comparing SPY, XLK, and QQQ, they highlight how higher concentrations in ETFs can lead to more volatility and higher Sharpe ratios. Although current trading platforms lack Sharpe ratio integration, advancements are underway to assess the effectiveness of trading strategies. The session underscores the necessity of diversification to reduce standard deviation in returns.
/jlne.ws/4dapGD2
| | | | | | Miscellaneous | | | Bad Trades Are Also Valuable; FX backrunning, crypto interns, Ray Dalio's non-compete, Ozempic and HBS.
Matt Levine - Bloomberg (opinion)
Wing Fung
If you are a trader, a good skill to have is buying stuff that will go up. If the stuff - stocks, bonds, currencies, whatever - that you buy reliably goes up, then you can make a lot of money. You can make money simply by buying the stuff, having it go up, and then selling it for more money than you paid. But there are other ways to monetize the skill. You can start an investment newsletter, and charge people a fee for telling them what stuff will go up. You can start a hedge fund, buying stuff for other people and taking a cut of their profits.
/jlne.ws/3WwEkiv
***** Matt Levine also picked up on the disciplinary action story by the CME against Wing Fung Futures Limited we shared yesterday. ~JJL
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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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