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VIX’s Highest Close Since Election Sparks Record Rush to Protect; Investors ponder further shocks after North Korea jolt

Observations & Insight

Seeking Opportunity Everywhere in the Market – JJ Kinahan

“The greatest expression I’ve ever heard is, ‘The harder I work, the more opportunity I get.'”

In this video from MarketsWiki Education’s World of Opportunity event in New York, JJ Kinahan, managing director and chief market strategist at TD Ameritrade, talks about seizing opportunity in every corner of the markets. Kinahan grew up in a large Irish-American family, and figured he would become a carpenter or an electrician. Instead, he landed a job at the CBOE one summer and never looked back.

Kinahan says in the early part of his career he was never the smartest guy in the room, but he made up for it by working harder than anyone else. Besides outworking everyone, Kinahan believes no one should have a better attitude than you. If you don’t think you’re in the greatest business, doing great things, then you’re making a huge career mistake.

Read the rest and watch the video »

Lead Stories

VIX’s Highest Close Since Election Sparks Record Rush to Protect
Elena Popina – Bloomberg
The biggest selloff in U.S. equities since May sparked an unprecedented rush for protection in the options market.
About 2.6 million puts and calls tied to the CBOE Volatility Index changed hands on Thursday, the most on record, as the VIX spiked 44 percent to close at the highest level since Nov. 8. About 3.4 call volatility options – a bearish equities trade – have changed hands for every put contract.

****JB: Another take on the same event: The New York Times – Wall Street’s ‘Fear Gauge’ Skyrockets as Tensions Rise With North Korea and Barron’s The Highest VIX Options Volume Day in History!!!. You can also read the press release from the CBOE on this below in the Exchanges section as well as an article by CBOE VP Matt Moran.

Investors ponder further shocks after North Korea jolt
Saikat Chatterjee and Vikram Subhedar – Reuters
After this week’s war of words between the United States and North Korea triggered the biggest fall in global stocks since the U.S. presidential election, investors are wondering what other off-radar shocks may be waiting to rock world markets.

Listed derivatives down in first half 2017 – WFE
Global Investor Group
World Federation of Exchanges said derivatives traded on exchange fell 5% in the first half of 2017

After a long drought, bear market funds attract buyers
Trevor Hunnicutt – Reuters
Bearish stock investors are slowly coming out of hibernation, as money has begun to move into funds that aim to profit when markets dive.
U.S. mutual funds that attempt to profit in falling markets attracted $413 million in new investments during the second quarter, the funds’ largest inflows since the height of 2013’s “Taper Tantrum” selloff, according to Thomson Reuters’ Lipper research unit.

U.S. Short Sellers Missed Out on Biggest China Slump This Year
Richard Frost – Bloomberg
The worst selloff in Chinese shares since November took U.S. traders by surprise, with short interest in one of the biggest exchange-traded funds tracking the country’s stocks near a two-year low.

One View of S&P 500 Retreat Is It’s Stocks Catching Up With Junk
Chart-happy Wall Street was hypnotized Thursday by a diagram purporting to show the bond market sending terror alerts into stocks.
It’s an overlay of the exchange-traded funds tracking shares and high-yield debt: credit has tumbled since the start of August, the S&P 500 not so much (before today). For equities, that’s supposedly bad, and it certainly looks bad as stocks endure their worst selloff in three months. But is it a reliable signal?

Volatility Takes the Stairs Down and the Elevator Up
Kevin Davitt – CBOE Options Hub
There are countless market/trader sayings that get bandied about depending on the macro environment (and perhaps your position). For example, who hasn’t heard?
Trying to catch a falling knife
The trend is your friend
Dead-cat bounce
Picking up pennies (used to be 1/8ths) in front of a steamroller
In the options world, one truism that was likely overheard on trading desks yesterday: “volatility takes the stairs down and the elevator up”.

Exchanges and Clearing

VIX Options and Futures Set New Daily Volume Records
CBOE Holdings, Inc.
CBOE Holdings, Inc. said today that trading volume in options and futures on the CBOE Volatility Index (VIX) each reached new all-time highs on Thursday, August 10. In VIX options at CBOE, a reported 2,562,477 contracts traded on Thursday, surpassing the previous single-day record of 2,382,752 contracts on February 3, 2014. Year-to-date through the end of July, average daily volume in VIX options was 687,181 contracts, 11 percent ahead of the same period a year ago

New Single-day Volume Records for VIX Futures and VIX Options, as the VIX Index Rises 44.4%
Matt Moran – VIX Views
On August 10 the VIX Index jumped 44.4% to close at 16.04. The move was the ninth-biggest one-day move (in percentage terms) for the VIX Index. Note that in the table below with ten dates that the S&P 500 Index fell farther than the CBOE S&P 500 PutWrite Index (PUT) on all ten dates, and that option-writing strategies often are designed to provide a cushion in the event of a downward move in the stock index.

Regulation & Enforcement

SEC and CFTC Take Opposing Views on Whether Bitcoin is Ready for Mainstream Investors
David Dinkins – Coin Telegraph
In February, the Securities and Exchange Commission (SEC) issued its eagerly awaited ruling on the Winklevoss Bitcoin ETF proposal: denied. Finance and media pundits and immediately declared that Bitcoin wasn’t ready for the mainstream, and Bitcoin’s price quickly dropped. But then something strange happened: shortly after the reject, the price of Bitcoin began soaring, from around $1,100 at the time of the ETF decision to $3,430 today.


Recent history says buy this 200-point dip in the Dow, but some fear it’s different this time
John Melloy – CNBC
The Dow Jones Industrial average fell 204 points Thursday in its first drop of that point magnitude or greater since a 373-point shellacking in May. Before that, the benchmark had only fallen more than 200 points one other time this year, a 238-point drubbing on March 21.

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About Author

Bergstrom is chief information officer of John J. Lothian & Co. He edits MarketsWiki and JLN Options.