| August 05, 2024 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
|
| | | | Observations & Insight | | | Friday's option volume hit a record 71.4 million contracts as markets fell after a weak jobs report and Intel layoffs, Cboe's Henry Schwartz shared on LinkedIn over the weekend. The first hour saw 22 million contracts, surpassing the 2019 daily average by nearly 3 million. As the VIX reached levels unseen since March 2023, traders moved into crisis mode, pushing index option volume to a record 8 million contracts, 88% above normal. Single stock options traded 38 million contracts (42% above average), and ETFs 25 million (33% above average), with volatility doubling since early July and SPX put/call skew rising from historic lows to 6.5 points.
++++
Editor's Note: I made a mistake and included the wrong chart in the recent JLN Options email. The correct version is below. My apologies for the mistake. ~JB
Volatility Insight of the Week: Volatility across major asset classes, like U.S. Treasuries, FX, Energy and Metals, has risen sharply amid a sudden equity market selloff. Friday saw the largest single percent day move in volatility since March 2023 for the indices in our chart, according to CME Group's Volatility Index (CVOL). To learn more, visit here.visit here.
++++
| | | | | | Lead Stories | | | Record Volume Day for Options, as VVIX and VIX Indexes Rise More than 42% in Two Days
Matt Moran via LinkedIn
Headlines on the August 2nd noted: "Jolted by Soft Jobs Report, Stocks Tumble to End a Turbulent Week" in the New York Times, and "S&P 500, Dow, Nasdaq end sharply lower as weak jobs report triggers recession fears" in USA Today. Spurred by the financial news on jobs and stock prices, on August 2nd the U.S. options markets had a record trading volume day with 71,768,294 contracts traded.
/jlne.ws/46y2Q69
The VIX just did something it hasn't done since 2008. Here's why this could be a buying opportunity for stocks.; To some, the spike in the VIX is a bullish contrarian indicator, signaling that stocks look attractive again even if more short-term losses follow
Joseph Adinolfi - MarketWatch
Wall Street's "fear gauge" was soaring on Monday as last week's stock-market selloff deepened. At one point, the gauge did something that it hasn't done since the depths of the financial crisis.
While a rising Cboe Volatility Index, known as the VIX, typically means traders are loading up on protection against a near-term selloff, it could also be a sign that the worst of the pain has already passed, market strategists said.
/jlne.ws/3AnfdpB
Record VIX Spike Rocks Wall Street Traders All-In on Market Calm; Wagering against stock turbulence is a huge Wall Street trade; Positioning feeds more volatile moves, says Sidial at Ambrus
Justina Lee - Bloomberg
The Monday meltdown across assets is hammering a slew of derivatives trades betting on enduring calm in the stock market - threatening to set off a chain reaction that could intensify the global turbulence.
Wall Street has for months been minting money with various strategies tied to stock tranquility, often via products that sell protective options in order to juice returns. But the scale of the boom in these so-called short volatility bets had stirred worries of what would happen when turbulence hit.
/jlne.ws/3YxS7Xv
Wall Street 'fear gauge' posts record intraday jump as stocks slide
Saqib Iqbal Ahmed - Reuters
Wall Street's most watched gauge of investor anxiety logged its largest ever intraday jump on Monday, as U.S. stock futures tumbled on rising fears the United States could be tipping into recession.
The CBOE Volatility Index jumped to a high of 65.73, up about 42 points from its close on Friday, as Wall Street looked set to continue the global stock rout that saw Japanese shares at one point exceed their 1987 "Black Monday" loss.
/jlne.ws/3WxNZUW
Nasdaq 100 Futures Indicate Gauge's Worst Open in Four Years
Henry Ren and Kurt Schussler - Bloomberg
The Nasdaq 100 is set for its biggest opening drop in more than four years, with investors bracing for days of volatility amid rising concerns over a slowing US economy and overheated gains in the tech sector. Contracts on the Nasdaq 100 fell as much as 6.5% before paring losses to about 4.5%. That puts the tech-heavy index on track for its worst open since the pandemic days of March 2020. S&P 500 futures were down 2.7% while those tracking the Dow Jones Industrial Average declined 1.6%.
/jlne.ws/4d0Xx1D
***** Mondays!~JJL
Volatility Futures at Key Inflection Point After S&P 500 Rout; Front spread of Cboe Volatility Index contracts has inverted; First-month VIX premium coincided with previous S&P 500 lows
David Marino and Elena Popina - The Wall Street Journal
One marker of stock-market volatility is at a level that in the past has signaled the S&P 500 Index was close to a near-term bottom.
As equities slump globally, volatility is rising with investors snapping up options to protect from a further selloff after surprisingly weak jobs growth on Friday added to concern that the Federal Reserve is waiting too long to reduce interest rates. So much so that futures on the Cboe Volatility Index have inverted, a signal that the here-and-now uncertainty is higher than that further down the line.
/jlne.ws/4dtBr7D
Global stock markets fall sharply as worries grow over US recession; Japan suffers worst day since 1987 while US and Europe also retreat
Leo Lewis, Arjun Neil Alim, George Steer and Kate Duguid and Harriet Clarfelt - Financial Times
Global stock markets tumbled on Monday, with the Japanese index suffering its worst day in 37 years, as investors fretted about a possible US recession and dumped risky assets.
Tokyo's Topix fell 12.2 per cent, the sharpest sell-off since "Black Monday" in October 1987 and more than erasing its gains for the year.
/jlne.ws/4cdEEHp
How hedge funds are dealing with the global market meltdown
Bradley Saacks - Business Insider
Japan's Nikkei index had its biggest single-day fall since 1987. The VIX, Wall Street's go-to snapshot of market volatility, is at its highest point since the onset of the pandemic. Stocks are falling in Europe and the US.
And hedge funds are sifting through the wreckage, with some looking to survive and others planning to pounce.
/jlne.ws/3LSMNGB
Tech ETFs That Drew Billions Are Battered by Losses Hitting 60%; The tech funds have suffered big losses in recent weeks; Investors fret over worsening economic data, earnings releases
Vildana Hajric and Denitsa Tsekova - Bloomberg
Traders plowed billions of dollars into betting on a big rebound in tech stocks last month. Now their leveraged-up ETF positions are getting thrashed in the sweeping market meltdown.
Even as the Nasdaq 100 Index tumbled in July, cash continued flowing into funds with notable exposures to companies like Nvidia Corp. and Intel Corp., indicating investors were wagering the slump would prove short lived.
/jlne.ws/4cahLVj
Stock Market Selloff Is Liquidity-Driven, Cboe's Xu Says
Bloomberg (Video)
Mandy Xu, Cboe's head of derivatives market intelligence, says the market selloff on Friday was driven more by fundamentals than the selloff on Monday. She speaks on Bloomberg Television.
/jlne.ws/3YwK1yg
| | | | | | Exchanges | | | CME Group Live Cattle Options Reaches New Open Interest Record Surpassing 400,000 Contracts
CME Group
CME Group, the world's leading derivatives marketplace, today announced that its Live Cattle options reached all-time record open interest of 410,120 contracts on August 1, 2024, surpassing the previous record of 399,626 on July 31, 2014.
"With demand high and supply at lows not seen for more than 60 years, market participants are turning to CME Group Live Cattle options to effectively hedge their price risk," said John Ricci, Managing Director and Global Head of Agriculture, CME Group. "Open interest in these products reached the highest level in a decade this week, demonstrating how options serve as an important tool to help producers, processors and institutions to navigate market uncertainty."
/jlne.ws/46Cek8E
Here's how far the stock market has to fall to trigger a circuit breaker; A big drop in the S&P 500 could lead to a pause on trading
Gordon Gottsegen - MarketWatch
Traders woke up to a sharply lower stock market on Monday morning and a spike in volatility. The Dow opened 2.7% lower, the S&P 500 opened 4.2% lower and the Nasdaq Composite opened 6% lower. The Cboe Volatility Index was up around 25%.
This quick drop left some traders wondering if we'd see a built-in stock market feature for especially volatile trading days - a circuit breaker.
/jlne.ws/3yrposN
This stock is seeing a rare gain as increased volatility prompts an upgrade; Analyst backs away from bearish stance on CBOE as trading in VIX and S&P 500 options should get a boost
Tomi Kilgore - MarketWatch
CBOE's stock rose Monday, bucking the sharp selloff in global stock markets, as J.P. Morgan said the options- and futures-trading exchange should benefit from increased volatility in the financial markets.
The stock climbed 1.5% in morning trading, and was one of just 11 stocks in the S&P 500 index that wasn't falling.
/jlne.ws/3Aairge
EEX Press Release - EEX Group Monthly Volumes - July 2024
EEX
EEX Group Global Power markets continued their upward trend with a monthly volume of 814.6 TWh (+35% year-on-year). Strong growth of 61% was achieved on the European power derivatives markets with a total of 591.3 TWh. Czech Power Futures reached a new monthly record of 3.2 TWh. Volumes in French (97.7 TWh), Spanish (14.2 TWh) and Hungarian Power Futures (13.5 TWh) more than doubled year-on-year.
/jlne.ws/3SBkVe6
OCC Stories: Priyanka Chib on Her Team's Encouragement
OCC
I work in the Corporate Risk Management team at OCC, specifically Third Party Risk Management (TPRM). The team's role is crucial because they collaborate with internal and external partners to safeguard OCC against third party risks, ensuring OCC can steadily provide its clearing, settlement, and risk management services.
I started at OCC as an intern in Business Continuity, which works closely with TPRM. In the summer of 2021, I was a graduate student searching for an internship that would aid my professional development and increase my risk management knowledge.
/jlne.ws/4fq9qjc
| | | | | | Strategy | | | How Investors Can Use Stocks' Moving Averages to Improve Returns; Moving averages can also smooth out daily volatility to give investors a clearer view of a stock's health
Russ Britt - The Wall Street Journal
Stock charts can be confusing, even for veteran investors. All those lines and data points.
But many stock-chart tools can be valuable even for novices-and one of the most important is something called a moving average, which is often preceded by a time frame such as "20-day," "50-day," "200-day" or "10-week."
/jlne.ws/3SCPRKG
JPMorgan Trading Desk Says 'Getting Close' to Buy-the-Dip Opportunity; Rotation out of technology sector may be 'mostly done': JPM; Bounce depends on data including manufacturing, inflation
Natalia Kniazhevich - Bloomberg
As the selloff in global stocks intensified Monday, JPMorgan Chase & Co.'s trading desk said the rotation out of the technology sector might be "mostly done" and the market is "getting close" to a tactical opportunity to buy the dip.
The Nasdaq 100 Index fell as much as 5.45% following the 9:30 a.m. open in New York, after Japanese equities crashed the most in over a decade. Markets were extending last week's declines, when a weak US jobs report ignited worries that the Federal Reserve isn't moving fast enough to prevent a sharp downturn in the world's biggest economy. A measure of volatility surged to the highest since 2020.
/jlne.ws/3yrWMzA
Stocks Are Crashing-That's a Great Reason to Sit Tight; The sudden selloff in Japanese equities and a surge in the Vix suggest the current rout is being exaggerated by trend chasers
Jon Sindreu - The Wall Street Journal
The red numbers in your 401(k) today might appear to vindicate warnings about an artificial-intelligence bubble and infirm economy. But don't tilt your portfolio toward full pessimism just yet.
/jlne.ws/3SDIOBs
| | | | | | Miscellaneous | | | Political Wagers Are Soaring in a Volatile US Election Season; With Harris in the race, a deluge of new gamblers are betting on outcomes in a fast-changing presidential cycle.
Paulina Cachero and Claire Ballentine - Bloomberg
First, he won $12,000 betting on Donald Trump picking JD Vance as his running mate. Then, another $40,000 predicting Joe Biden would drop out of the presidential race. Now, Caleb Davies has set his sights on who Kamala Harris will add to the Democratic ticket. In an era when retail traders lever up on options, meme stocks rocket from the bowels of Reddit and sports betting has shifted into the mainstream, a record flood of gamblers are trying to capitalize on the volatility of this year's chaotic election season by wagering on politics.
/jlne.ws/4furNnb
| | | | |  | | | | 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
| | | Asma Awass
Intern |
|
|
| |
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. |
|
|
