| February 01, 2022 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Huge Growth in Options Trading Comes to Institutions
Sarah Rudolph - John Lothian News
The enormous recent growth in options trading has mostly been focused on retail traders, but the use of options has also been growing among "'40 Act" funds, which are SEC-regulated funds governed by the U.S. Investment Company Act of 1940. These include ETFs, mutual funds, and closed-end funds, according to Matt Moran, head of index insights at the Cboe Options Institute. He spoke, along with three other industry experts, in a webinar from the Institute on Wednesday Jan. 26 and in a separate interview with John Lothian News in advance of the webinar.
Many of these funds, including those offered by First Trust, Calamos, and Innovator, are based in or around Chicago, Moran said. They do not include hedge funds, which are somewhat less regulated, and most of these funds use fairly conservative strategies, he added.
Many of the new options-based funds use target income or buffer protect strategies. Cboe Global Markets has some benchmark indexes for these strategies, with which fund managers may strive to eliminate 10% of an investor's downside risk.
Read the rest of this story HERE.
| | | | | | Lead Stories | | | Stock Market Chaos Revved Up by Options Dealers Rushing to Hedge
Lu Wang and Cristin Flanagan - Bloomberg
Two days of big stock rallies have investors wondering: Is the new year's selloff over? Maybe, but a couple researchers are pointing to below-the-surface dynamics that may be exaggerating moves and leaving investors exposed to more volatility.
At Goldman Sachs Group Inc., strategists including Rocky Fishman found that the market's ability to absorb orders worsened rapidly during last week's turmoil. Liquidity evaporated so much that a measure based on the bid-ask spread of S&P 500 futures widened to levels not seen since the 2020 pandemic crash.
/jlne.ws/3L5hbvJ
US options trading heats up even as speculative stock rally cools
Industry participants see 'no sign' US equities wobble has caused exodus from derivatives bets
Madison Darbyshire and Philip Stafford - FT
Investors are turning to derivatives to make supercharged bets on the US equities market, highlighting how the pandemic has left a lasting mark on Wall Street even as the rally in speculative shares fizzles. Trading volumes in options, tools that let investors bet on price movements of shares without holding them, have jumped this year, in an acceleration of a trend that began in the early days of the pandemic.
/jlne.ws/3rfJXC7
Mohamed El-Erian Explains Why Volatility in Stocks Will Stick Around
Hamza Fareed Malik - Business Insider
The wild volatility in stocks seen in recent weeks is not a thing of the past, top economist Mohamed El-Erian has warned.
"In addition to the sharp drop in markets in January, the dizzying intraday volatility added uncertainty and contributed to an unsettled feeling about the future, and not just because of the marked change in the policy stance of the Federal Reserve," he wrote in a Bloomberg column.
"The volatility is likely to stick around, at least for a while."
/jlne.ws/3uyaCfF
Hedged Tesla Fund Wants to Tame Wild Ride in Elon Musk's Company
Katherine Greifeld - Bloomberg
Looking to tap into Tesla Inc. gains while avoiding its white-knuckle volatility? A planned exchange-traded fund wants to do precisely that, just as the Elon Musk-loving retail mob gets tested in the tech market turmoil.
The Innovator Hedged Tesla ETF (ticker TSLH) will invest 20% of its assets in options tied to the electric-vehicle maker, while the bulk of the rest will be in Treasury bills, according to a Monday filing with the U.S. Securities and Exchange Commission.
/jlne.ws/3ucxn8C
| | | | | | Exchanges | | | Cboe FX volumes rebound double digits as traders return from vacation
Abdelaziz Fathi - Finance Feeds
During January 2022, Cboe FX disclosed a total trading volume of $768 billion, up 13 percent on a month-over-month basis from $681 ?billion in December?. In addition, the figure was higher by 10 percent year-over-year when weighed against $700 billion in January 2021.
The exchange's institutional FX trading venue saw its average daily trading volumes amounting to $36.5 billion in January 2022, up 23 percent month-over-month from $29.6 billion in December 2021. The ADV figure was the highest since February 2021.
/jlne.ws/3s7tJu2
Trading Overview in January 2022; Japan Exchange Group released Trading Overview in January 2022.
JPX
Cash Equity Market: In January 2022, the daily average trading value for the TSE 1st Section (domestic common stocks) was JPY 3.3810 trillion; In January 2022, the daily average trading value of ETF market was JPY 333.5 billion.
Derivatives Market: In January 2022, total derivatives trading volume was 34,081,961 contracts; In January 2022, total derivatives trading value was JPY 248 trillion.
/jlne.ws/3s4TBqw
| | | | | | Regulation & Enforcement | | | CFTC Charges South Florida Resident and His Firm for Operating a $9.8 Million Commodity Futures and Options Fraud
CFTC
The Commodity Futures Trading Commission today announced that the U.S. District Court for the Southern District of Florida, West Palm Beach Division, on January 20, 2022, entered a restraining order to preserve records and freeze assets controlled by defendants Rajiv Patel, a/k/a Ravi Patel, a/k/a/ Raj Patel (Patel) and Bluprint LLC (Bluprint), both of Wellington, Florida.
/jlne.ws/3KV5jfQ
| | | | | | Strategy | | | Using Volatility Expectations For Successful Option Trading
Russell Rhoads - Nasdaq
The Nasdaq-100 Volatility Index (VOLQ) offers traders a consistent measure of expected volatility for the Nasdaq-100 Index (NDX). This measure extrapolates how concerned market participants are about future volatility in the near term. Understanding VOLQ and applying this knowledge to trading any instrument tied to NDX is an essential part of successful trading strategies. Additionally, VOLQ may help traders create systematic approaches to NDX as well as choose the best options relative to an individual's outlook.
/jlne.ws/3B40oF3
Market Bulls Are Betting on a Sharp and Shallow Fed Rate-Hike Cycle
Katherine Greifeld - Bloomberg
While trying to map the speed of Federal Reserve interest-rate hikes has unleashed harrowing volatility in equities, expectations about the central bank's destination are keeping things from spinning completely out of control.
Despite a series of dramatic repricings following last week's policy meeting, traders still anticipate the Fed's tightening campaign to top out below 1.75% by the end of 2023, according to data compiled by Bloomberg. That's well below the range of 2.25% to 2.5% in the fourth quarter of 2018, a period of far worse turbulence for investors.
/jlne.ws/3GdRXI9
Stock Market Outlook: UBS Sees More Volatility for 3 Reasons
Isabelle Lee - Business Insider
UBS has a warning to investors licking their wounds after a hugely volatile January: expect more bumps ahead.
Entering the year, strategists Stuart Kaiser and Artour Danilov already expected risk and Volatility to run higher in the first half of 2022 due to a hawkish Federal Reserve, slowing forward growth, and surging inflation.
/jlne.ws/3ghLi4U
| | | | | | Miscellaneous | | | Opinion: The SEC is illogical in its continued refusal to OK a bitcoin ETF
Jennifer J. Schulp - MarketWatch
To those waiting on the Securities and Exchange Commission to approve a bitcoin exchange-traded fund, it feels a bit like the classic 1993 movie "Groundhog Day."
Instead of Bill Murray waking up destined to relive the same day no matter what changes he makes, proponents of a bitcoin ETF keep receiving SEC denials of the investment product, no matter what has changed. Whatever merits the SEC's rationale initially had, the commission's recent acceptance of bitcoin futures ETFs puts it long past time to approve a bitcoin ETF.
/jlne.ws/3sbzPtc
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| | | | 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
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| | | Jeff Bergstrom
Editor
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