| July 27, 2022 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Traders Rack Up Bets That US Oil's Discount to Brent Will Deepen
Devika Krishna Kumar and Alex Longley - Bloomberg
In a niche corner of the oil options market, traders have quietly amassed a large number of positions betting that the gap between the world's two main oil benchmarks will keep growing.
More than 30,000 positions are open for the rest of the year, wagering that the spread between West Texas Intermediate futures and Brent would trade beyond $8 a barrel, and even $10. The contracts could compound a recent blowout in the WTI-Brent spread, which this week was the widest intraday since crude briefly turned negative in 2020.
/jlne.ws/3cLK1oq
Options trader makes million-dollar bet against Meta into earnings
Tyler Bailey - CNBC
Analysts are predicting that Meta, the company formerly known as Facebook, will announce its first-ever quarterly revenue drop when it reports earnings after the bell Wednesday.
The social media giant is in a transition period, aiming to make strides toward becoming a company firmly rooted in the metaverse, with augmented and virtual reality a big part of its push. The transition could take a while, and the options market is betting that this earnings report in particular will reflect Meta's bumpy ride so far, in a year where the stock has been cut in half.
/jlne.ws/3zEo8R0
Nancy Pelosi's husband sells $4 million worth of Nvidia stock at a major loss
Weston Blasi - MarketWatch
The husband of House Speaker Nancy Pelosi sold more than $4 million worth of shares in software and computer-chip company Nvidia this week, publicly available financial disclosures show.
The trade by Paul Pelosi was executed on July 26, when he sold 25,000 shares at an average price of $165.05 per share, for a total loss of $341,365.
Last week, it was disclosed that Paul Pelosi had exercised call options for as much as $5 million worth of Nvidia stock ahead of deliberations in Congress about a bill that would boost the U.S. semiconductor industry.
/jlne.ws/3zgnaZP
Black Swan Hedge Funds Are Booming in Scary Times; Money managers are selling insurance against sudden market drops, but the strategy is expensive and doesn't always pay off when the market falls.
Denitsa Tsekova and Erik Schatzker - Bloomberg
An increasingly popular sales pitch on Wall Street goes like this: If you've insured your home against some disaster, or even a total loss, shouldn't you do the same for your investment portfolio? In the case of a house or apartment, the danger would be fire, flooding, or perhaps a devastating storm. In the financial markets, it might be a sudden spike in volatility and a rapid decline in prices that wipes out months if not years of gains.
/jlne.ws/3cJ4avc
Market Crash Hedges Can Help Investors Survive a Recession
Denitsa Tsekova and Erik Schatzker - Bloomberg
An increasingly popular sales pitch on Wall Street goes like this: If you've insured your home against some disaster, or even a total loss, shouldn't you do the same for your investment portfolio? In the case of a house or apartment, the danger would be fire, flooding, or perhaps a devastating storm. In the financial markets, it might be a sudden spike in volatility and a rapid decline in prices that wipes out months if not years of gains.
/jlne.ws/3z5aDIg
Why Markets Are Shrugging Off a 'Mild' Recession: JPMorgan's Kolanovic
Phil Rosen - Markets Insider
Markets have been ignoring weak economic data recently and even rallied over the past week, according to JPMorgan's Marko Kolanovic.
In addition, volatility in stocks and rates is easing in a sign of low sensitivity to mounting recession concerns, he said in a note Wednesday.
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Investors gauge U.S. stocks rebound: 'suckers' rally' or market bottom?
David Randall - Reuters
As investors await another jumbo-sized rate increase from the Federal Reserve, they are taking the temperature of a weeks-long U.S. stock market rally that followed a vicious first-half selloff.
Even after Tuesday's sharp fall, the S&P 500 remained up 7% from its June 16 low, buoyed in part by expectations that the Fed will pause its aggressive rate hikes early next year and a recent decline in commodity prices that investors hope will help ease inflation.
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| | | | | | Exchanges | | | The Futures Industry Association (FIA) reported its June 2022 volume highlights yesterday via email. Worldwide volume of exchange-traded derivatives reached 7 billion contracts in the month of June, the highest monthly total ever recorded. The June total was up 11.8% from May 2022 and up 40% from June 2021.
On a year-to-date basis, volume in the first half of the year was 38.32 billion contracts, up 32.6% from the first half of 2021. The majority of that increase came from equity index contracts.
Total open interest at the end of June was 1.09 billion contracts. The June total was down 3.6% from May 2022 but up 0.5% from a year ago.
(FIA members can receive monthly exchange volume reports free of charge, and non-FIA members can subscribe by paying an annual fee. Here is more information.) ~SR
CME Group Inc. Reports Second-Quarter 2022 Financial Results
CME Group
CME Group Inc. (NASDAQ: CME) today reported financial results for the second quarter of 2022.
The company reported revenue of $1.2 billion and operating income of $750 million for the second quarter of 2022. Net income was $663 million and diluted earnings per share were $1.82. On an adjusted basis, net income was $717 million and diluted earnings per share were $1.97. Financial results presented on an adjusted basis for the second quarter of 2022 and 2021 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1
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| | | | | | Regulation & Enforcement | | | Chairman Behnam Announces Technology and Customer Outreach Reorganization
CFTC
Commodity Futures Trading Commission Chairman Rostin Behnam today announced a reorganization of FinTech and customer protection efforts and changes to key roles as the agency evolves to address changing markets and market demographics. Chairman Behnam is bolstering the agency's FinTech efforts by creating the Office of Technology Innovation (OTI), formerly LabCFTC, and naming Jorge Herrada as its director. In addition, the chairman announced today that FinTech specialist Jason Somensatto, in addition to continuing his role in OTI, will be joining the Chairman's Office along with legal advisor David Felsenthal. Further, and responding to an unprecedented rise in retail futures, options and digital asset trading, Chairman Behnam today announced the realignment of the Office of Customer Education and Outreach (OCEO) within the Office of Public Affairs. Steve Adamske is the director of the Office of Public Affairs and will also serve as interim director of OCEO with additional personnel changes to be announced at a later date.
/jlne.ws/3S4oRSz
| | | | | | Technology | | | Banks Get Algo-Trading Tool With No Coding Needed Through BestEx Research; Buy-side clients, brokers will save money, time: BestEx CEO; Algo-trading commissions to reach $34 billion next year
Katherine Doherty - Bloomberg
BestEx Research Group LLC, which operates a trading platform driven by algorithms, is offering an electronic tool to banks so they can build their own algos without having to write the code themselves. The technology firm's new tool, Strategy Studio, gives buy-side clients and brokers the ability to build algos, helping cut costs and time, said Hitesh Mittal, BestEx's founder and chief executive officer. Each algo can be matched to a bank or broker-dealer's trading objectives. "In the next decade I think banks are going to be buyers rather than builders in trading," Mittal said in an interview. Commissions for algo trading are expected to increase to $34 billion next year, according to researcher Chartis, with Wall Street trading more and more asset classes, including foreign exchange, fixed income and options, algorithmically.
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| | | | | | Moves | | | Christa Lachenmayr reported on LinkedIn that she is starting a new position as principal, regulatory policy, at the Options Clearing Corporation (OCC) after having been with the CFTC since 2008.
| | | | | | Strategy | | | U.S. Consumers are 'Trading Down.' How to Play It With Options.
Steven M. Sears - Barron's
American consumers, one of the greatest economic forces in the history of the world, are nervous.
Investors may be debating whether the economy will fall into a recession as the Federal Reserve normalizes interest rates, but consumers aren't waiting for an answer. They are changing buying behaviors and trying to save money.
/jlne.ws/3BqhD5p
Inside Volatility Trading: Is VIX Backwardation Necessarily a Sign of a Future Down Market?
Scott Bauer - Cboe
Since the beginning of 2022, the Cboe Volatility Index ("VIX") futures curve has shifted higher, indicating that expectations for volatility in the market remain elevated. In fact, the 200 Day Simple Moving Average has risen from 18.59 on January 3rd to its current level of 24.03, a 29% increase. But what has happened to the shape of the VIX futures curve and how might this be a precursor of market performance?
/jlne.ws/3cLL87A
Markets face 'the most catalyst-packed week of the summer'. How to hedge it.
Christine Idzelis - MarketWatch
For investors willing to risk wading into the equities option market, BofA Global Research analysts suggested there's still time to consider strategies tied to exchange-traded funds that could pay off in what may be a volatile week.
It's "not too late to hedge the most catalyst-packed week of the summer" as some option markets are "still underpricing event risks," said equity-linked analysts at BofA, in an equity derivatives note Tuesday. "This week promises to be one of this year's most consequential for markets."
/jlne.ws/3cLpDUa
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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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