| October 04, 2023 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Panic Creeps Up as VIX Curve Inverts for First Time Since March
Lu Wang - Bloomberg
The US stock selloff is spreading panic among volatility traders at a scale unseen since the regional bank crisis in March. In perverse Wall Street logic, that's raising hopes that the equity rout is on its last legs.
As stock losses gathered pace Tuesday on still-surging Treasury yields, derivatives pros priced in more turbulence in the here and now than in the future.
/jlne.ws/3rCeBbU
VIX Soars To 5-Month High: What Surging Treasury Yields Mean For Stocks
Markets Insider
The CBOE Volatility Index, commonly known as the VIX or the "fear gauge" of the stock market, has experienced a notable upswing recently, reaching levels not seen in over five months.
This surge in the VIX, which has breached the psychologically significant mark of 20, serves as a compelling indicator of growing apprehensions within financial markets.
/jlne.ws/3tbGmZ6
Wall Street's Fear Gauge Spikes to a 4-Month High on Bond Sell-Off
Markets Insider - George Glover
The index, which measures market uncertainty by tracking options, has shaken off a quiet summer to climb higher in recent weeks with the first-half rally for stocks grinding to a halt.
The benchmark S&P 500 has tumbled 8% since the end of July, dragged down by traders' worry that the Federal Reserve will try to kill off still-sticky inflation by holding interest rates at their current level well into 2024.
/jlne.ws/3PZ7QtX
Options-Linked ETFs Flourishing in 2023
Tom Lydon - ETF Trends
Following last year's calamity in the bond market, it's not surprising that advisors and investors are looking for new avenues through which to source income. That search is leading many market participants to options-based exchange traded funds, including covered call ETFs.
/jlne.ws/46gFWiS
'Frustrating' Revisions to Jobs Data Slow Wall Street Trading
Brenda León and Dion Rabouin - WSJ
A record run of downward revisions to the federal government's monthly jobs report is discouraging some Wall Street traders from making big bets on the data.
There have been fewer stock trades on the days the jobs report has been released this year than in past years, and swings have been more muted, according to Dow Jones Market Data. The report is typically one of the most-watched economic releases on Wall Street because it helps signal the course of the Federal Reserve's interest-rate policy.
/jlne.ws/46Ua8QX
Generative AI gaining traction in derivatives markets; Panellists at FIA Expo discuss how they are using AI
Kirsten Hyde - FIA
The use of artificial intelligence in derivatives markets was a key theme at FIA's Expo conference on 2 October with speakers sharing how they are exploring potential uses for generative AI as well as demonstrating current applications in trading and clearing. In the first AI panel of the day, speakers discussed the practical issues that firms should consider as they begin experimenting with generative AI tools and models. Setting the scene, Erin Stanton, global head of analytics client coverage at Virtu Financial, explained the difference between generative AI - or Gen AI - and traditional machine learning. "Traditional machine learning is what I call 'discriminative AI'. It looks for patterns and trends within data it is trained on and makes predictions from those patterns," Stanton said. "Generative AI refers to models or algorithms that create something new. For example, you can use it to help you draft an email. You can use it to ideate on a marketing slogan, or you can use it to help you generate Python code. Discriminative AI is looking for patterns in data, generative AI is more creative."
/jlne.ws/3PK9huS
****** Great to have FIA coverage of their panels. People who understand the issues writing summaries are a valuable thing, even if it is not independent journalism.~JJL
Ether futures ETFs fizzle on US debut; The nine ETFs saw combined trading volume of $6.6mn on Monday - attracting only a fraction of BITO's $1bn initial haul
Steve Johnson - Financial Times
The hotly anticipated rollout of exchange traded funds linked to ether, the world's second-largest cryptocurrency, in the US has turned into a damp squib, with modest investor interest. Nine ETFs holding futures contracts based on ether - the token of the Ethereum blockchain on which most "smart contracts" are written - debuted on the same day after regulators expedited the approval process to sidestep a potential US government shutdown, now averted.
/jlne.ws/3tiBDFb
Hedge funds Millennium and Schonfeld in advanced partnership talks; War for talent heralds the largest tie-up of its kind between multi-managers
Ortenca Aliaj and Harriet Agnew - Financial Times
Millennium Management is in advanced talks to put billions of dollars to work with smaller rival Schonfeld Strategic Advisors, according to people familiar with the situation, in a partnership deal that would mark the largest of its kind in the $4tn global hedge fund industry.
/jlne.ws/3PKbW7S
Banks are bracing for a recession as Treasury yields surge
Joy Wiltermuth - MarketWatch
Bank stocks might be on pace for yearly losses as sharply higher interest rates take a toll, but the industry's reserves are at the highest level in three decades, according to DBRS Morningstar.
Bank shares have come under more selling pressure since the Federal Reserve in September signaled it could keep rates higher for longer than earlier anticipated. The tough talk has dampened the year's rally in stocks and reignited a dramatic selloff in the roughly $25 trillion Treasury market.
/jlne.ws/48C5Mzt
| | | | | | Exchanges | | | OCC Reports September 2023 Monthly Volume Data
OCC
OCC, the world's largest equity derivatives clearing organization, announced today that year-to-date average daily volume through September 2023 was 44.4 million contracts. Total monthly volume for September 2023 was 847.8 million contracts.
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| | | | | | Strategy | | | The co-founder of Thinkorswim breaks down a bargain-hunting options strategy he says offers the highest probability of profit â although 2 other experts say the unhedged trade isn't for everyone
Laila Maidan - Business Insider
Tom Sosnoff, the co-founder of Thinkorswim and Tastytrade, is a longtime advocate of options trading. He says that, if done right, investors can capture asymmetrical opportunities where the upside exceeds the downside risk.
One feature of options is they allow you to trade costly underlying securities with a fraction of the money. You don't need $37,500 to buy 100 shares of Netflix at $375. Sosnoff says an options trader can get that same exposure for as little as $250.
/jlne.ws/3ZHoZLT
5 Ways Not to Be a 'Dumb Money' Options Investor
Steven M. Sears - Barron's
The options market is Wall Street's Rodney Dangerfield. It gets no respect, even though the financial markets couldn't function without puts and calls. Even Bitcoin, invented in 2009 by the still-pseudonymous Satoshi Nakamoto, has found greater acceptance. Many on Wall Street now consider crypto to be a full-fledged asset class, unlike options and other derivatives.
/jlne.ws/3tePoVb
Here's where Wall Street strategists see the stock market headed next after a brutal September
Phil Rosen - Markets Insider
The stock market is coming off back-to-back rocky months, and Wall Street is split on what could be coming next for investors.
The S&P 500 has tumbled about 8% since the end of July but is up about 10.9% on the year. On Tuesday, the Dow Jones Industrial Average gave up all the gains it made this year and is trading about 0.46% lower over the last 10 months. The Nasdaq Composite is up more than 17% in 2023, but it's shed more than 6.4% over the last month.
Meanwhile, the CBOE Volatility Index, the market's so-called fear gauge, hit a four-month high on Tuesday.
/jlne.ws/3PAmer2
October Volatility
Cboe (Video)
In #Vol411, @JoeTigay covers market seasonality, upcoming catalysts for interest rates and the group of companies that have buoyed the performance of the major indices.
/jlne.ws/3Q6w6us
| | | | | | Education | | | OIC 2023 Educational Series: Volatility, Ratio Spreads, and Index Trading
OIC
During the fourth quarter, The Options Industry CouncilSM (OIC) will conclude its 2023 webinar program with a series of new instructor led presentations covering three separate options investing topics: implied volatility, ratio spreads, and index trading.
Two sessions are scheduled each month. In October, OIC will review volatility related topics. The first webinar will focus on pricing and implied volatility and the second webinar of the month will navigate options skew. For November, ratio spreads will be the theme with an overview of the stock repair strategy in webinar one and a review of front and back spreads later in the month. Finally, the December series will feature index trading. The first session of the December series will compare equity options with index options while the second session will discuss volatility indices.
Every OIC webinar is open to all current and future investors to attend at no cost. As always, each session is led by an OIC instructor with industry experience who will discuss both the potential benefits and the risks of investing with options.
/jlne.ws/3Q6vW6k
| | | | | | Miscellaneous | | | What McCarthy ouster means for markets as investors fret over congressional 'dysfunction'
William Watts - MarketWatch
Another round of political infighting that ended up spelling the end of Kevin McCarthy's short tenure as House speaker on Tuesday wasn't the primary driver of a selloff in stocks and bonds â but it didn't help, analysts said.
Continued dysfunction in Congress goes a long way toward explaining why the bond market has been "out of sorts," said Jamie Cox, managing partner for Harris Financial Group, in emailed comments.
/jlne.ws/46vU48d
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