| March 10, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
|
| | | | Lead Stories | | | How option traders drive explosive stock-market swings
Joseph Adinolfi - MarketWatch
U.S. stocks are poised to experience large swings in the days and weeks ahead as heavy trading in equity option contracts continues to contribute to choppy price action, especially on days that feature the release of crucial economic data like Friday's monthly jobs report, or Tuesday's reading on the consumer-price index.
An analysis of options trading flows performed by SpotGamma, a provider of data and analytics tied to the market for U.S. equity option contracts, shows a correlation between trading in options on the verge of expiring, and large intraday market swings.
/jlne.ws/3FBPAS3
Wall Street examines risks around short-dated options as warnings rise-sources
Carolina Mandl and Laura Matthews - Reuters
An explosion in trading in a type of equity derivative security in recent months has prompted Wall Street players and a major clearing house to examine the potential risks it poses, according to two sources familiar with the matter.
So-called zero day to expiry options (0DTE), which refers to contracts that expire in less than 24 hours, offer retail and institutional traders a relatively cheap, though high-risk, way to bet on intra-day swings in stock prices. They could be tied to the price of indices, exchange traded funds or single stocks.
/jlne.ws/3T8qe3n
Bets Against Banks Surge
Eric Wallerstein - WSJ
Traders swarmed regional banks on Thursday after Silicon Valley Bank-parent SVB Financial led a sector-wide rout.
Options bettors placed more wagers against regional banks on Thursday than any time before, outpacing record highs last seen in early 2020, Cboe Global Markets data show.
/jlne.ws/3mJTDVJ
High-Risk Stocks' Revival Faces Reckoning From Policy Hawks
Sagarika Jaisinghani and Michael Msika - Bloomberg
Investors chasing attractive returns by piling into riskier equities this year face a reckoning if the Federal Reserve follows through on warnings of higher-for-longer interest rates.
After lagging behind the market in 2022, stocks that are generally more volatile have outperformed this year as corporate earnings held up better than feared and worries of a recession abated. Bloomberg's factor analysis, calculated on a net long-short return basis, shows low volatility is the worst-performing strategy so far this year for the MSCI World Index.
/jlne.ws/3yqDRlc
Inflation-Protection Funds Struggle to Perform as Advertised
Eric Wallerstein - WSJ
A number of exchange-traded funds market themselves as ports in the current inflationary storm. Not many actually appear to be havens.
Fewer than 10% of the more than 100 mutual and exchange-traded funds aiming to protect investors from inflation have notched gains over the past year, Morningstar Direct data show.
/jlne.ws/3TehJnB
| | | | | | Exchanges | | | CME Group FX Futures and Options Reach New Volume and Open Interest Records
CME Group
CME Group, the world's leading derivatives marketplace, today announced its foreign exchange futures and options reached a new single-day volume record of 3.15 million contracts on March 8, 2023, equivalent to $296 billion in USD notional.
In addition to the overall futures and options volume record, which represents a 5% increase over the previous record of 3 million contracts set in September 2022, CME Group also reached trading records in several individual currencies, including a record of 1.1 million Euro FX futures and a record 264,000 Canadian Dollar FX futures. In addition, blocks and exchange for related positions (EFRP) transactions traded a record 274,000 contracts on March 8, a level 23% higher than the previous record set in December 2022.
/jlne.ws/3ZYOdEx
| | | | | | Regulation & Enforcement | | | Joint consultation on changes to the OTC derivative Clearing Rules
Securities & Futures Commission of Hong Kong
The Hong Kong Monetary Authority (HKMA) and Securities and Futures Commission (SFC) today launched a joint consultation on proposed changes to the types of transactions subject to clearing obligations under the Clearing Rules (Note 1) for over-the-counter (OTC) derivatives (Note 2).
/jlne.ws/3F9W6iE
| | | | | | Strategy | | | Opinion: The stock market is telling you loud and clear: Now is not the time to fight the Fed or stand up to the bears.
Lawrence G. McMillan - MarketWatch
The S&P 500 Index SPX, -1.72% hit resistance this week when an oversold rally failed near the 4080 level. This continues to support the idea that the index's rise above 4100 in early February was a false upside breakout, and the onus is on the bulls to prove otherwise.
There was some optimism among stock investors early this week â until Federal Reserve Chair Jerome Powell spoke on Tuesday, and once again the market did not like what he had to say. This is reminiscent of the 1973-74 bear market when then Fed Chair Arthur Burns was notorious for driving the stock market lower every time he spoke.
/jlne.ws/3ZCNKIx
Banking Sector Concerns Boosting Options Demand
Cboe (Video)
In #Vol411, Dan Deming @djd551 runs through shifts in the volatility complex on a very busy day for #options #trading as #markets realize further downside. $VIX $SPX
/jlne.ws/3JwckFl
| | | | | | | | | JLN Options is sponsored by: | | | | | | | | | | | | | | | | | | | |
|
|
| | | |
| | | | 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
Publisher | | | Sarah Rudolph
Editor-in-Chief
| | | Jeff Bergstrom
Editor
| | |
|
|
Disclaimer: All John Lothian Newsletters, JohnLothianNews.com, MarketsWiki.com and MarketsReformWiki.com are products of John Lothian News, a division of John J. Lothian & Company, Inc. The opinions expressed in all John J. Lothian & Company, Inc. publications are strictly those of their respective editors. They are intended solely for informative purposes and are not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Security futures are not suitable for all customers. Futures and options trading involve risk. Past results are no indication of future performance. Nothing on any John J. Lothian & Company site should be considered an endorsement by any sponsor of any website or newsletter content.
© 2023 John J. Lothian & Company, Inc. All Rights Reserved. |
|
|
