Observations & Insight
Tom Zagara – Open Outcry Traders History Project – Part 1
Tom Zagara has lots of great stories to tell from his time as a trader at the Chicago Board Options Exchange. He was a broker, trader, marketmaker and more down on the CBOE trading floor starting in the 1970s. His best day trading was the stock market crash of 1987. He was positioned to make markets because of the discipline of his trading, covering short positions before they expired. As a result, he had plenty of trading firepower for when the market was so out of sorts. This is part one of a two part interview Tom had with John Lothian News for the Open Outcry Traders History Project.
70% chance of recession in next six months, study from MIT and State Street finds
Pippa Stevens – CNBC
There’s a 70% chance that a recession will hit in the next six months, according to new research from the MIT Sloan School of Management and State Street Associates. The researchers created an index comprised of four factors and then used the Mahalanobis distance — a measure initially used to analyze human skulls — to determine how current market conditions compare to prior recessions.
BitGo Grows Crypto Custody Options With New Swiss and Germany Entities
Daniel Palmer – Coindesk
BitGo is expanding its institutional cryptocurrency storage service to Europe with the launch of two entities in Switzerland and Germany.
The Palo Alto, California-based firm said Monday the new custody options will allow clients to choose the jurisdiction that best suits their needs.
Pockets of Currency Volatility May Signal Tide Is Changing
Robert Fullem – Bloomberg
As broader gauges of implied currency volatility remain near all-time lows, pockets of turbulence are emerging in a potential signal that the foreign-exchange market could be less stable in 2020.
Take the yuan. After rising more than 1.5% in the month prior to the Jan. 15 signing of the U.S.-China trade agreement, the currency has relinquished those gains amid concerns that Chinese growth could stumble as the coronavirus spreads. Singapore, a key financial hub, is seeing historic price swings due to angst around the outbreak.
Hedge funds sell oil as coronavirus stokes recession fear
John Kemp – Reuters
Hedge funds were heavy sellers of petroleum last week for the third time in four weeks, amid mounting anxiety about the impact of a coronavirus outbreak on oil consumption in China. Hedge funds and other money managers sold the equivalent of 131 million barrels in the six most important futures and options contracts in the week ending Feb. 4.
Regulation & Enforcement
SEC Publishes MIAX PEARL Equities Rules; Trading Expected to Begin in September 2020
Miami International Holdings
Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX, MIAX PEARL and MIAX Emerald options exchanges (the MIAX Exchange Group), today announced that the Securities and Exchange Commission (SEC) has published MIAX PEARL’s proposal to adopt rules governing the trading of equity securities under its exchange license. MIAX PEARL is expected to begin trading equity securities in September 2020, subject to SEC approval.
Instead of Buying Put Options, Investors Opt for ‘Leaps’
Nick Ravo – WSJ
With the stock market at historic highs and volatility close to all-time lows, some investors are considering taking their gains in their stock and ETF positions and buying long-term call options called Leaps (Long-term Equity Anticipation Securities).
Leaps expire 12 to 28 months out and can reduce losses when the inevitable correction comes, and, if the stock price rises enough, they also allow for buyers to participate in the appreciation.
Why a Rising ‘Black Swan’ Index Could Be a Sign of Bullishness
Mark Hulbert – WSJ
In mid-December, a risk benchmark for the U.S. stock market known as the SKEW Index—aka the Black Swan index—hit one of its highest levels ever, higher than 99.8% of all other daily readings since 1990, which is how far back data extend.
Even more incredibly, December’s high (at 150.14) was 31% higher than the SKEW’s average reading of 114.5 during the 2007-09 financial crisis.
The Agony of the Tesla Bears: $8.4 Billion of Losses in Five Weeks
Gunjan Banerji and Gregory Zuckerman – WSJ
Fred Lande’s heart was pounding as he watched Tesla Inc. shares charge to an all-time high of $968.99 last week. It wasn’t because he was happy.
He’d bet thousands of dollars that the frantic rally that has more than tripled the price of the shares in just a few months was doomed to end, and soon. Concluding his gamble was wrong, he closed the options trade at a loss.