| October 05, 2022 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Traders Pile Into Boom-or-Bust Options to Play Stock Market Volatility
Eric Wallerstein and Gunjan Banerji - WSJ
Activity in the market for stock options is hitting a fever pitch, with many rushing to trades expiring within mere hours or days to play the wild market swings.
Options contracts that expire in less than a week make up about half of all activity in the U.S.-listed options market, according to the derivatives-analytics firm SpotGamma. That is up from around 45% last year and roughly a third of all activity in 2019.
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Market Volatility Is Surging. Longer-Term Investors Should Buy Now.
Jacob Sonenshine - Barron's
Volatility has recently emerged to tear through the stock market. If history is any guideâand this time could be differentâthe next year will be one with solid gains.
The CBOE Volatility Index (VIX), which measures expected market volatility, has risen to about 29. That's up from just about 19 in mid-August, the low point for the second half of this year. Unsurprisingly, the S&P 500 has fallen just over 12% from its second-half high from that point as volatility picked up. The root of the issue is that the high rate of inflation is not declining as fast as Wall Street had expected. That prompted the Federal Reserve to forecast a higher peak federal-funds rate, a short-term interest rate, than previously anticipated. Higher rates are meant to squelch inflation by reducing economic demand. To be sure, the Vix has tended to top out at right around this level since the end of 2021, and it has flatlined this week.
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Commodity-Trading Hedge Funds Are Having a Strong Year; Funds are among the notable winners from market turbulence. Some have pared bets as prices have retrenched.
Julie Steinberg - The Wall Street Journal
Some hedge funds that trade raw materials have generated blockbuster returns this year, making them among the major beneficiaries of exceptionally volatile commodity markets. Prices for oil, natural gas, metals and grains ripped higher earlier this year as economies reopened from lockdown and the Ukraine war disrupted flows of energy and raw materials. The flagship fund of e360 Power LLC, a Texas firm that uses futures and options to trade power, natural gas and emissions, has more than doubled, rising about 125% so far this year through September. The oil-focused fund of London-based Westbeck Capital Management LLP is up about 41% in the same period, while separate Westbeck funds concentrating on the energy transition are up around 14% and 15%.
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The Bank of England Promotes Moral Hazard â Again.
Marc Rubinstein - Bloomberg
Back in the 20th century, banks formed the foundation of the global financial system. No more. If there were any doubts about the shifts that have taken place in finance in the past several decades, recent events in the UK should dispel them.
The Bank of England made two important interventions in the past two weeks to support financial stability; neither of them directly involved banks. In response to violent moves in long-dated gilts â following the government's since-discarded proposal to cut income taxes for the highest earners â the central bank hastily rolled out a program to buy up to GBP65 billion ($74 billion) of the government bonds. And, in partnership with the UK Treasury, it announced GBP40 billion of emergency funding for energy companies struggling to meet margin calls.
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'Someone will get hurt': Investors and analysts warn on rising market stress
Eric Platt and Kate Duguid - Financial Times
Investors and Wall Street analysts are sounding the alarm about a possible "market accident", as successive bouts of tumult in US stocks and bonds and a surging dollar cause rising levels of stress in the financial system.
A gauge of strain in US markets â produced by the Treasury's Office of Financial Research â has soared to its highest level since the coronavirus pandemic ructions of May 2020.
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Short positions are building in Credit Suisse, but it's still not the European bank with the most bets against it.
Anviksha Patel - MarketWatch
Credit Suisse shares have dropped to record lows this week and derivatives bets against it have surged, but the Swiss lender is not even the most shorted European bank in Europe.
Make no mistake, short interest in the beleaguered bank has seen the second largest increase in the last 30 days, according to new research by S3 Partners, which combined the short interest in local shares with its U.S-listed shares.
Short interest in the last month has ramped up 2% by $167 million to a total $303 million, S3 says.
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Why investors are dismissing --- even welcoming --- signs of cracks in the global financial system
Vivien Lou Chen - MarketWatch
Dislocations are emerging in global markets, drawing comparisons to the early days of the 2007-2009 financial crisis and recession while also giving many investors and traders a paradoxical ray of hope.
If anything, market participants are growing more optimistic that central banks might back off aggressive interest-rate hikes out of fear of exacerbating financial instability, creating a deeper-than-needed recession, or both. On Tuesday, Australia's central bank delivered a surprise pivot, hiking interest rates by less than expected.
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| | | | | | Exchanges | | | Cboe Takes Step Into DeFi by Posting Free Market Data on Pyth
Katherine Doherty and Yueqi Yang - Bloomberg
Cboe Global Markets Inc. is making some real-time market data freely available over blockchain, as the exchange operator makes its entry into decentralized finance.
The Chicago-based firm is joining the Pyth Network, the Jump Trading Group-backed decentralized publisher of crypto and other market data, as a contributor. It will provide data of 10 equities starting in the fourth quarter.
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Global Capital names Eurex "European Derivatives Exchange of the Year"
Eurex
Once again, the Global Capital Award team has invested months of work and market consultations to identify the best players in the derivatives market. We are all the more proud and honored to have been named "European Derivatives Exchange of the Year" by these experts for the second year in a row. This was in recognition not only of our product innovations, which build on our world-leading position in index products, but also of our strong and continuous innovations to help our clients overcome their market challenges.
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SGX Orb Awards winners unveiled, with eyes on growing collaboration in Asian financial markets
SGX
Singapore Exchange (SGX Group) has unveiled the winners of SGX Orb Awards 2022, with a focus on the growing trend of collaboration in Asian markets that is strengthening Singapore's position as an international financial centre. Content producers submitted work on a range of topics such as volatile conditions in the equity and interest-rate markets, financial innovation - including technology centred on food - as well as the growth of sustainability opportunities in Singapore. Entries for the special category, "Collaborate to Compete", highlighted how market participants increasingly value collaboration, partnerships and an ecosystem mindset to drive success amid global economic uncertainty.
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MIAX Options Exchange: Change To Minimum Trading Increment For All Series Of SPIKES Options
Press Release
This is to inform MIAX Options Exchange Members that a proposed rule change to amend Interpretation and Policy .03 to Exchange Rule 510, Minimum Price Variations and Minimum Trading Increments, will be implemented on October 31, 2022.
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| | | | | | Moves | | | Former Cboe SVP Head of US Sales Bryan Christian has joined LMAX Digital as a director of US institutional sales. He was just previously head of exchange with CrossTower.
| | | | | | Strategy | | | More Stress and VIX Above 40 Before 'Powell Put' is Triggered
Senad Karaahmetovic - Investing.com
Wells Fargo analysts have reiterated the firm's view that 2023 will bring a recession, more Fed hawkishness, and lower EPS.
These factors, as well as growing tail risks (e.g., liquid credit markets, the limited chance of a Lehman/TARP event), could eventually "catalyze a VIX spike."
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| | | | | | Miscellaneous | | | Most Powerful Women in Finance: No. 5, Lynn Martin, NYSE Group
Joel Berg - American Banker
As a child, Lynn Martin nurtured her love of technology and coding on a Commodore 64 in her parents' home in Smithtown, New York. But it was not until her first job in coding that she felt the pull of Wall Street.
After landing at IBM in 1998, Martin was assigned to write code for a major global bank to measure trade-processing times on the New York Stock Exchange during peak days. The work, coupled with her after-hours pursuit of a master's degree in statistics, set her on the path that led to her current job.
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| | | Jeff Bergstrom
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