Observations & Insight
*****JJL: Congratulations to David Hoag, OCC’s chief information officer, for his nomination as a finalist for the 2021 National CIO of the Year ORBIE Awards for the Corporate category, which includes CIOs for organizations up to $1 billion in annual revenue. This nomination recognizes Hoag’s excellence in technology leadership and innovation at OCC.
CME announces close of most of its trading pits; Cboe dabbles in ESG – The Spread
This week on The Spread, the CME Group announces it’s keeping most of its pits closed for good, Cboe announces it’s getting into ESG derivatives, and more.
A Signal in VIX Underbelly Flashes a Green Light to Stock Bulls
Joanna Ossinger – Bloomberg
A volatility measure hovering near the highest in two months is sending a bullish signal for a relentless stock rally defying eye-watering valuations.
Known as the market’s fear gauge, the Cboe Volatility Index is trading some 7 points higher than how much the S&P 500 Index has actually been swinging around for the past 20 days.
Option Traders Boost Bets on Carbon Hitting 100 Euros
Will Mathis and Jesper Starn – Bloomberg
Carbon permits broke through a fresh record as the options market shows more traders willing to bet on carbon prices almost doubling by the end of the year.
European Union pollution rights have climbed about 60% this year, putting them among the best-performing commodity futures markets. Even after such hefty gains, some of the biggest options positions are for bets that carbon permits will pass 60 euros ($73), or about 15% above current rates, and 100 euros by the end of the year.
Speculators keep bullish CBOT bets as futures continue historic run
Karen Braun – Reuters
Speculators’ bullishness toward Chicago-traded grains and oilseeds has hovered near record levels since late last year as global demand accelerates and supplies tighten, though various market participants have recently been in the driver’s seat when it comes to the persistent rally, especially in corn.
Oil buying accelerates amid growing confidence in economic recovery – Kemp
John Kemp – Reuters
Hedge funds boosted their position in petroleum for the fourth week running, as bullishness about oil consumption and prices rebounded after the setback in March.
Hedge funds and other money managers purchased the equivalent of 40 million barrels in the six most important petroleum futures and options contracts in the week to May 4.
Corn Is the Latest Commodity to Soar
Ryan Dezember and Kirk Maltais – WSJ
America’s biggest cash crop has rarely been more expensive. Corn prices have risen 50% in 2021 and a bushel costs more than twice what it did a year ago.
Corn has been one of the sharpest risers in the broad rally in raw materials that is prompting companies to boost prices for goods and fueling concern among investors that inflation could hobble the post-pandemic economic recovery.
Silver ETF assets surge to all-time high as retail investors pile in
Chris Flood – Financial Times
Silver prices surged to an eight-year high in January, after retail investors piled into exchange traded funds holding the precious metal. But their mistaken reasons for doing so — and subsequent losses — have led to renewed debate about silver’s role in investors’ portfolios.
Around $1bn flowed into silver-backed ETFs on a single day in January, after comments on the Reddit online forum, called WallStreetBets, erroneously suggested that US investment banks were suppressing the price of the metal. This encouraged a group of investors to try to oppose the banks by buying silver ETFs, to push up the metal’s price. Reddit users were exhorted to buy into the funds to create losses for investment banks such JPMorgan, as “payback for the bailouts and manipulation”.
Exchanges and Clearing
Nasdaq gets green light from SEC for volatility index options; Nasdaq plans to launch the volatility index options later this year, following the approval from the US financial regulator.
Annabel Smith – The Trade
US exchange operator Nasdaq has received approval from the Security and Exchanges Commission (SEC) to launch options on its Nasdaq-100 Volatility Index (VOLQ). Following the approval from the SEC for the options on 5 May, Nasdaq said it plans to launch later this year.
SGX reports market statistics for April 2021
Risk-management demand stays robust across equities, FX and commodities; Secondary fundraising on SGX rises to highest amount in six months
Singapore Exchange (SGX) today released its market statistics for April 2021. Demand to manage portfolio risk across multiple asset classes stayed robust, even as manufacturing activity in key Asian markets improved, cooling price volatility in equities. Emerging Asia foreign exchange (FX) and commodity derivatives performed strongly.
Regulation & Enforcement
New SEC Chairman Sets Sights on Citadel Securities and Virtu
Dave Michaels and Alexander Osipovich – WSJ
The electronic-trading firms Citadel Securities and Virtu Financial Inc. have become pillars of the stock market in recent years, rivaling the role played by stock exchanges. Wall Street’s new top regulator is putting pressure on them by questioning a key service they provide: executing the orders of millions of ordinary investors whose trades go to their black boxes, instead of being routed to public exchanges. Testifying before Congress last week, Securities and Exchange Commission Chairman Gary Gensler criticized the system that funnels orders to Citadel Securities and Virtu, which pay for the opportunity to trade with retail stock and options orders.
No Decision Decision
Dylan Ratigan – tastytrade
In 1919, Supreme Court Justice Oliver Wendell Holmes, Jr. wrote in his decision for Schenck vs. United States, one cannot shout fire in a crowded theater. Some fifty years later, in Brandenburg vs. Ohio, the Court clarified that decision to specify one cannot falsely shout fire in a crowded theater. That has been the standard by which free speech has been tested ever since. If the language being used is false and can be reasonably expected to cause imminent lawless action, it is not protected. Fast forward another fifty years and we find ourselves faced with a similar conundrum, but updated for the times.
The Non-Wisdom of Crowds With Nigol Koulajian of Quest Partners
RCM Alternatives blog
In through the nose – out through the mouth. In through the nose – out through the mouth. You’ve now joined a headspace where we think you’re prepped to focus in and become one with today’s guest. He’s a well known CTA, expert researcher, meditation and yoga practitioner, and Founder & CIO of $1.8 Billion in AUM = Quest Partners. Today’s guest is none other than Nigol Koulajian, he’s been in the business since the early 1990’s and has grown to become one of the leading voices in alternative investments.
All About Options (With) Expert Sheldon Natenberg
Join the Cboe Options Institute on Wednesday, May 12, to learn from one of the industry’s most renowned option trading educators. This webinar will interest traders of all ages and experience levels, but if you are new to options trading you really won’t want to miss it.
Wednesday, May 12, 2021
12:00 p.m. ET
Fundamentals of Futures & Options (also applicable to Series 3 Exam)
For more than 30 years, IFM has consistently provided learners with a solid foundation and understanding of futures and options markets and trading including terminology, risk management, pricing, and basic trade strategies. This instructor-led virtual course includes lectures from an engaging instructor with real-world expertise and supported by class discussion, practice exercises and educational materials. The course fee includes two must-read industry books, “Futures and Options” and the “Guide to U.S. Futures Regulation.”
Dates: May 10, 2021 through May 14, 2021, 12:00 p.m. to 2:00 p.m. ET.
Location: Virtual Live. 2-hour sessions over 5 days.
Instructor: Marti Tirinnanzi
Class size registration is limited to approximately 20 participants to promote student participation and interaction.
The Covered Call Options Strategy
Date: Wednesday, May 12, 2021
Time: 3:30 p.m. CT
Duration: 1 hour
Mark Benzaquen – Principal, Investor Education – OCC
For options investors, the covered call is one of the core strategies for income generation, but there are many details to consider before opening a position. On May 12, join The Options Industry Council’s Mark Benzaquen, a former pit broker who now focuses on options education, for a detailed overview of the covered call.
Anti-money laundering considerations for security and commodity derivatives
Part of the L&C webinar series
May 13, 2021 • 10:00 a.m. – 11:00 a.m. ET
In 2018, the CFTC Division of Enforcement established a Bank Secrecy Act task force dedicated to investigating and enforcing AML regulations. In October 2019, the CFTC, the SEC and FINCEN issued a joint statement highlighting the importance of AML compliance in matters involving securities, commodities, derivatives and digital assets. Since then the CFTC, SEC, FINCEN and DOJ have initiated numerous investigations of alleged AML deficiencies, and pursued civil and criminal actions enforcing AML compliance. In this webinar, we will discuss recent AML enforcement investigations and actions, cooperation among the various U.S. and foreign agencies, best practices and compliance considerations for security- and commodity-based instruments and digital assets, and risk mitigation measures.
Clearing 101: Exchanges, Clearinghouses and CCPs
Dates: Sep. 15, 2021 12:00 p.m. – Sep. 16, 2021 1:30 p.m. ET.
Location Virtual Live. Two 90-sessions over 2 days.
Instructor: Marti Tirinnanzi
Registration is limited to approximately 20 participants to promote student participation and interaction.
Join us for a short program (90 minutes each day for 2 days) that explains the multilateral systems that provide the infrastructure for transferring, clearing and settling payments, derivatives and other financial transactions among financial institutions and end users. Following Dodd Frank, clearinghouses became designated as Systemically Important Financial Market Utilities, vital to the operations of the financial markets and subject to heightened regulatory scrutiny. Buyers and sellers in exchange transactions rely on clearinghouses to intermediate transactions and to manage credit risks between trading parties. As such, clearinghouses promote transparency, efficiency, and stability by providing market-based pricing, daily settlement, and ensuring adequate capitalization for markets to function.
Archegos Rout Helps China Hedge Fund to 120% Gain This Year
Bei Hu and Nishant Kumar – Bloomberg
A China-focused hedge fund led by a 30-year-old who started trading as a teenager returned 120% in the first quarter, thanks in part to the unraveling of Bill Hwang’s Archegos Capital Management.
Bullish bets on a pair of Chinese fintech consumer lending platforms accounted for more than half of the quarterly return for Henry Liang’s Seahawk China Dynamic Fund, he said in a telephone interview. Additional gains came from wagers against a “bubble basket” of over-hyped new-economy companies, including GSX Techedu Inc., the Chinese after-school online tutoring firm later caught up in the Archegos-induced selloff.
(Podcast) VV 445: Scary Yellen and Spooky Jobs Numbers Can’t Save Volatility
Volatility Views – Options Insider
Host: Mark Longo, The Options Insider Media Group Co-host: Mark Sebastian, The Option Pit