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Tag Archives: volatility

Options hedging impact during downturn; Bulls punished; EU derivatives update JLN Options Newsletter,Newsletter,Options

Lead Stories JP Morgan’s widely followed analyst Kolanovic sees market bounce Friday and continuing next week Thomas Franck – CNBC J.P. Morgan’s Marko Kolanovic told clients Friday that a combination of technical factors should lead to a market bounce during the session and into next week. “Given the rapid selloff yesterday, the reverting feature of yesterday’s option hedging impact should have a positive market impact today,” he said. Kolanovic has blamed the recent sell-off on so-called systematic strategies like risk parity funds and options hedging rather than fundamental forces. /goo.gl/T7WCEA ****SD: ‘Option hedging is a temporary impact (intraday momentum) that…

U.S. midterms a mere blip on equity options traders’ radar Newsletter,Options

Lead Stories U.S. midterms a mere blip on equity options traders’ radar Saqib Iqbal Ahmed – Reuters Less than a month before the U.S. congressional elections, data suggests equity options traders do not view the election as a big catalyst for setting the direction of U.S. stock market in the immediate aftermath of the vote results. /reut.rs/2ExMqBH ****JB: For a different view on this from Yahoo Finance – Markets think the midterms could be as big as the presidential election Federal Reserve minutes indicate interest rates will have to rise high enough to slow down the economy Greg Robb –…

Options Market Quality Hovers at Best Levels in Five Years Newsletter,Options

Lead Stories Options Market Quality Hovers at Best Levels in Five Years TABB Forum Options LiquidityMatrix Year-to-date options volumes remain strong, with September 2018 volume up almost 44% year over year. For the first nine months of 2018, more than 3.6 billion contracts have traded, an increase of 18.7% versus the first nine months of 2017. /goo.gl/8g3D5Z ****SD: Due to the record setting pace in 2018, all exchanges are experiencing growth in volumes, however, market share is shifting a bit. “Cboe year-to-date market share has dropped, from 41.8% to 37.7%, and Nasdaq’s share is down, to 35.4% from 36.8%. NYSE…

Why Hedge Funds Will Stick With Ever-Risky Short Volatility Trades Newsletter,Options

Lead Stories Why Hedge Funds Will Stick With Ever-Risky Short Volatility Trades Yakob Peterseil – Bloomberg It’s a familiar spectacle on Wall Street: the short-volatility complex takes a beating — and prophets of doom warn money managers the strategy is running out of steam. But the trade isn’t going to be pounded into submission, even as late-cycle bears sharpen their claws and assets in passive products that bet against equity-price swings shrink to their smallest since 2013. /bloom.bg/2EqbOce Does Increased Volatility Mean The Bull Market Is Over? Adam Sarhan – Forbes The short answer is only time will tell. But…

Upstart Exchange Looks to Profit From Wall Street Fear Newsletter,Options

Lead Stories Upstart Exchange Looks to Profit From Wall Street Fear Gunjan Banerji – WSJ (SUBSCRIPTION) Just after the stormiest week for U.S. markets in months, investors may get a new way to bet on Wall Street fear. Miami International Holdings Inc., a small but rapidly growing exchange operator, won regulatory approval on Friday for options on an index that tracks expectations for U.S. stock volatility. The measure, called SPIKES, competes head-to-head with the already established Cboe Volatility Index, known as the VIX. /on.wsj.com/2CKKtQC ****SD: Recall that Bats (pre-CBOE acquisition) gave SPIKES a try, but it never had a product…

Pound volatility; The professor behind the VIX manipulation paper; VIX action JLN Options Newsletter,Newsletter,Options

Observations & Insight A Volatile Week: Having Fun? Spencer Doar – JLN First, a correction (not in the market sense): as many of you probably realized, the cybersecurity blog we had in yesterday’s newsletter – The Complex Realities of a Cybersecurity Program – was not from the Cboe, but from the OCC. Apologies for any confusion. Second, the correction (now about markets). An implicit short vol unwind? The choppy end of a bull cycle? Bond yields? Trade war? A combo? Who’s to say. A brief recap: VIX contango was/is back and spot VIX momentarily hit 28 this week. Gold caught…

Fear Driving Up Hedging Costs; GMEX and Demand Derivatives creating new exchange JLN Options Newsletter,Newsletter,Options

Observations & Insight Mad Morning Sees Half Dozen S&P 500 Flips as Tech Gains, Fades Sarah Ponczek and Vildana Hajric – Bloomberg Traders returning dazed from the worst stock selloff in nine months found themselves engulfed in more chaos Thursday as volatility surged and the S&P 500 went from up to down and back half a dozen times. /bloom.bg/2yw06qA ****SD: Yesterday’s cleared volume at the OCC was 33.9 million contracts, making it the 11th best day ever. That total is more than 66 percent higher than the ADV thus far in 2018. So, to all our market making friends –…

VIX Activity Spikes; Nasdaq Patent Infringement Claim Dismissed JLN Options Newsletter,Newsletter,Options

Lead Stories Options Activity in `Fear Gauge’ Spikes as U.S. Stocks Sink Luke Kawa – Bloomberg October’s living up to its reputation as a volatile month for equities. Trading activity in options linked to the stock market’s so-called fear gauge spiked as the S&P 500 Index was poised for its longest losing streak since U.S. President Donald Trump’s election win. VIX options are tied to the Cboe Volatility Index, a measure of traders’ expectations for swings in the benchmark U.S. equity gauge. Volume has averaged more than 1 million a day over the four sessions ended Tuesday. That’s the most…

Virtu/ITG – Two great tastes; Tradeweb chief stokes M&A speculation; Rate worries JLN Options Newsletter,Newsletter,Options

Observations & Insight Monday Miscellany Spencer Doar – JLN Front month VIX futures are (still) trading higher than November VIX futures, albeit not my much (as of this writing). There was no episode of “The Spread” this past week. We are working on some special Spooktacular editions about the fear gauge. Stay tuned. John was in D.C. this past week. He attended Friday’s CFTC Technology Advisory Committee (“TAC”) meeting and shared his opinion on crypto. (His comments start at ~103:30, just after Gary DeWaal.) There is yet another hurricane threatening the U.S. – Michael strengthened to a Category 1 and…