19-Hour VIX Options Trade Surges as Stock Market Resumes Swoon

Nov 30, 2021

Lead Stories

19-Hour VIX Options Trade Surges as Stock Market Resumes Swoon
Lu Wang – Bloomberg
A sizable bet that equity market volatility would worsen appears to have turned a tidy profit in less than a day.
About $13 million was spent last night on 65,000 December call contracts tied to the Cboe Volatility Index, with a strike price at 26. Similar volume erupted in the series this morning as the VIX jumped above 27, sending the options to as high as $3.55 after trading as low as $1.75 in the prior session.

VIX Action During Omicron Slump Seen as Positive Sign for Stocks
Joanna Ossinger – Bloomberg
Volatility markets are suggesting stocks may see only a limited impact from the omicron variant, and then bounce back over the coming month.

Moderna’s Omicron Warning Reignites Selloff. Get Used to Volatility.
Current Covid-19 vaccines are unlikely to be as effective against Omicron as they have been against other variants, Moderna CEO Stéphane Bancel said in an interview. He predicted a “material drop” in effectiveness, though he added that more data were needed to determine how severe that drop will be, the Financial Times reported early Tuesday.

Stocks and oil prices fall as concerns over Omicron variant grow
Naomi Rovnick and Derek Brower – Financial Times
Global equities and oil prices fell on Tuesday, while investors parked cash in high-grade government bonds, as trading was dominated by concerns over the Omicron coronavirus variant.
Wall Street’s broad-based S&P 500 share index, which had rallied on Monday to reflect a burst of optimism that market volatility sparked by Omicron would turn out to be a buying opportunity, dipped 1.4 per cent in New York morning dealings. The Nasdaq Composite share gauge dropped 1.5 per cent.

Only 10% of investors see omicron as biggest threat to financial markets by year-end: flash poll
William Watts – MarketWatch
Investors aren’t dismissing the omicron variant’s potential to shake up financial markets, but only a small minority expect it to be the top worry when the bell rings on 2021 at the end of next month, according to a flash poll of clients conducted by Deutsche Bank on Monday.
That makes for a “relatively relaxed financial market which will be a worry if the news flow becomes negative on the variant,” said Deutsche Bank macro strategist Jim Reid in a note.

FX options wrap – Flashing volatility and directional risk warnings
Uncertainty surrounding the new Omicron variant and its effects on the economy and central bank policy are being compounded by thinning year-end liquidity issues and positioning – a cocktail of risk that is clear to see in FX option markets.

Oil positions and prices back to neutral after Omicron-triggered flash crash
John Kemp – Reuters
Portfolio managers were already selling oil even before news of the Omicron coronavirus variant sent prices into a tailspin on Nov. 26, and the resulting lack of buyers probably worsened the sell off.Hedge funds and other money managers sold the equivalent of 28 million barrels in the six most important petroleum-related futures and options contracts in the week to Nov. 23.


Nasdaq Partners With Amazon to Move Market Trading to the Cloud Next Year
Katherine Doherty – Bloomberg
Nasdaq Inc. partnered with Amazon.com Inc. to shift its North American exchanges to the cloud starting in 2022.
The move is the latest among exchanges that have started to expand into cloud-based software and data analytics. Earlier this month Alphabet Inc.’s Google struck a deal with CME Group Inc. to help the derivatives exchange operator move its data and clearing services to Google Cloud, then eventually trading and other markets.
But Nasdaq will start trading in the cloud next year, beginning with Nasdaq MRX, one of its options exchanges, according to a statement Tuesday.

The Trade names Eurex “Outstanding Derivatives Exchange Group 2021”
We have focused intensively on supporting the market during the pandemic and on promoting important trends that have been reinforced and accelerated by the pandemic, said Eurex chief executive Michael Peters.

***** Congratulations to Eurex on an outstanding win.~JJL

NZX’s dairy derivatives go live on SGX – with globalised access and reach
NZX’s suite of dairy derivatives will trade exclusively on Singapore Exchange (SGX) from today – under a partnership between New Zealand’s Exchange and SGX.
This partnership combines NZX’s market development expertise in dairy derivatives with SGX’s global distribution capability. The joint stewardship of these important contracts unites NZX’s core dairy expertise in industry engagement, market research, and product development know-how with SGX’s international connectivity, under a working strategic partnership.

MIAX and SIG Index Licensing to Launch Capital Gains Tax Rate Futures on MGEX
MIAX , operator of high-performance securities exchanges and SIG Index Licensing, LLC (SIG Index Licensing) announced today the launch of cash-settled futures contracts on SIG Index Licensing’s U.S. Capital Gains Tax Rate Index (the Index). The new futures contracts will begin trading on Minneapolis Grain Exchange, LLC (MGEXTM) on December 6, 2021.

Karthik Subramanian – Finance Feeds
Cboe Global Markets, one of the largest markets infrastructure companies that also provide tradable products, has announced that it has hired Albert Tortensson for its Data and Access Solutions Division as the Director of APAC Market Data Sales.

Regulation & Enforcement

CFTC Awards $200 Million to Whistleblower
The National Law Review
Last month the Commodity Futures Trading Commission (CFTC) announced that it had awarded $200 million to a single whistleblower, by far the largest award it has ever granted. Prior to this award, the largest award given to any individual was about $30 million.


Omicron variant may delay ‘breakout’ performance of these stock-market trades, RBC says
Christine Idzelis – MarketWatch
The omicron variant of the coronavirus may hold back “breakout” performances for certain areas of the U.S. stock market, but heightened concern over the spread of COVID-19 infections hasn’t derailed the outlook for the S&P 500 index in 2022, according to RBC Capital Markets.
“From a U.S. equity market perspective, the main risk we see today is that the intermediate-term bout of leadership in value, cyclicals, and small cap we’ve been waiting for may be on hold,” analysts led by Lori Calvasina, RBC’s head of U.S. equity strategy, said in a note Monday. “These parts of the U.S. equity market have been deeply undervalued and tend to outperform when U.S. GDP is running hot,” and ahead of first rate increases by the Federal Reserve, they said.


Trading Technologies to connect platform to the Taiwan Futures Exchange; The move comes as demand for access to Asia’s derivatives markets continues to grow.
Wesley Bray – The Trade
Trading Technologies (TT) has contracted with Taipei-based broker Yuanta Futures Taiwan to connect its platform to the Taiwan Futures Exchange (TAIFEX). Yuanta Futures Taiwan, through the use of the TT platform, will be provided with a combined carry broker and multi-broker solution for all international clients to access TAIFEX through TT’s global infrastructure.


Stock Index Options for Fixed-Income Challenges
Stock Index Options for Fixed-Income Challenges
Air Date:wednesday, december 1, 2021
Start Time:12:00 pm et
Duration:60 minutes
This 60-minute webinar explores uses of Stock Index Options for Fixed-Income Challenges.


Inflation ETF Pioneer Says Investors Need More Interest-Rate Risk; Quadratic’s Nancy Davis explains why she switched to managing ETFs instead of a hedge fund
Sydney Maki and Claire Ballentine – Bloomberg
Nancy Davis was a trader at Goldman Sachs Group Inc. and a fund founder before she made a splash with IVOL, an actively managed exchange-traded fund that allows investors to bet on inflation and interest-rate volatility. The Tampa native says she’s loved the nonlinear risk of options trading since she was in college at George Washington University. Today her firm, Quadratic Capital Management, no longer manages hedge fund money. Instead Davis focuses on overseeing the IVOL strategy, which had about $3.56 billion as of mid-November, and a deflation strategy, BNDD, that opened in September. Davis, 45, spoke with Bloomberg Markets in October about her career, why fixed-income investors need volatility exposure, and her relationship with fellow active ETF manager Cathie Wood of Ark Investment Management. The interview has been condensed and edited for clarity. (Bloomberg Terminal users can participate in a TopLive Q&A with Davis at 10 a.m. in New York here.)

These are the 10 talked about stocks on Reddit’s WallStreetBets
Matthew Fox – Markets Insider
Following which stocks Reddit’s WallStreetBets crowd is talking about this year has paid off, as several have gone through epic rallies and seen heightened volatility.
From GameStop in January to AMC Entertainment in June, the more than 11 million-member forum has driven the conversation in so-called meme stocks that have exploded higher amid overwhelming demand from retail investors. The surge in stocks with shaky fundamentals has led to several hedge fund blowups that were caught on the opposite side of the trade betting against the company in question.

We visit more than 100 financial news websites daily (Would YOU do that?)

The Spread

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