A divergence between the VIX fear gauge and the stock market is sending mixed signals to investors as they search for a bottom amid the latest sell-off

May 27, 2022

Observations & Insight

Cboe’s Rob Hocking Talks Nanos and New Tools for the Retail Investor
JohnLothianNews.com

Rob Hocking, senior vice president, head of derivatives strategy at Cboe Global Markets, met with John Lothian News at FIA Boca 2022 to discuss the explosive growth of retail investors and the launch of Nanos, a lower-stakes option that Cboe has created to open the world of options trading to a wider audience.

Watch the video »

Lead Stories

A divergence between the VIX fear gauge and the stock market is sending mixed signals to investors as they search for a bottom amid the latest sell-off
Matthew Fox – Business Insider
A divergence between the S&P 500 and the VIX fear gauge is sending mixed signals to traders as they try to identify a bottom amid the market’s ongoing correction.
Typically the VIX has an inverse relationship with the broader stock market and surges higher as the stock market falls lower, and vice versa. But while the S&P 500 has fallen to new lows in May, almost hitting bear-market territory as it neared a 20% decline last week, the VIX index has remained subdued below the 30 level.
/jlne.ws/3LP2cFn

Bets Against U.S. Treasurys Rake In Gains as Fed Raises Rates
Funds designed to soar when bonds crash have shined for investors who predicted tighter policy
Matt Grossman – WSJ
Christopher Backes has embraced a gutsy trade: betting against U.S. government debt.
With Treasury yields soaring this year, the price of government bonds has plunged. For traditional debt investors, that is a nightmare. For Mr. Backes, a 31-year-old recruiter from Maryland, it is a gold mine—for now, anyway.
Late last year, Mr. Backes plowed money from his personal brokerage account into an exchange-traded fund offered by the asset manager ProShares designed to bet against Treasurys. It rises, just as yields do, when long-dated bond prices fall. For the first stretch of 2022, that is exactly what happened.
/jlne.ws/3GqiEuF

United States: CFTC Considers FTX’s Democratized Clearing Proposal
Peter Y. Malyshev, Cadwalader, Wickersham & Taft LLP, contributor – Mondaq
On May 25, 2022, the U.S. Commodity Futures Trading Commission (“CFTC”) conducted a public hearing to consider a request from LedgerX, LLC, d.b.a. FTX US Derivatives (“FTX”), to amend its order of registration as a derivatives clearing organization (“DCO”) to allow direct clearing of listed futures contracts on Bitcoin and Ethereum and other digital assets by retail participants. This is a dramatic departure from a traditional clearing model where retail participants can trade and clear futures only through professional intermediaries – registered and heavily-regulated futures commission merchants (“FCMs”).
/jlne.ws/3wRdRiW

Exchanges

MIAX Exchange Group – Options Markets – Corporate Action Alert: Apollo Strategic Growth Capital (APSG) Name and Symbol Change to Global Business Travel Group, Inc. (GBTG)
Apollo Strategic Growth Capital (APSG) will have a name and symbol change to Global Business Travel Group, Inc. (GBTG) effective on Tuesday, May 31, 2022.
All GTC orders resting on the MIAX order books in APSG will be canceled at the close of business on Friday, May 27, 2022.
/jlne.ws/3wWeXsv

Technology

Best New Product: Xero Volatility Trading Engine
Anna Lyudvig – Traders
Exegy won Best New Product (Xero Volatility Trading Engine) at the 2022 Markets Choice Awards.
Traders Magazine caught up with David Taylor, Co-President and Chief Technology Officer of Exegy, to learn more.
What is your reaction to winning the Award at the 2022 Markets Choice Awards?
Exegy is thrilled that Markets Media honored Xero VTE with its award for Best New Product. We believe Xero is truly a game-changing technology and are gratified that the MCA panel recognized its potential as well.

Strategy

Hmm, Which Nanos Option to Buy?
Cboe Insights
Nice, you’re reading an article about trading options. But maybe you’re like, “Well yeah, I’d love to try options, but I have no clue how to figure out why prices vary so much. And how would I even pick a contract, much less the right strike price for my investment strategy?”
Well, read on friend, soon you’ll know which option is best for you (and you can stop those contemplative chin-scratches). For now, let’s focus on buying options. We’ll tackle selling ’em in a future article.
/jlne.ws/3lNSM2q

Investors Turn to Global Index Options Overlay Strategies Amid Heightened Geopolitical Volatility
Kelly Broadhurst – Cboe Insights
When markets become volatile, investing in derivatives may potentially help market participants ride out the turbulence. Cboe MSCI Index options can be used to gain exposure to global markets, help generate income and provide portfolio protection.
Cboe offers cash-settled index options trading on the MSCI Emerging Markets Index (MXEF) and the MSCI EAFE Index (MXEA) benchmarks. These products provide opportunities for investment exposures across countries and currencies, which has become particularly attractive as global events spur volatility.
/jlne.ws/3MZjiSC

The Option Block 1099: BITO Breakdown, SNAP Saga and the Death of VVIX
Option Block (podcast)
Host: Mark Longo, The Options Insider Media Group
Co-host: Andrew Giovinazzi, The Option Pit
Co-host: Mike Tosaw, St. Charles Wealth Management
What level does VIX have to hit to signal concession in the broad markets? We discuss this and more on this episode of The Option Block.
/jlne.ws/3lWtdfv

Miscellaneous

Time to Stop Coddling Crypto
Volatility among stablecoins has stirred calls for industry rules but proposed legislation is unlikely to end the turmoil.
Steve H. Hanke and Matt Sekerke – WSJ Opinion
Even among the crypto faithful, confidence in stablecoins has been shaken, and calls for regulation have intensified. Sen. Pat Toomey (R., Pa.) has proposed legislation, but the real question is why the government continues to sidestep existing laws and protections to coddle a stagnant, wasteful technology in search of a compelling legal-use case.
/jlne.ws/3z03Ilq

A New Prediction Market Lets Investors Bet Big on Almost Anything
Recently approved by the CFTC, Kalshi lets people place five-figure wagers on the outcome of the Grammys, the next Covid wave, and future SEC commissioners. What could go wrong?
Liam Vaughan and Benjamin Bain – Bloomberg
On Nov. 3, 2020, Election Day, two young entrepreneurs received a call from the chairman of the Commodity Futures Trading Commission with some important news. Luana Lopes Lara and Tarek Mansour had spent the past 18 months trying to get permission to start an ambitious and controversial new type of financial exchange—one where, rather than betting on equity prices or commodity futures, people could trade instruments tied to the outcomes of real-world events, such as the passage of legislation, the weather on a particular day, or the winner of best actor at the Oscars.
/jlne.ws/3wTebxI

Crypto Lender BlockFi, in Talks With FTX, Also Gets Ledn Offer

Crypto Lender BlockFi, in Talks With FTX, Also Gets Ledn Offer

First Read Hits & Takes John Lothian & JLN Staff Monday is the 4th of July holiday in the U.S. and you can expect to see JLN's annual sharing of the Declaration of Independence edition of the John Lothian Newsletter. We will resume our normal publication...

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The Spread

Bears Picked Right Stocks to Short With Declines Twice the S&P’s

Observations & Insight Editor's Note: The JLN Options Newsletter will not be published on Monday, July 4 in observation of the Independence Day holiday. Have a great weekend! Lead Stories Bears Picked Right Stocks to Short With Declines Twice the S&P's Lu Wang...

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