All the Ways Day Traders, Nasdaq Whales Move Stocks Via Options; Reddit’s Stock Threads Become a Must-Read on Wall Street

Sep 15, 2020

Observations & Insight

New Retail Interest Spurs Renewed Focus on Investor Education
By Suzanne Cosgrove, John Lothian News

Equity markets are seeing an influx of new retail interest, with up to 25 percent of market activity executed by retail investors on peak days this year, compared with about 10 percent in 2019, said John Zecca, Nasdaq’s executive vice president and chief legal and regulatory officer.

The trend is pushing market professionals and regulators to look at comprehensive ways to educate and protect novice market entrants.

“During this time period, we have seen some challenging questions,” including about complex investments like inverse exchange-traded funds (ETFs) and options leverage accounts, said Lori Schock, head of the SEC’s office of investor education and advocacy. “We’re a disclosure-based system in the U.S.,” she said. “We need people to read and understand it. You need to do your homework.”

Schock was among the half-dozen panelists who examined the retail trend Monday in a Nasdaq-sponsored webinar titled, “The Evolution of Retail Investing and Related Obligations.”

To read the rest of this story, go HERE.

Lead Stories

All the Ways Day Traders, Nasdaq Whales Move Stocks Via Options
Sam Potter – Bloomberg
Beyond all the wrangling over who caused the recent boom in options is a more fundamental debate: How much do they matter to stock prices, anyway?
Quite a bit, according to the academic research.
Conclusions have varied over the years, but the weight of evidence points to three main channels through which options can drive equity prices — all of which may have been at play of late.
Wall Street has been looking for culprits in an explosion in volatility, with September posting three of the worst days for technology stocks in 2020.
/bloom.bg/2E3vAeh

Reddit’s Stock Threads Become a Must-Read on Wall Street
Sarah Ponczek – Bloomberg
Are you young, newly rich from stock trading and ready to take the plunge in options? Wall Street is following your every move.
With the sway of stay-at-home traders growing and starting to eclipse other influences on equities, figuring out who is doing what among amateur stock dabblers has become a critical mission for big investors. They’re canvassing Reddit threads like r/wallstreetbets and picks at retail brokerages, plugging data into programs and trying to gain an edge.
/bloom.bg/3c1O1MZ

A Wall street chief strategist says markets have seen the ‘worst of the sell-off’ and thinks equities are fairly valued
Saloni Sardana – Markets Insider
The US stock market has lived through the worst part of its sell-off, Wells Fargo’s global chief investment officer Kirk Hartman said Tuesday.
“I do think there will be more volatility but I think we have seen the worst of the sell-off,” Hartman told CNBC’s “Street Signs Asia” in a pre-recorded interview released Tuesday. “What is interesting to me is the market has priced in a very good recovery in 2021 and, as long as that happens, I think the market, while a bit stretched, is fairly valued,” he added.
/bit.ly/3c0hUNK

Why Did Stock Markets Rebound From Covid in Record Time? Here Are Five Reasons
Gunjan Banerji – WSJ
The Dow Jones Industrial Average’s wild round trip is nearly complete.
The venerable stock index, despite a recent hiccup, has nearly recovered all the losses suffered during the coronavirus pandemic, an epic journey during one of the most catastrophic economic collapses in U.S. history.
/on.wsj.com/3iAFT8z

*****MR: “Strong recovery” in this context is relative, and failing to recognize that puts us in a position where a lot of carts may be put before a lot of horses. From the article: “‘The stock market is comprised of the biggest and strongest companies…. It is not representative of the entire economy,” hedge-fund billionaire William Ackman, founder of Pershing Square Capital Management LP, wrote in a recent letter to shareholders. ‘If there were a stock market index of private, small businesses, it would likely be down 50% or more.'”

US futures exchanges target retail investors with ‘mini’ contracts
Philip Stafford – FT
The biggest US futures exchanges are producing miniature versions of some of their most popular contracts to attract traders being pushed out of the market by rising costs. CME Group, Intercontinental Exchange (ICE) and Cboe Global Markets have all created smaller versions of their widely traded futures contracts, which allow investors to place bets on the direction of share prices, for example, or the level of volatility in the market. The new products are a fraction of the cost to trade, as they come in smaller increments and are targeted at what the exchanges call the “sophisticated” retail investor.
/on.ft.com/2FAolei

Exchanges and Clearing

FXCM Expands Trading Offering With Volatility Index CFDs
Mondovisione
FXCM Group, LLC (“FXCM Group’ or ‘FXCM’), a leading international provider of online foreign exchange trading, CFD trading, cryptocurrencies and related services is today announcing the addition of Volatility Index CFDs to its range of available trading instruments.
/bit.ly/35E67U0

Miami International Holdings Announces Fully Subscribed Strategic Equity Rights Transaction with Leading Equities Firms to Trade on MIAX PEARL
Miami International Holdings, Inc.
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 it has finalized a strategic transaction with industry-leading firms to trade on MIAX PEARL Equities, MIH’s first cash equities exchange. MIAX PEARL Equities will officially join the MIAX Exchange Group on September 25, 2020 when trading begins under MIAX PEARL’s exchange license.
/bit.ly/2H0ofNO

MIAX Options Exchange – SPIKES Special Settlement Auction Settlement Reference Price Opening Width and Valid and Priority Quote Width Tables used in the September 16, 2020 SPIKES Special Settlement Auction
MIAX Options
Due to sustained market volatility, MIAX Options will continue to use the Settlement Reference Price Opening Width and Valid and Priority Quote Width tables detailed in MIAX Options Regulatory Circular 2020-11 for opening the SPY October 16, 2020 options used in the September 16, 2020 SPIKES Special Settlement Auction.
/bit.ly/3mjaxWx

MIAX Exchange Group – Options Markets – Corporate Action Alert: Qurate Retail, Inc. (QRTEA)
MIAX Options
Qurate Retail, Inc. has announced a distribution effective for Tuesday, September 15, 2020. On that date, the current QRTEA option class will change to QRTA1. The MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange will not list QRTA1 options. Therefore, no options on QRTEA will be available for trading on Tuesday, September 15, 2020.
/bit.ly/2GTWRAT

Temporary Amendments of the Listing Schedule of Five (5) FX Weekly Option Contracts to Early List the Monday and Wednesday Week 1 and Friday Week 2 Contracts
CME Group
Effective Sunday, September 27, 2020 for trade date Monday, September 28, 2020, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will implement temporarily amendments of the listing schedule of five (5) FX weekly Options contracts (the “Contracts”) to early list certain weekly contracts on a one-time basis as more specifically described in the table below. Pursuant to the temporary rule amendments, the Exchange will list five weekly instead of four weekly contracts as shown in Appendix A. The listing of the additional weekly contracts pursuant to the temporary rule amendments is designed to provide additional risk management tools in advance of the United States 2020 General Election on November 3, 2020.
/bit.ly/2GVVFwU

CME Group Global Head of Financial and OTC Products and Managing Director of Investor Relations to Present at Raymond James North American Equities Conference
PR Newswire (press release)
CME Group announced today that Sean Tully, Global Head of Financial and OTC Products, and John Peschier, Managing Director of Investor Relations, will present at the Raymond James 16th Annual North American Equities Conference on Thursday, September 17, at 9:40 a.m. (Eastern Time). The presentation will be available for livestreaming via CME Group’s investor website at http://investor.cmegroup.com. Please allow extra time prior to the presentation to visit the site and download the streaming media software required to listen to the Internet broadcast. An audio webcast will be available for replay at the same address approximately 24 hours following the conclusion of the conference.
/prn.to/3iyocGJ

CME Group Chief Financial Officer, Global Head of Financial and OTC Products and Global Head of Commodities and Options Products to Present at Barclays Global Financial Services Conference
PR Newswire (press release)
CME Group announced today that John Pietrowicz, Chief Financial Officer, Sean Tully, Global Head of Financial and OTC Products, and Derek Sammann, Global Head of Commodities and Options Products, will present at the Barclays Global Financial Services Conference on Wednesday, September 16, at 10:30 a.m. (Eastern Time). The presentation will be available for livestreaming via CME Group’s investor website at http://investor.cmegroup.com. Please allow extra time prior to the presentation to visit the site and download the streaming media software required to listen to the Internet broadcast. An audio webcast will be available for replay at the same address approximately 24 hours following the conclusion of the conference.
/prn.to/3kkha91

Clearing Member Firms; Back Office Managers
CME Clearing
September 2020 Final Foreign Currency Settlement Prices – UPDATED
/bit.ly/35F6m1a

Clearing Member Firms; Back Office Managers
CME Clearing
As mentioned in advisory 20-321, please be advised that CME will hold a Dress Rehearsal over the weekend of Sept 18 – Sept 21 to simulate the end-to-end processing of the SOFR Discounting Transition. This event is held in our New Release environment and meant to test operational and technical impacts.
/bit.ly/3klQbdq

Regulation & Enforcement

EU to delay euro clearing decision on Brexit divorce threat – source
Huw Jones – Reuters
The European Union is set to delay a decision on allowing clearing houses in London to continue clearing euro transactions for EU-based clients due to Britain’s plan to breach part of the Brexit divorce settlement, a derivatives industry source said.
The delay is one of the first warning shots from the EU as UK lawmakers vote later on Monday on a bill that would breach parts of Britain’s Withdrawal Agreement from the bloc.
/reut.rs/2E1gdmy

Moves

Barclays Asia FX Trading Head Leaves as Bank Cuts Costs
Suvashree Ghosh – Bloomberg
Barclays Plc asked Pritpal Gill, head of foreign exchange trading in Asia Pacific, to leave after about 18 months with the British lender. Gill, head of G10 foreign exchange and foreign exchange options trading in the region, is departing as part of cost cutting measures across the bank’s corporate and investment divisions, according to people with knowledge of the matter, who asked not to be identified because the matter is private. Gill joined Barclays in January 2019 and was based in Singapore. Before that, he ran a family office and also worked at Citigroup Inc. A representative for Barclays in Mumbai declined to comment.
/bloom.bg/2E227RV

Strategy

An Options Bet on Apple’s Continued Dominance
Steven M. Sears – Barron’s
Apple stock may fluctuate, but the company continually executes at the highest possible level.
Most investors forget that fact and instead focus too much on what happens to the share price. The equity moves are important, of course, but it is Apple’s ability to operate one of the world’s greatest companies that matters most.
/bit.ly/2FB9uAr

Options Traders Are Pricing In an Exxon Dividend Cut, Analyst Says
Avi Salzman – Barron’s
Traders in the options market appear to be betting that Exxon Mobil will cut its dividend, according to a new note from Susquehanna Financial Group analyst Christopher Jacobson. Whether Exxon can maintain its dividend is one of the most active debates right now among energy investors. The company has a strong incentive to keep making payments at current levels, because there’s little reason to invest in most oil-and-gas companies today aside from their dividends. Exxon’s dividend yield is now nearly 10%.
/bit.ly/2Fz0MT7

Stock market’s 7% pullback? Get ready for more, as a 2009-style ‘stair-step’ rally continues, says Wall Street bull
William Watts – MarketWatch
The stock market’s September pullback was likely the first of many as it follows a “stair-step” playbook that echoes the rally off the financial-crisis low in 2009, one prominent Wall Street bull argued in a Monday note.
“The 7% correction in the S&P 500 SPX over the past six trading sessions is likely the first of a few 3-7% drawdowns followed by new highs as the market stair-steps higher like the fall of 2009, driven by election-year angst and the extended nature of the market-cap-weighted indices,” said Tony Dwyer, chief market strategist at Canaccord Genuity.
/on.mktw.net/3hsO9Gs

How to Tame Risk with VIX Futures and Options in 2020
Matt Moran – Cboe blog
Record volatility in early 2020 along with potential heightened uncertainty around the U.S. presidential election, the ongoing COVID-19 pandemic and other concerns have increased interest in harnessing tradable volatility products to manage risk. Let’s see what the VIX futures term structure and other benchmark indices tracking VIX options and futures are predicting for 2020.
/bit.ly/3mz5tgS

Events

OIC Exclusive Event: The State of the Options Industry
OIC
Date: Tuesday, September 15, 2020
Time: 03:30 PM Central Daylight Time
Duration: 1 hour
Amid the dramatic changes occurring around the world and in the financial markets, the options industry is having a year unlike any other. But what should investors take away from the developments in the options space? The Options Industry Council wants to help you make sense of it.
/bit.ly/3ke5SDg

Taming Tail Risk – Uses of VIX Futures and Options
Cboe
Air Date: Wednesday, September 16, 2020
Start Time: 12:00 PM ET
Duration: 60 Minutes
Description: You are invited to join a live 60-minute webinar hosted by Cboe Global Markets as we examine the topic of Taming Tail Risk, and New Research on Many Uses of VIX Futures and Options.
/bit.ly/2ZGGMVU

Managing Global Risk Exposure – MSCI EAFE and EM Options
Cboe
Air Date: Wednesday, September 30, 2020
Start Time: 12:00 PM ET
Duration: 60 Minutes
Description: You are invited to join a live 60-minute webinar hosted by Cboe Global Markets as we examine the topic of Managing Global Risk Exposure – MSCI EAFE and EM Options.
/bit.ly/2H7mNtb

Shielding Against Drawdowns Using VIX Tradeable Products
Cboe
Air Date: Wednesday, October 14, 2020
Start Time: 12:00 PM ET
Duration: 60 Minutes
Description: You’re invited to join a live 60-minute webinar hosted by Cboe Global Markets as we examine – Shielding Against Large Drawdowns and Left Tail Risk with VIX Futures and Index Options. In 2020 investor interest in portfolio protection has increased, with a new pandemic, trade wars and uncertainty about the November elections.
/bit.ly/2FBd65t

Miscellaneous

(Podcast) Option Block 934: We Love It When A Plan Comes Together
Option Block – Options Insider
/bit.ly/2GVwyu6

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