After U.S. bank stock surge, options traders brace for earnings-fueled volatility

Jan 11, 2022

Lead Stories

After U.S. bank stock surge, options traders brace for earnings-fueled volatility
Saqib Iqbal Ahmed – Reuters
Bank stocks have rallied in recent weeks, but a pick-up in hedging on a key financial sector exchange-traded fund may be a sign that investors are wary of earnings season volatility, options market experts said.

Jamie Dimon: Markets Are in for a Wild Ride in 2022 As Fed Hikes Rates
Harry Robertson – Business Insider
Jamie Dimon has said financial markets are in for a rocky ride in 2022, with the JPMorgan CEO saying he’d be surprised if the Federal Reserve hiked only four times.
Dimon told CNBC Monday that he’s “expecting that the market will have a lot of volatility this year as rates go up.”
He said higher interest rates would cause investors to “redo projections and look at the effective interest rate and businesses differently than they did before.”

Bitcoin Death Cross Is Staring Down Bulls After a Painful Retreat
Vildana Hajric and Emily Graffeo – Bloomberg
After one of roughest patches ever for Bitcoin enthusiasts, holders of the largest digital currency are facing an ominous technical price pattern with a name that suggests more pain ahead.
Known as a death cross, the measure shows up whenever an asset’s average price over the last 50 days drops below that of its 200-day moving average, an indication that its momentum is headed downward. And though it hasn’t occurred yet for Bitcoin, it looks to be on course to hit it later this week, according to Mati Greenspan, founder of Quantum Economics.

‘If we’re lucky,’ the Fed can engineer a ‘soft landing’: Expect more than 4 rate increases in 2022 and a lot of market volatility, says JPMorgan’s Jamie Dimon
Mark DeCambre – MarketWatch
JPMorgan Chase & Co. CEO Jamie Dimon says the consumer remains in great shape in 2022 but also concedes volatility could be elevated in financial markets as the Federal Reserve aims to navigate a COVID-induced surge in inflation.
During a CNBC interview on Monday afternoon at a healthcare conference hosted by his bank, the U.S.’s largest by market capitalization, the CEO said market projections for as many as three rate increases would be “very easy” for the economy (and market) to absorb. But he said he expects that the central bank might aim to do more.
“I’d personally be surprised if it was just four [interest-rate hikes],” he told the business channel.


Robinhood Has Become an Attractive Takeover Target
Jared Dillian – Bloomberg
It’s been quite a year for brokerage firm Robinhood Markets Inc., from a rollicking initial public offering to technical glitches that blocked its customers from accessing their accounts, and from capital raising efforts to questions about how it guarantees the best execution of trades. Today, the shares are languishing at around $15, cutting its market capitalization to about $13 billion from a peak of some $60 billion back in August.

CME Group Achieves Record International Average Daily Volume of 5.5 Million Contracts in 2021, Up 4% from 2020
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that it achieved record international average daily volume (ADV) of 5.5 million contracts in 2021, up 4% from 2020. This record, reflecting all trading done outside the United States, was driven largely by growth in Interest Rate products, up 19%.

NYSE US Exchanges to Close in Observance of Martin Luther King Jr. Day
In observance of Martin Luther King Jr. Day, the New York Stock Exchange, NYSE American Equities, NYSE Arca Equities, NYSE Chicago, NYSE National, NYSE American Options, NYSE Arca Options, and NYSE Bonds markets will be closed on Monday, January 17, 2022.

Regulation & Enforcement

SEC Pushes for More Transparency From Private Companies
Paul Kiernan – WSJ
The Securities and Exchange Commission is preparing to force more transparency from big private companies, as regulators grow concerned about the lack of oversight of the private fundraising that has fueled their rise.
Private capital markets have become an increasingly popular way for companies to raise money in the U.S. in recent decades, allowing firms to acquire funding from institutions and wealthy individuals without the regulatory burdens of going public. The number of so-called unicorns—private companies valued at $1 billion or more—has continued to grow even amid the recent boom in initial public offerings.


Buy the dip, says JPMorgan. ‘Markets can handle higher yields’
Christine Idzelis – MarketWatch
Investors should buy the dip in the stock market as the selloff sparked by last week’s “hawkish surprise” in the Federal Reserve’s meeting minutes is arguably overdone, according to analysts at JPMorgan Chase & Co.
Monetary policy tightening will probably move at a gradual pace, the analysts, led by Marko Kolanovic, wrote in a J.P. Morgan research note Monday. “Markets can handle higher yields.”

How to Stay Invested While Seeking to Buffer Against Risk in 2022
Elevated equity valuations. Low bond yields. Potentially rising interest rates. There’s a lot of challenges ahead in 2022, and investors will need to position their portfolios carefully to stay one step ahead of tough market conditions. Defined outcome ETFs can help investors maintain their market exposure while seeking to buffer their portfolio against risks ahead.
In the upcoming webcast, How to Stay Invested While Seeking to Buffer Against Risk In 2022, Innovator ETFs’ co-founder and CEO, Bruce Bond, and vice president of product and research, Graham Day, will discuss how buffer ETFs can help investors remain fully invested in the markets up to a cap, with built-in buffers to help manage downside risks.


Is SEC’s Gary Gensler the Skunk at the Fintech Party or the Adult in the Room?
Benjamin Bain – Bloomberg
You don’t have to look far to see how algorithms and machine learning can influence a market: Ask your kitchen smart speaker to play some Taylor Swift, and before long a computer formula will likely rack up songs by another artist her fans tend to like. What if a similar bit of black-box code could nudge you into buying a popular stock? U.S. Securities and Exchange Commission Chair Gary Gensler says that question might not be hypothetical for long. The pandemic hastened the already rapid rise of cryptocurrencies, robo-advisers, and apps that make it easier to trade and invest. In a recent speech—where he made the comparison to music streaming algos—Gensler said the changes “could be every bit as big as the internet was in the 1990s.”

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The Spread

Volatility ETFs Aren’t Flashing Signs of Market Fear

Observations & Insight The FIA is seeking fintech startups for its annual fintech showcase, the Innovators Pavilion, at the Futures and Options Expo in Chicago November 14-15. All selected fintech startups will participate in a pitch competition and one will be...

Past Options Newsletters

Market Volatility Not Over, Allspring’s Miletti Says

Market Volatility Not Over, Allspring’s Miletti Says

Lead Stories Market Volatility Not Over, Allspring's Miletti Says Bloomberg (Video) Ann Miletti, head of active equity at Allspring Global Investments, says the recent market rally has been healthy but the volatility isn't over yet. She speaks on "Bloomberg Markets:...

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