 | | | | | | | | December 02, 2024 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | 
Volatility Insight of the Day: Soybean Oil CVOL Index (SOVL), as measured by CME Group's Volatility Index (CVOL), has reached a 16-month high heading into winter amid shifting policies regarding trade and renewable energy. To learn more about CVOL, please visit here.
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Trump's Plans Risk Inflating Bullish Stock Market Into a Bubble; Equities at new records despite inflation, trade wars in play; 'One of my top concerns is extreme bullishness,' Diton says
Esha Dey - Bloomberg
The new Trump administration is coming in hot, with mass deportations of undocumented immigrants and threats of triggering a global trade war among its immediate priorities. Fighting continues in Europe and the Middle East. And bond traders are scaling back bets on lower interest rates as the US economy risks a fresh bout of inflation. But despite all of these risks, investors seem largely unperturbed, with the S&P 500 Index setting another record just this week. Traders are piling into the riskiest parts of the market, too, with the small-capitalization Russell 2000 Index nearly doubling the S&P 500's performance over the past two weeks and approaching its first record since 2021. Meanwhile, the Cboe Volatility Index is at levels that historically indicate serenity among traders.
/jlne.ws/3VkBOel
****** Now would be a good time to learn how to trade volatility. VIX is not just something you rub under your nose when you get a cold.~JJL
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Leverage Shares Wants to Help European Investors Trade U.S. ETPS and Manage Fragmentation, Says Oktay Kavrak
JohnLothianNews.com
Investors in the EU and UK are looking for exposure to U.S. companies. They are also looking for the enhancement of leveraged products. In the past, foreign institutional investors could access U.S. ETFs directly or through local US-based affiliates. But in the past five years, regulations such as PRIIPs have made it harder for EMEA traders to hold U.S. ETFs.
Read more »
| | | | | | Lead Stories | | | 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. It's an all-or-nothing play: in exchange for a premium, the trade either returns 100% or nothing. While critics say it's more akin to betting on a sporting event than traditional options trading, the reality is that such a binary payoff is extremely useful to investors focused on hitting target returns within strict risk limits.
/jlne.ws/3CW620T
Managers rush to file for 'risk-averse' crypto ETFs; If approved, the products will allow investors to limit or protect against losses in return for surrendering some potential gains
Steve Johnson - Financial Times
Risk-averse investing in cryptocurrency might sound like a contradiction in terms, but a tranche of US exchange trade fund providers have plans to let investors try to do just that. A quartet of asset managers have filed with US regulators to create ETFs that invest in bitcoin, but use derivatives to minimise or completely protect against potential losses. "Given the meteoric rise in bitcoin this year, many investors are likely regretting they missed out because they were nervous about the volatility of the cryptocurrency," said Todd Rosenbluth, head of research at TMX VettaFi, a consultancy. "These pending downside protection ETFs will allow more people to add bitcoin exposure to their portfolios in a risk-aware manner."
/jlne.ws/4ihpRA0
Bitcoin Euphoria Threatens to Break These ETFs; Investors are piling into funds that seek to amplify daily return of MicroStrategy shares, but the ETFs haven't been working as intended in recent days
Jack Pitcher - The Wall Street Journal
Investors have flocked to a pair of turbocharged exchange-traded funds to ride the momentum in bitcoin, but they contain hidden risks that aren't widely understood. The ETFs seek to amplify the daily return of MicroStrategy, the software company that has turned itself into a bitcoin buying machine. Using complex derivative bets, they aim to offer double the daily return of the stock-to the upside or downside.
/jlne.ws/3ZyUdGE
US Bitcoin, Ether ETFs Log Record Inflows on Trump's Embrace of Crypto; Crypto market up over $1 trillion since Trump's election win; Traders expect US regulators to pivot to a friendlier stance
Sunil Jagtiani and Suvashree Ghosh - Bloomberg
US exchange-traded funds investing directly in Bitcoin and Ether are enjoying unprecedented demand, buoyed by President-elect Donald Trump's pledge to unfetter the crypto industry from regulatory shackles. The groups of Bitcoin and Ether ETFs each posted record monthly net inflows in November, $6.5 billion and $1.1 billion respectively, according to data compiled by Bloomberg. Friday's daily Ether ETF subscriptions also hit an all-time peak. The interest in Ether, the largest token after Bitcoin, points to widening speculative appetite for crypto following Trump's US election victory on Nov. 5. By some metrics, the clamor for exposure to digital assets has yet to reprise the mania of a pandemic-era bubble, at least among retail investors.
/jlne.ws/4fTFqvR
Dollar Faces Treacherous December on Trump, Rate Risks; US currency has weakened in eight of the last 10 Decembers; Foreign-exchange volatility has risen since TrumpâEURâ¢s Nov. 5 win
Ruth Carson, Alice Atkins, and Carter Johnson - Bloomberg
Dollar bulls emboldened by Donald TrumpâEURâ¢s win are entering a month that has historically punished the greenback.
The US currency has advanced about 2% since the Nov. 5 election, but seasonality shows the odds are stacked against it from here. The greenback posted losses in eight of the last 10 Decembers, often a victim of year-end portfolio rebalancing flows and the so-called Santa Rally that emboldens traders to sell dollars for riskier assets like stocks.
/jlne.ws/4ggKyKi
BMLL Expands into Options as Market Data Costs Spiral
Shanny Basar - MarketsMedia
BMLL, which provides harmonized, historical data and analytics, has expanded into options as global trading volumes are expected to be another record this year.
Paul Humphrey, chief executive of BMLL, told Markets Media that this was the first time the firm expanded outside its traditional asset classes of equities, exchange-traded funds and listed futures. He said: âEURÅOptions data is generated by the same exchanges that we deal with but has many of its own challenges. The options data set is enormous.âEURÂ
/jlne.ws/4gcxtBQ
| | | | | | Exchanges | | | Unlocking Retail Participation in Europe
Iouri Saroukhanov - Cboe
The rise of the retail investor has emerged as one of the most significant trends in financial markets over recent years. At Cboe, we have observed the growing influence of retail investors firsthand, especially within the US options market. However, Europe continues to lag behind other regions in terms of retail participation in its capital markets. This discrepancy can be attributed to various factors, including regulatory and taxation differences, cultural attitudes towards investing, and the availability of educational resources. However, as European policymakers and market participants recognise the benefits of an engaged retail investor base, efforts to encourage retail activity in European markets are gaining momentum.
/jlne.ws/4eX5jtu
| | | | | | Strategy | | | S&P 500 Starts December Trading Near All-Time Highs
Christopher Vecchio - tastytrade
The final month of the year has begun, and with it the S&P 500 is entering the final stretch trading near all-time highs. U.S. equity markets are seeing a shift back to the Magnificent Seven stocks, however, and breadth is weaker at the open. Bonds are down across the curve despite a bump higher in the odds of a Federal Reserve interest rate relative to this time last week (62.2% vs. 52.3%). Metals, both base and precious, are marginally weaker across the board, even as the U.S. dollar has surged against all of its major counterparts on the other side of the holiday weekend.
/jlne.ws/49gtFgu
Why Buyers Should Use Options to Manage Risk This Week; The current optimism among equity option buyers remains a risk
Todd Salamone - Schaeffer's Investment Research
Looking back on the holiday-shortened Thanksgiving week, nothing changed with respect to bulls remaining in control. In fact, after the S&P 500 Index (SPX -- 6,032.38) failed to sustain a move through resistance in the 6,000-6,008 region Monday through Wednesday, options bulls exerted their might in a shortened session on Friday, with a move through 6,000-6,008. Keep in mind that during half-day sessions like on Friday, volume is thin.
VIX tumbles and completes largest 7-day volatility drop in history
Seeking Alpha via MSN
A continued downward move in volatility levels persisted on Thursday as Wall Street's benchmark averages (COMP:IND) (SP500) (DJI) climbed after the latest retail sales and jobless claims data. Furthermore, the drop in volatility levels now represent the largest 7-day volatility crash in history.
/jlne.ws/3Vjlo62
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