| September 30, 2019 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | 
The Spread: Quadruple witching causes VIX hiccup; Bakkt vs. CME
JohnLothianNews.com
In this week's episode of The Spread, VIX hiccups after quadruple witching day, drone strikes and impeachment announcement, Bakkt and CME duke it out in bitcoin, and MIAX announces SPIKES futures on the Minneapolis Grain Exchange.
Watch the video »
| | | | | | Lead Stories | | | Investors Flock to Options Bets
Gunjan Banerji - WSJ
Options trading is flourishing as investors struggle to make sense of a tumultuous period in the markets and the economy.
Assets under management for mutual and exchange-traded funds that use options strategies have jumped 24% this yearâon track for one of the biggest advances of the past decade, according to Morningstar data. They hit a record $22 billion at the end of August.
/on.wsj.com/2nVRozY
LedgerX cries foul; CFTC says there's no favoritism
Frank Chaparro - The Block Crypto
Regulatory drama in the cryptocurrency derivatives market reached a fever pitch this weekend. Executives at U.S.-based cryptocurrency options exchange LedgerX are claiming that their primary regulator, the Commodities Futures Trading Commission (CFTC), has acted unfairly, favoring their legacy rival Bakkt over the Chicago-based crypto-native firm. Paul Chou, the firm's CEO, went off in a series of tweets Friday night, alleging that the CFTC broke promises and engaged in backroom dealings.
bit.ly/2mEXaWL
Stock Options Are Now Bracing for Brexit or Trump-Like Shock
Luke Kawa - Bloomberg
Volatility markets are signaling that traders are steeling themselves for a news bomb to roil U.S. stocks.
Options "are pricing in heightened risk of a big move in the near term," said Pravit Chintawongvanich, Wells Fargo's equity derivatives strategist. He flagged that downside options that expire within the next week to 30 days have become pricey. Based on how little U.S. stocks have been gyrating and their proximity to all-time highs, he reckons the Cboe Volatility Index is two standard deviations higher than it would be under normal conditions.
/bloom.bg/2oBkYLv
How Negative Rates Broke Black-Scholes, Pillar of Modern Finance
Brandon Kochkodin - Bloomberg
Negative interest rates have quite literally broken one of the pillars of modern finance.
As economists and central bankers weigh the pros and cons of sub-zero rates and their impact on the world, traders have been contending with a rather more mundane, but fundamental issue: How to price risk on trillions of dollars of financial instruments like interest-rate swaps when their complex mathematical models simply don't work with negative numbers.
/bloom.bg/2oEk8O9
Fidelity Digital Assets to Provide Custody for Bitcoin Derivatives Yield Fund
David Pan - Coindesk
An asset manager wants to have a go at a bitcoin-options-based fund as major exchanges make crypto derivatives trading more accessible to investors. The Los Angeles-based Wave Financial has launched the Wave BTC Income & Growth Digital Fund, touting the fund to be the first crypto-derivatives-based yield fund on the market.
bit.ly/2n5LegD
Why the markets aren't worried about impeachment
Rana Foroohar - Financial Times
Americans are glued to their phones and televisions for impeachment news, but for global financial markets it's all just a sideshow. Sure, the S&P 500 index reacted rather badly to the news that Our Dear Leader might be ousted from office (or as Republican presidential challenger Bill Weld suggested, much worse) but that was a blip. Market volatility is being driven, as ever, by uncertainty about central bank policy, late cycle excesses such as an unprecedented corporate debt bubble, and an increasing sense of fragility (eg, the repo shocks).
/on.ft.com/2n5ZIx0
Third quarter could mark turning point in U.S. profit cycle
Caroline Valetkevitch - Reuters
As investors prepare for U.S. corporations to report financial results next month, they could look past recent sluggish growth and find comfort as earnings look set to rebound after the third quarter.
Profits were strong throughout 2018 because of the tax windfall, so comparisons to those earnings periods mean growth has been relatively more muted this year.
Those comparisons will get "easier" in Wall Street parlance in coming months, with the third quarter set to mark a low point in the recent earnings cycle.
/reut.rs/2nRDXkI
Hedge funds resume selling oil as focus turns back to economy: John Kemp
John Kemp - Reuters
Hedge funds resumed selling petroleum as Saudi Arabia ramped up output following attacks on its oil installations and the focus shifted back to the poor health of the global economy and oil consumption.
Hedge funds and other money managers sold 16 million barrels of futures and options in the six major petroleum contracts in the week to Sept. 24, after buying a total of 144 million in the previous two weeks.
/reut.rs/2mlUME7
Brazil grain grower Terra Santa using derivatives to reap trade war gains
Roberto Samora and Ana Mano - Reuters
Listed Brazilian grain grower Terra Santa Agro has stepped up use of complex derivatives to defend positions and potentially profit from commodity price volatility amid a global trade war, an executive told Reuters.
/reut.rs/2n8CuGz
| | | | | | Exchanges and Clearing | | | Intercontinental Exchange and MSCI Expand Relationship
Intercontinental Exchange (press release)
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, and MSCI Inc. (NYSE:MSCI), a leading provider of mission-critical decision support tools and services for the global investment community, today announced they have expanded their existing relationship. This expansion includes a long-term extension of ICE's existing license agreement for listed futures based on MSCI Indexes.
bit.ly/2nYuR5z
A Wall Street Revolt That Fizzled
Alexander Osipovich - WSJ
Upstart exchange operator IEX Group Inc. cooked up its own version of the New York Stock Exchange's daily, opening-bell ceremony in an attempt to lure corporate listings from rivals.
The idea: Executives would stand in front of a white podium in the company's Manhattan office, drop an orange cube into a slot and a synthetic gong would sound, according to people familiar with the matter. But no IEX-listed companies ever took part.
/on.wsj.com/2nP2AP6
| | | | | | Regulation & Enforcement | | | Derivatives regulation under the spotlight at FIA Frankfurt Forum
FIA.org
On 24 September, FIA welcomed more than 100 attendees from across the derivatives industry to its forum in Frankfurt where the impact of post-crisis reforms, new rules in Europe and international oversight of cross-border trading and clearing came under the spotlight.
bit.ly/2mocIhm
| | | | | | Strategy | | | Japanese Yen Rated as Most Stable in 2019 Currency Forecasts
Anooja Debnath - Bloomberg
The myriad of global risks this year is keeping yen bulls happy and encouraging bets on a world-beating rally in coming months.
The Japanese currency is predicted to outperform its Group-of-10 peers by the end of 2019 and gain nearly 3% to 105 per dollar, according to Bloomberg's survey of currency analysts. With the bullish tone also reflected in the options market, Morgan Stanley and BNP Paribas SA expect tense geopolitics to drive it to a three-year high of 100 by early next year.
/bloom.bg/2nXUaol
Coiled Volatility Suggests Possible Rocky Month Ahead
Aaron Neuwirth - etfdb.com
Just a day before the CBOE VIX or Volatility index exploded higher in late July, I wrote about the monstrous rally the market had in June and July, recovering all of its May losses and repeatedly chronicling fresh highs, during which time the VIX had coiled, settling around the 11-12 level, amid investor complacency. With the market having made fresh highs recently, the VIX had once again moved back into the 13-14 area over the last week, and now a storm could be brewing all over again.
bit.ly/2mnRwrR
| | | | | | Miscellaneous | | | Wall Street Warns Against Bets on October U.S.-China Truce
Chris Anstey - Bloomberg
The next round of U.S. tariff hikes on China is little more than two weeks away, though equity and foreign-exchange markets aren't signaling any obvious concern.
/bloom.bg/2nRuZny
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