50 Cent Big Buyer of March VIX Calls; New Japanese Flex Options; Currency Volumes

Jan 26, 2018

Lead Stories

’50 Cent’ Is Buying Up Big on March VIX Calls
Luke Kawa – Bloomberg
Just as the rapper Curtis Jackson III captures attention for realizing he’s made millions on Bitcoin, the buyer of volatility options that shares his moniker is a window shopper in VIX options no longer.

****SD: Said it before, I’ll say it again – Kawa gets the hip-hop puns. The more this options 50 Cent keeps putting on size, the harder it will be for me to find songs by the rapper to reference… I’ll probably have something to say about this on the next episode of The Spread. That feature is not gone, just on pause. I got wicked sick – as my Pats fan friend would say – but will be returning to my hosting duties shortly.

Japan Traders Piling Into Derivatives Set to Get New Options
Livia Yap – Bloomberg
BOJ policy, consumption-tax hike may lead to renewed interest; Flexible options have had limited success in HK, Australia
As the Japanese stock-market euphoria continues into the new year and traders increase spending on derivatives, the nation’s exchange is about to give them another tool to bet on the shares: flexible options.

****SD: Let’s see those biceps!

Currency volumes surge as dollar weakness accelerates; Trading activity hits unusually high levels for January
Philip Stafford and Roger Blitz – Financial Times (Subscription)
Foreign exchange activity is riding high on the back of a sharply weaker dollar and explosive daily trading shifts in major currency pairs, with elevated volumes marking a notable change for this time of the year.
****SD “The trader also pointed to a growing divergence in January between the implied level of volatility on equity options markets, and actual volatility. ‘People are buying options but they will lose money on it. But there’s enough movement in [the] spot market to get the premium back.'”

Wall Street Wants Just a Little More Debt Volatility
Liz McCormick – Bloomberg
Across Wall Street, there seems to be little dispute that traders in U.S. debt markets need more volatility — although maybe not too much. Dealers have been wishing for a bit more tumult in assets from corporate obligations to Treasuries since the Federal Reserve quashed volatility by buying up bonds in the wake of the financial crisis.

****SD: You could easily drop the word “debt” from the title and it’d still be accurate.

Is Volatility Back? In an unusual occurrence, the VIX has moved the same direction as the S&P 500 on over half of trading days this month
Gunjan Banerji – WSJ (Subscription)
The relationship between market volatility and stocks is getting complicated. A yardstick of expected stock swings, the Cboe Volatility Index, has started darting higher even as the S&P 500 has risen in January. Strategists say that the correlation can’t last forever.

****SD: Update on the recent phenomenon.

Podcast: Damiano Brigo on derivatives, AI, machine learning and more
Mauro Cesa Nazneen Sherif – Risk.net
In February, we welcome professor Damiano Brigo, chair of mathematical finance at Imperial College London, as an occasional Risk.net columnist. For this podcast – the first of a monthly series – Brigo visited our office to share his thoughts on the lost causes, current role and future prospects of quantitative finance.

Exchanges and Clearing

Eurex simplifies its corporate structure
Over the last two years, the regulatory framework and market structure changed significantly. Eurex, one of the leading derivatives marketplaces, adapts its global structure to the new reality. To best serve its clients, reduce complexity and improve agility, the exchange will change its set-up in Switzerland and strengthen its offering in Asia.

****SD: Financial News has Deutsche Bˆrse drops plans for Asian derivatives hub, the Financial Times has Deutsche Bˆrse ends Asia expansion plans and The Trade has Eurex scraps plans for Singapore clearing house.

PHLX, NOM, BX, ISE, GEMX and MRX – Modified Quarterly Quote Spread Parameter Relief through March 16, 2018
Effective January 29, 2018, the modified market maker quarterly quote width requirements on Nasdaq PHLX (PHLX), The Nasdaq Options Markets (NOM), Nasdaq BX (BX Options), Nasdaq ISE (ISE), Nasdaq GEMX (GEMX) and Nasdaq MRX (MRX) will be effective through March 16, 2018.

***SD: Pertains to symbols that trade in the hundreds per share.

Regulation & Enforcement

How Hedge Funds (Secretly) Get Their Way in Washington; Fake grass roots. An inflatable rat. Testimony with hidden ties. Billionaires are using DCI Group to make their bets pay offówhile keeping the public in the dark.
Zachary Mider and Ben Elgin – Bloomberg
With swept-back silver hair and a prestigious rÈsumÈ, James K. Glassman cuts the classic figure of a Washington wise man. He’s a former undersecretary of State, think-tank founder, and best-selling author, with a considered opinion on just about any Beltway issue.

Hammond ‘increasingly confident’ of good access to EU markets after Brexit
British finance minister Philip Hammond said on Friday he was increasingly confident that Britain would be able to get very good access to European Union markets after Brexit.


Alt Data on the March with Machine Learning
Ivy Schmerken – The Industry Spread
The explosion of alternative data sources, such as satellite images, sentiment analysis, and geolocation data, is having a profound impact on the field of quantitative investing. Analyzing torrents of unstructured data requires sophisticated tools and technology, and this leads to opportunities as well as challenges.

Artificial Intelligence Nears the Summit of Hype in Davos
Jeremy Kahn – Bloomberg
The technology will be better than fire; lead to World War III; Karl Marx invoked; corporate decision-making in AI crosshairs
Artificial intelligence approached the summit of hype at this year’s World Economic Forum.


What Drives Price Changes in Options?
Sage Anderson – tastytrade blog
While terminology and concepts in the world of options trading are important to understand, it’s likewise critical not to miss the forest for the trees. In that regard, a recent episode of Options Jive takes a step back to reframe a simple question that is central to any options trading endeavor – “what drives options prices?” While “implied volatility” and “expected move” are both paramount in a technical answer to this question, let’s put those on the back-burner for the time being.


FX Option Market Update: January 26, 2018
Dan Larsen – TradingFloor.com

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