The founder of a volatility-hedging program that gained over 3,700% in March 2020 says the stock market could fall another 10% to 20% and the VIX could spike to 125. He breaks down his strategy and shares 2 other trading ideas.
Vicky Ge Huang – Business Insider (Paywall)
September is historically the worst month for stocks but Monday’s market rout still caught many investors off guard.
Heavily indebted Chinese property developer Evergrande became the catalyst that ushered in a global market sell-off. In the US, the S&P 500 had its largest single-day drop since May and the Cboe volatility index surged 38% at one point to nearly 29 on Monday.
The stock market’s fear gauge could signal more weakness ahead if it closes above this key level, according to technical analyst Katie Stockton
Matthew Fox – Markets Insider
The stock market could still have further downside ahead if the Volatility Index closes above the key 25 level for the second day in a row, according to a Tuesday note from technical analyst Katie Stockton of Fairlead Strategies.
Stockton is keeping an eye on the market’s fear gauge as investors assess the damage from a potential default of China’s second largest property developer, Evergrande.
Fund guru who won big with inflation ETF is now making opposite bet
Ethan Wu – Markets Insider
A new ETF from Nancy Davis is betting on deflation ahead, cutting against a market consensus fixated on rising prices.
BNDD is a bet on Japanification – the fund should gain most if a low-growth, low-rates regime comes to US.
The options portion of the ETF promises exposure to interest rate derivatives not often available to retail investors.
China Stock Traders Relieved as Evergrande Coupon Plan Surprises
Ishika Mookerjee and Abhishek Vishnoi – Bloomberg
Anxiety arising from China Evergrande Group’s debt crisis seems to have moderated, with mainland stocks declining less than expected on Wednesday as they resumed trading.
The CSI 300 Index trimmed losses to 1.1% as of the mid-day lunch break after falling as much as 1.9% at open, as Evergrande’s onshore unit plans to pay interest due Thursday on a yuan bond. Market participants said the development could provide support to stocks battered by regulatory worries, with an injection of short-term cash by the People’s Bank of China also boosting sentiment.
The S&P 500 Might Not Be Past the Worst. What It Needs for an ‘All Clear.’
Jacob Sonenshine – Barron’s
The stock market is calming down, but the S&P 500 needs to cross a key level in order for investors to feel confident even for the moment.
Tuesday’s trading action has been less extreme than Monday’s. Near midday, the S&P 500 was up more than 1% from the lowest level seen in the recent pullback, reached Monday afternoon.
Commodity markets set for high volatility, says Louis Dreyfus
Commodity markets face a period of intense volatility as they grapple with the effects of the pandemic, uncertainty over macroeconomic policy and supply chain disruption, the chief executive of Louis Dreyfus Company (LDC) said on Tuesday.
Prices of agricultural commodities have risen sharply, a trend contributing to increased first-half profits reported by LDC, but remain well below peaks seen a decade ago, Michael Gelchie said.
Exchanges and Clearing
London Stock Exchange to abandon lossmaking derivatives venture; CurveGlobal Markets has failed to win enough business and will cease trading in January
Philip Stafford – FT
London Stock Exchange Group is to shut its lossmaking derivatives exchange CurveGlobal Markets after the venture failed to make headway against rivals in the European bond market. CurveGlobal, which was set up five years ago, will cease trading at the end of January, the LSE said late on Tuesday. Some contracts, including futures on German government debt and long-dated UK gilts, will end trading immediately because there were no open positions, the exchange said.
***SR: Here is Bloomberg’s version of the story.
Regulation & Enforcement
Virtu Fires Opening Shot in SEC Tussle Over Trading Rules
Benjamin Bain and Katherine Doherty – Bloomberg
Virtu Financial Inc., a powerful trading firm whose business model is under scrutiny in Washington, says it can show U.S. investors how much money it saves them — if regulators let it.
Virtu is petitioning the Securities and Exchange Commission to overhaul the public data that’s used to gauge whether retail customers get the best deal when buying and selling shares. The firm contends that when it and other market makers execute orders internally — rather than sending them to stock exchanges — it dramatically lowers costs for investors.
CFTC commissioner: agency doesn’t have enforcement resources without Congress
Turner Wright – Cointelegraph
“We’re not necessarily looking for more authority without more resources,” said Dan Berkovitz in regards to crypto markets.
Dan Berkovitz, one of three commissioners currently serving at the U.S. Commodity Futures Trading Commission, said while the agency is suited to futures contracts, swaps, and options trading, it would need additional resources to handle the cash market for crypto assets.
Key Bitcoin options ‘fear’ indicator reflects traders’ regulatory concerns
On Tuesday, SEC Chair Gary Gensler re-confirmed his plan to crack down on cryptocurrencies, and traders’ regulatory concerns are confirmed by this key Bitcoin futures and options indicator.
After 46 consecutive days of trading above $42,000, the price of Bitcoin (BTC) started to show weakness on Sept. 21. Over the last three days, the 13% accumulated loss was enough to erase the hard-earned gains added since Aug. 6. Historicals also show that the previous bearish cycle took 79 days to regain the all-important $42,000 level.
Cboe’s Harkins to Join Electronic Bond-Trading Platform Trumid
Jack Pitcher – Bloomberg
Electronic bond trading platform Trumid Financial has hired Bryan Harkins to lead its sales organization as chief revenue officer, a company spokesperson confirmed.
Harkins comes from Cboe Global Markets Inc., where he held a variety of executive roles, most recently as president of the firm’s BIDS Trading subsidiary. Prior to that, he was executive vice president and head of markets at Cboe, leading the sales, product development and strategy for the exchange operator’s equities and options businesses, among others.
Russell CEO Seitz Says Make Volatility Your Friend
Russell Investments Group Chief Executive Officer Michelle Seitz discusses her views on the markets, where she sees opportunities, and her advice for investors. She speaks with Sonali Basak and Caroline Hyde on the sidelines of the Greenwich Economic Forum.