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13-Year High for Nasdaq Fear Premium; Lessons from Corrections Past

Lead Stories

Tech Stocks Fear Premium Just Jumped to a 13-Year High
Luke Kawa – Bloomberg
The disruptors are getting ditched as tech fear spreads well beyond Facebook.

****SD: Different chart on same subject from Bloomberg. Also from the WSJ – Tech’s Risk Bill Comes Due

The Lesson From Stock Corrections Past? 200 Days of Pain
Lu Wang, Sarah Ponczek and Elena Popina – Bloomberg
S&P 500 fell 14% on average in five similar selloffs since ’09; Current rout would rank at bottom in duration if ended now
Remember the last time stocks fell so hard? You probably don’t, and that’s making today’s market seem harsher than it is.

Here’s why stock volatility likely won’t end in April
Ryan Vlastelica – MarketWatch
The U.S. stock market has seen a number of dizzying swings over the past two months, and while investors shouldn’t expect that to end anytime soon, the catalysts for the moves may shift from macroeconomic events like trade policy and inflation concerns to company-specific news.

Inverse ETFs Are Trading Like They Did When VIX Index Blew Up
Dani Burger – Bloomberg
Exchange-traded products see volume surge amid choppy trading; High turnover concentrated among inverse leveraged tech funds
Remember last month when the VIX imploded? Perhaps the skyrocketing volume in leveraged exchange-traded products that bet against stocks and indexes rings a bell.

****SD: Waiting for one of these to act erratically and for people get all up in arms ala XIV. Buyer beware.

Q1 was a torrid time for markets, expect more of the same in Q2
Jamie McGeever – Reuters
Investors take into account a welter of economic, financial and political information when deciding where to put their money. News and events – some foreseen, some out of the blue – shift that dial constantly. Stuff happens. Always.

Exchanges and Clearing

Nasdaq ISE to delay launch of NDXP – PM-settled “End of Week Options” on the Nasdaq-100 Index
Nasdaq ISE will delay the launch of the NDXP PM-Settled Weekly Options on the Nasdaq 100 Index (End of Week Options) on ISE to a future date and set of initial expiries to be determined.

CME Is Said to Near Accord on $5.7 Billion Takeover of NEX
Dinesh Nair, Manuel Baigorri and Will Hadfield – Bloomberg
Futures trading giant CME Group Inc. is in advanced talks to buy Michael Spencer’s NEX Group Plc for an equity value of about 4 billion pounds ($5.7 billion), according to people with knowledge of the matter.

****SD: Please, finish this off. Reading about what Spencer is doing and saying continues to throw me off.


Intercontinental Exchange Announces Marketing And Communications Leadership As Kelly Loeffler Prepares To Depart At The End Of 2018
Intercontinental Exchange, Inc., a leading operator of global exchanges and clearing houses and provider of data and listings services, announced today that Kelly Loeffler, the company’s longtime head of communications, marketing and investor relations, will depart at the end of 2018, concluding 16 years with the company.

JonesTrading Expands Derivatives Trading Services
JonesTrading Institutional Services LLC (“JonesTrading”) announced today that it continues recruitment of top industry talent as the firm grows, naming David O’Shaughnessy as Managing Director in its Derivatives Trading Group. Mr. O’Shaughnessy is an industry veteran, bringing over 15 years’ experience and expertise to the team. He will be based in New York and report to Jeff Micsky, Head of Global Derivatives.

Regulation & Enforcement

A floored plan: Europe’s CCP recovery rules draw fire
Samuel Wilkes – (SUBSCRIPTION)
It is often said the best compromises are the ones where both sides are dissatisfied with the outcome. If that’s true, then the European Parliament has found the perfect balance on the question of how central counterparties (CCPs) should handle losses that do not arise from clearing member defaults.
Both CCPs and clearing members have reacted with irritation to the Parliament’s proposed floor that sets the minimum amount of non-default losses CCPs must bear before passing on further losses to their members.

Pakistani man found liable for hoax Integrated Device takeover bid
Brendan Pierson – Reuters
A Pakistani man violated U.S. securities law by illegally trading Integrated Device Technology Inc (IDTI.O) stock options after submitting a bogus takeover bid for the chipmaker, a federal judge ruled on Tuesday.

India markets regulator to take steps to make algo trading cheaper
Zeba Siddiqui, Abhirup Roy – Reuters
India’s market regulator said on Wednesday it will take steps to make algorithmic trading cheaper for investors, even as it called for stricter monitoring of such trades amid concern about fair access to markets.

Liquidity enhancement schemes in commodities permitted: Sebi
Times of India
Markets regulator Sebi has decided to permit liquidity enhancement schemes (LES) in commodity derivatives contracts. Sensitive commodities however will not be eligible for LES. “Any commodity that is classified as ‘Sensitive Commodity’ by the exchange shall not be eligible for LES,” it said.


Choppy stock trading an ominous sign for bull market’s future: BAML
Joe Ciolli – Business Insider
The stock market has been possessed by volatility in recent days as fears of a global trade war have whipsawed US equities, particularly tech firms.
Bank of America Merrill Lynch warns these types of price swings can spell disaster for equity bull market periods, and explains why.

Stocks are getting slammed. Here’s one way to trade it
Stocks got slammed again Tuesday as volatility returned to the market with a vengeance, and according to one trader there’s more downside ahead.

****SD: TL;DR: Bear put spread.

How the VIX is Breaking Records in 2018
Andrea Kramer – Schaeffer’s Research
The Cboe Volatility Index (VIX) — also known as Wall Street’s “fear gauge” — has been much more active than usual to start 2018. The index last week jumped more than 50% for the third week this year — already the most surges of that magnitude in one year ever for the VIX. As such, the index has racked up its biggest year-to-date gain ever for this point in the year, according to Schaeffer’s Quantitative Analyst Chris Prybal — which could have bullish implications for the S&P 500 Index (SPX), if history repeats.

Brackets and Defense – Indexes that Bought VIX Calls – LOVOL and VXTH
Matt Moran – Cboe Blog
Over the past two months, there has been increased interest in: (1) portfolio protection strategies (2) learning more about prudent uses of VIX futures and options, and (3) following brackets. To tie all these topics together, below is a new bracket with 8 benchmark indexes that shows that two indexes that buy VIX call options (LOVOL and VXTH) had the lowest standard deviations over the past decade

FX Option Market Update: March 28, 2018
Dan Larsen –

Dead-Cat Bounce, Or Real Market Recovery?
Peter F. Way – Seeking Alpha
Figure 1 shows how diminutive this media-labeled “market crash” really was, in terms of expectations by market professionals for near-term (3-4 month) coming prices. Nowhere near as “serious” as the February “disaster” that was already all but recovered from, as seen in Figure 2. Now the VIX is retreating, and SPDR S&P500 ETF (NYSEARCA:SPY) is moving back up – both by market quotes and coming-price expectations (the vertical price-range lines).

Move below 200-day simple moving average for stock indicates long-term bear market
Devangshu Datta – Business Standard News
The settlement has been negative after an index breakdown from a trading zone.


FIA Boca Recap Report
This year’s annual FIA Boca conference, attended by more than 1,100 delegates from
30 countries, highlighted several important trends affecting the global markets for
listed and cleared derivatives. With the financial crisis now 10 years in the past, the
conference provided a platform for taking stock of the progress made since then and the
major sources of growth and innovation going forward. The conference also provided an
opportunity for industry leaders to discuss their top concerns before an audience that
included senior market regulators from Europe, Asia-Pacific and the Americas.

****SD: Comprehensive recap, except no mention of Barney Frank’s fiery panel…


Easter Lull in Volatility Market May Give False Riksbank Signal
Love Liman – Bloomberg
Options contracts on the Swedish krona capturing the Riksbank’s policy meeting in April suggest no more risk than normal. But that may change once Easter is over.

Fed’s Bostic sympathetic to adopting price-level targeting
Ann Saphir – Reuters
The head of the Federal Reserve Bank of Atlanta, Raphael Bostic, waded into a potentially contentious debate at the U.S. central bank on Tuesday over whether to replace its 2 percent inflation target, saying he favors a new and nearly untested monetary policy strategy known as price-level targeting.

Will a Sino-U.S. Trade War Impact Grain, Meat Markets?
Erik Norland – CME Group
With China threatening to retaliate against U.S. agricultural producers after the White House announced $50 billion in tariffs, it’s a good time to evaluate how China influences agricultural prices – both directly and vicariously. In a direct sense, China is primarily a buyer of U.S. soybeans – imports it could replace with supplies from Argentina and Brazil. It is also an importer of U.S. wheat, which it could find in Russia and Ukraine. The U.S. in no longer a big exporter of corn to China but it does export a great deal of pork and, increasingly, beef.

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Graduate of University of Minnesota School of Journalism and Mass Communication