| November 29, 2023 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | 
A Deeper Dive into 0DTE Options trading: Jonathan Zaionz, Senior Derivatives Analyst at Cboe Global Markets and Author of "The Rise of SPX & 0DTE Options," Discusses 0DTE and More in this Options Discovery Full Interview
JohnLothianNews.com
In this Options Discovery full interview, Asma Awass speaks with Jonthan Zaionz, a senior derivatives analyst at Cboe Global Markets who recently had his paper, "The Rise of SPX & 0DTE Options" published. Jonathan addresses a variety of topics from his career, including his passion for the derivatives space as well as the content published in his most recent article. Jonathan also gives more insight into 0DTE options trading such as the history, misconceptions, benefits and risks. You can download "The Rise of SPX & 0DTE Options" here: https://cottconsulting.com/services
Watch the video »
| | | | | | Lead Stories | | | Wall Street's fear gauge drops below 13. What it could mean for stocks over the long run.
Joy Wiltermuth - MarketWatch
Wall Street's "fear gauge" hasn't been this low since before the COVID crisis of 2020 took hold.
The Cboe Volatility Index VIX, a gauge of expected stock-market volatility over the coming 30 days, has been trading below the 13 mark since last Friday, when it closed at 12.46, its lowest finish since Jan. 17, 2020, according to Bespoke Investment Group.
/jlne.ws/3sOBpG2
The $7 Trillion ETF Boom Gets Blamed Again for Dumb Stock Moves
Emily Graffeo - Bloomberg
It's the latest critique of the passive-investing boom: Fresh academic research claims that the relentless flood of index-chasing cash on Wall Street is distorting stock prices and causing extreme market moves.
With assets in such exchange-traded funds now above $7.1 trillion in the US alone, a team from Goethe University in Frankfurt has published a paper arguing the frenzy is disrupting the natural investing order by spurring equity gyrations and blunting the role of company earnings on market prices, among other charges.
/jlne.ws/3TaKbsm
The flood of money investors are putting in ETFs is distorting stock prices and worsening volatility, study says
Aruni Soni - Markets Insider
Critics of passive investing got fresh ammunition with a recent study that found the boom in exchange traded funds has warped the stock market by distorting prices and increasing volatility.
The latest round of the ETF debate was highlighted by Bloomberg and comes as Wall Street looks back on the life of Charlie Munger, who famously preached index funds for most investors.
/jlne.ws/47Q3tYe
Thematic fund investors miss two-thirds of potential returns, research shows
Emma Boyde - Financial Times
Investors in funds that follow a narrow theme have lost out on more than two-thirds of their potential total returns over the past five years due to buying high and selling low, research from Morningstar reveals.
Thematic funds that existed for the entire five-year period ending June 30 enjoyed annualised returns of 7.3 per cent, but the typical investor received only 2.4 per cent a year as many bought in after the bulk of returns had been made.
/jlne.ws/46Rv62t
| | | | | | Exchanges | | | Exchange of the year: Eurex
Risk.net
The rush for ever shorter options expiries hit fever pitch in 2023, as investors flocked to single-day contracts offering low-cost bets on intraday index moves.
In August, Eurex transferred a trend that had already gripped US markets to Europe, launching the first end-of-day index options on the Euro Stoxx 50. The first month of trading surpassed expectations, as more than 330,000 contracts traded.
/jlne.ws/3sSHbq7
Currency derivatives house of the year: Bank of America
Risk.net
In 2023, the volume was turned way down on the market for foreign exchange volatility. Huge spikes in interest rate vol did little to offset the muting effect on G10 currencies. And as hedge funds turned to emerging market (EM) carry trades, the result has been a resurgence in exotic FX options trading.
/jlne.ws/3uHhtFG
Equity derivatives house of the year: JP Morgan
Risk.net
The resilience of US stock markets in 2023 took many banks by surprise - not least JP Morgan. Like many of its peers, the dealer started the year with defensive positioning, which weighed on equity trading revenue as markets surged in the wake of Silicon Valley Bank's collapse.
Yet the bank has few regrets. Its more conservative approach allowed it to provide firms with life-or-death financing as a crisis gripped the US regional banking sector. The clients who spoke to Risk.net praised it for consistent pricing, refreshing transparency and superior technology, and for a quantitative investment strategies (QIS) business that was "a world of difference" from its competitors'.
/jlne.ws/3sUYx5I
Flow market-maker of the year: Citadel Securities
Risk.net
The bulge-bracket bookrunners had completed a multi-billion dollar bond issuance. Now came the routine matter of hedging a floating rate tranche of the debt to help protect the client against fluctuations in interest rates over the lifespan of the bond.
It is a longstanding Wall Street convention that one of the bookrunners will get to fulfil any hedging needs the corporate issuer might have.
/jlne.ws/47UKhZl
October 2023 SEF trading activity
FIA
Trading volume on swap execution facilities reached $1.31 trillion in average notional value per day during October 2023, the second highest level ever recorded. This was up 16.9% from the previous month and up 76.3% from the same month of the previous year. Compared to September 2023, trading was up in the FRA and non-FRA sectors, with non-FRA trading reaching its highest level ever.
/jlne.ws/47Rzpvp
| | | | | | Regulation & Enforcement | | | Ex-Hedge Fund Boss Fights SEC at Supreme Court With Big Backers
Greg Stohr - Bloomberg
Hedge-fund manager George Jarkesy said he didn't recall more than 800 times during questioning at the SEC about deceiving investors. A judge at the agency said he was so evasive his testimony was all but worthless.
A decade later, Jarkesy may have the last laugh.
/jlne.ws/3uCBi0J
SEC Says WeWork Options Plot Failed on Botched Press Release
Patrick Clark - Bloomberg via Yahoo Finance
The US Securities and Exchange Commission accused a strip mall owner of a botched attempt to profit by manipulating the price of WeWork Inc. shares and using client funds to pay for his lavish lifestyle.
/jlne.ws/46HVStH
LME Wins Nickel Crisis Case as UK Rules Against Elliott; Challenges by Elliott and Jane Street were dismissed; Elliott says it plans to appeal Wednesday's High Court ruling
Mark Burton and Jonathan Browning - Bloomberg
The London Metal Exchange won a UK court challenge by Elliott Investment Management over its controversial decision to halt a runaway short squeeze in the nickel market last year, removing one of the biggest threats facing the LME as it seeks to move past the crisis. Challenges by both Elliott and trading firm Jane Street were dismissed, according to a ruling on Wednesday. The judges said the exchange's executives should be granted wide discretion to make the urgent decisions that they did.
/jlne.ws/3T3s7jX
| | | | | | Strategy | | | S&P 500 Hits New High as 10-year Yield Dips Under 4.3%
Christopher Vecchio - tastylive
The Federal Reserve rate cut odds continue to build for March 2024, increasing to 43% as implied by fed funds futures.
This is good news for both bonds and stocks, which are moving to fresh November highs and multi-month highs in many cases. The third-quarter U.S. GDP report was revised higher to +5.2% annualized, underscoring the fact that the seemingly impossible 'soft landing' has been happening over the past few months. The OPEC+ meeting tomorrow and Federal Reserve Chair Jerome Powell's speech on Friday remain the most notable events on the calendar for the rest of the week.
/jlne.ws/47UBQ0h
How Options Traders Should Play the Santa Clause Rally
Rocky White - Schaeffer's Investment Research
December is one of the more interesting months when it comes to stock market seasonality. The table below summarizes the monthly returns for the S&P 500 Index (SPX) going back to 1950. December is a historically excellent month for stocks, ranking second behind April for average return, and first for the percentage of positive returns. The positive returns, however, were concentrated in the second half of the month, which is shown in the next section. I will also investigate the impact of November's performance on December's seasonality. Anyone paying attention knows that the SPX is in the midst of a very strong November performance.
/jlne.ws/3uJj25E
Amazon Stock Is Approaching a New High. Instead of Buying Shares, Do This.
Steven M. Sears - Barron's
The financial world has become so complicated that many folks increasingly talk like they are sophisticated managers of multi-asset-class funds.
/jlne.ws/47BwK9x
Here's how close the stock market indexes are to their all-time highs
Matthew Fox - Markets Insider
Our Chart of the Day maps the current rebound of the major stock market indexes, and it shows that all-time highs are within reach.
The Dow Jones Industrial Average, S&P 500, and Nasdaq 100 are all less than 5% away from hitting a record high, according to data from YCharts.
/jlne.ws/4a1I7Ji
Data
Cboe (Video)
In #Vol411, Joe Tigay @JoeTigay gives us market updates and covers recent $VIX Index activity as we near the end of November, lets us know that the jobs report is coming next week and more.
/jlne.ws/3N5tmeM
| | | | | | Education | | | Swiss Army Knife of Option Overlays
Shawn Gibson, Co-Founder, Liquid Strategies - Cboe
The term "Option Overlay" has become trendy as more advisors and asset managers have discovered the power and appeal that option strategies can have in a portfolio if structured and managed properly. The team at Liquid Strategies (Advisor to the Overlay Shares suite of ETFs) recognized this over 10 years ago and have been running overlays in separate accounts and funds ever since. The keys to the successful implementations of overlays are 1) selecting the right overlay for the portfolio need or desired outcome and 2) properly managing risk in the structure to lessen the chance of a poor outcome.
/jlne.ws/415bpmf
Day Trading Options: A Beginners Guide
Nasdaq
Day trading options is a popular strategy for traders who seek to take advantage of short-term market fluctuations. Options are financial derivatives that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price and time. Day trading options involves opening and closing options positions within the same trading day, with the aim of profiting from small price movements in the underlying asset.
/jlne.ws/3SZcCtt
| | | | | | Miscellaneous | | | A Master of One-Liners: Munger on Politics, Life and Crypto; Berkshire Hathaway Vice Chairman Charlie Munger dies at age 99; Bank of America CEO Moynihan calls Munger a 'legendary' figure
Katherine Chiglinsky - Bloomberg
The thing many Berkshire Hathaway Inc. investors may have enjoyed almost as much as the 3,800,000% return Charlie Munger helped engineer were his quips along the way. His label for a derivatives trading desk: "casino in drag." Alan Greenspan was smart but "totally overdosed on Ayn Rand." And Bitcoin was "noxious poison."
/jlne.ws/47CUdHs
The Robots Will Insider Trade
Matt Levine - Bloomberg
Here you go, insider trading robot:
"We demonstrate a situation in which Large Language Models, trained to be helpful, harmless, and honest, can display misaligned behavior and strategically deceive their users about this behavior without being instructed to do so. Concretely, we deploy GPT-4 as an agent in a realistic, simulated environment, where it assumes the role of an autonomous stock trading agent. Within this environment, the model obtains an insider tip about a lucrative stock trade and acts upon it despite knowing that insider trading is disapproved of by company management. When reporting to its manager, the model consistently hides the genuine reasons behind its trading decision. We perform a brief investigation of how this behavior varies under changes to the setting, such as removing model access to a reasoning scratchpad, attempting to prevent the misaligned behavior by changing system instructions, changing the amount of pressure the model is under, varying the perceived risk of getting caught, and making other simple changes to the environment. To our knowledge, this is the first demonstration of Large Language Models trained to be helpful, harmless, and honest, strategically deceiving their users in a realistic situation without direct instructions or training for deception."
/jlne.ws/3Go03k0
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