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Fund manager bets millions that traders are about to get whipsawed by volatility

Lead Stories

Fund manager bets millions that traders are about to get whipsawed by volatility
Shawn Langlois – MarketWatch
‘If central banks want to keep saving the day, that is fine. But volatility will then be transmuted through other forms like populism and identity politics and threaten the fabric of democracy. And that is something that my hedge fund will never be able to protect against.’
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An investing legend who’s nailed the bull market at every turn sees no end in sight for the 269% rally
Joe Ciolli – Business Insider
When Laszlo Birinyi talks about the stock market, it’s in your best interest to listen.
The legendary investor and president of Birinyi Associates has repeatedly nailed his predictions since the start of the bull market. He was one of the first analysts to recommend buying after markets bottomed in March 2009 and has remained a stock enthusiast as the S&P 500 has nearly quadrupled.
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Have investors grown too comfortable with North Korea?
Reuters
North Korea’s latest missile launch has sparked yet another round of international condemnation but in a pattern increasingly playing out in financial markets, investors already seem to have shrugged it off.
A closer inspection however, reveals this is not unusual: market reactions to bellicosity from the reclusive nation shows stock market drops, spikes in volatility, gold and the Japanese yen – typical “risk-off” moves – often reverse within a few days, sometimes within hours.
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Wild stock swings put Equifax options on traders’ radar
Saqib Iqbal Ahmed – Reuters
The heightened drama in Equifax Inc’s shares after the credit reporting company last week disclosed a massive data breach has turned its sparsely traded options contracts into one of the busiest names in the U.S. options market.
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1987 Vs. 2017: Will History Repeat Or Just Echo?
ValueWalk
Last week, I detailed the various factors leading up to the stock market crash of October 19, 1987. As we approach the 30-year anniversary of Black Monday, are there signs that the bull market of 2017 could end in the same way? Let’s compare the financial, economic, and political factors now and then to paint a better picture.
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Here are the two biggest risks for bitcoin
Justine Underhill – Yahoo Finance
It’s been another wild day for bitcoin (BTCUSD=X) as the cryptocurrency faces both regulatory and structural challenges.
On the regulation front, it’s getting hit hard in China. One of the biggest exchanges in the country, BTC China, said it’s shutting down trading in the next couple weeks.
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Exchanges and Clearing

CME Group to Exit OTC Credit Clearing Business, Return $650M in Capital to Clearing Members
Markets Insider
CME Group today announced that it will exit the company’s credit default swap (CDS) clearing business by mid-2018, freeing up $650 million in clearing member capital. Going forward, in order to meet customer needs in light of uncleared margin rules, CME will focus its over-the-counter (OTC) clearing services on interest rate swaps (IRS) and foreign exchange (FX), as well as on developing further capital efficiencies for market participants.
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Strategy

Turn Your Collar Inside-Out
Meredith Kelley Zidek – CBOE
Ever make a sandwich so big and poorly constructed that the second you pick it up, the insides propel themselves out and all you’re left with is a few pieces of dry toast? Me neither, but I can envision it happening. Keep stacking the vegetables without regard to sound principles of sandwich engineering and you may end up with a floor salad. Well, I set out to make a short sandwich (reverse collar, you could also call it) on Tuesday, September 12th, hoping for the best, as always, but not preparing all that well for the worst.
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Market Volatility Bulletin: Four Witches’ Stew
Seeking Alpha
Well, so much for that! The S&P 500 fell all of about 6 points and then quickly bounced back. The index rests just a few points away from the magic 2500 mark. Tomorrow morning is the quadruple witching … any chance of a touch? Meanwhile, spot VIX searches out lower ground, with the September 1 10.05 bottom in the wake of the jobs number release as a possible support.
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Education

Risk Assessment through VIX, Volatility Indexes, and Beta
Doug Ashburn – TD Ameritrade
When you hear the phrase “stock market volatility, what’s the first thing that pops into your mind? If you’re like many investors, you think of the VIX—the CBOE Volatility Index, aka “the fear index.” And sure, that makes sense. VIX, which is made up of the implied volatilities of a basket of short-term options on the S&P 500 Index (SPX), is widely viewed as the market’s volatility benchmark.
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****SR: A primer on volatility and the VIX from the former editor-at-large of John Lothian News.

Miscellaneous

Hugh Hendry Blames Broken Macro Model as He Shuts Hedge Fund
Katia Porzecanski, Saijel Kishan, and Nishant Kumar – Bloomberg
Hugh Hendry said the macro hedge fund model is broken because it isn’t making enough profit to cover costs and keep investors sweet.
The money manager, known for his provocative statements and contrarian views, is throwing in the towel on his firm after a 15-year run amid mounting losses. He and peers betting on economic trends have been running higher levels of risks to justify their existence and play catch-up with markets that are on a roll, Hendry said in an Bloomberg Television interview.
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Robots Are No Match for the Human Bond Trader
Marcus Ashworth and Lionel Laurent – Bloomberg
If there’s one crowded trade in the finance industry, it’s predicting the automation of bank jobs.
The former head of Citigroup Inc., Vikram Pandit, reckons three out of 10 bank staff will be replaced by a machine. Deutsche Bank AG’s CEO John Cryan, meanwhile, has called for a “revolutionary spirit” among his troops as computers replace a “big number” of people. In an industry still hampered by weak profit a decade after the financial crisis, you can see why executives are seduced by the idea of using automation to become more efficient and productive.
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About Author

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