Observations & Insight
The Spread: It Takes Two to Contango
This week on The Spread – low natural gas prices lead to an increase in swaptions trading, the CME has another successful launch, and a Binance-backed exchange boasts a ton of trading volume.
Bernie Sanders’s Advance Has Some Traders Betting on Euro Gains
Vassilis Karamanis and Constantine Courcoulas – Bloomberg
Options traders are beginning to hedge against a Bernie Sanders victory in the race for a Democrat presidential candidate by betting on gains for the euro.
Less than two weeks before voters cast their ballots in the first nominating contest in Iowa, hedge funds have been buying euro-dollar call spreads — essentially bets that the dollar could come under pressure — should Sanders’ chances of a victory increase, according to a Europe-based trader.
Super Tuesday Hedging Already Showing Up in Volatility Curves
Luke Kawa – Bloomberg
Alarm bells are sounding in volatility markets amid a set-up that traders warn has some resemblance to the period preceding the February 2018 risk rout.
The signal is flashing from contracts tied to the VIX, the benchmark gauge for turbulence in U.S. stocks derived from options in the S&P 500. Through those tea leaves, a build-up of trader anxiety is taking shape in the relative cost of near-term versus long-term derivatives. One explanation is the large number of presidential primaries in early March.
CME’s Futures Options Sprinted Out of the Gate but a Marathon Lies Ahead
Nikolai Kuznetsov – Coin Telegraph
In the two years since it launched cash-settled Bitcoin futures, CME has firmly established itself as a leader in the regulated crypto derivatives space despite not always being the first to market. In December 2017, it launched regulated Bitcoin futures a week after rival exchange CBOE. However, it only took 15 months for CBOE to completely withdraw from the market. By August, CME had announced record highs for Bitcoin futures trading.
CME Group Achieves Record International Average Daily Volume of 4.8 Million Contracts in 2019, Up 10 Percent from 2018
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that it achieved record international average daily volume (ADV) of 4.8 million contracts in 2019, up 10 percent from 2018. This record, reflecting all trading done outside North America, was driven largely by growth in Equity and Interest Rate products, up 17 percent and 15 percent respectively.
In 2019, Europe, Middle East and Africa ADV hit a record 3.6 million contracts in 2019, up 7 percent from 2018. This was driven by a strong performance in Equity and Interest Rate products in the region, up 14 percent and 7 percent respectively, compared to the same period in 2018.
India Now Has World’s Largest Derivatives Exchange by Volume
Abhishek Vishnoi and Ashutosh Joshi – Bloomberg
India’s National Stock Exchange has surpassed America’s CME Group Inc. to become the world’s largest derivatives bourse by volume.
Mumbai-based NSE traded the most contracts in the world last year, the exchange said in a statement, citing data from the Futures Industry Association. Volume on the Indian exchange grew 58% to about 6 billion derivative contracts in 2019, surpassing CME’s 4.83 billion, according to FIA’s website.
Barchart Releases New Solution to Stream Real-Time Market Data in Excel
Barchart, a leading provider of data and technology services to the financial, media and commodity industries, has released cmdtyView Excel, a new solution for streaming market data in Excel alongside physical commodities pricing, and global fundamental data. Through this robust solution, commodity traders, risk managers, research analysts, and data scientists can easily power bespoke research and analysis from any desktop.
Sentiment Indicators Hint at Market Vulnerability
Todd Salamone – Schaeffer’s Investment Research
The price action being described above is another way of saying that stocks have been engaged in a multi-month advance, with very little drawdown. The rally has resulted in new high after new high, leaving investors and traders looking for a pullback little or no opportunity to enter the market. In fact, since November, the S&P 500 Index (SPX – 3,329.62) has spent many days and weeks in or near overbought territory, according to its 14-day Relative Strength Index (RSI), an indicator that will give false sell signals in trending environments like we are experiencing now.
Fears of Coronavirus Could Make Market Selloff a Self-Fulfilling Prophecy
Maleeha Bengali – TheStreet
Over the past week, the market has been showing signs of fatigue as it begrudgingly climbed up on lighter and lighter volumes — with no consistent theme in stocks and sectors, as such. Bond yields, after their ascent towards the end of last year on the potential reflation theme, have been stuck below the 1.90% ceiling for now. Gold had a sharp move higher towards $1565/tonne after the Iran debacle that caught most by surprise, as Gold was heading lower before that as risk on trades took precedence. The trade deal was signed last week as expected. All the good news from central bank liquidity support to an economic rebound have been priced into the market and investors across the board are all-in as the worries of repo and recession are in the rear-view mirror. What could go wrong?
Annual Trends in Futures and Options Trading
This webinar will highlight the main trends in trading activity in 2019 in the global exchange-traded derivatives markets. The webinar will use data released by FIA on Jan. 16, which showed a 13.7% increase in trading volume and an 8.8% increase in open interest over the previous year. The webinar will break the data down by category and region and identify specific markets that contributed to the upsurge in trading activity.
Will Acworth, Senior Vice President, FIA
29 January 2020 10:30am EST
The Bridges That Narrow The Diversity Gap
Francesca Carnevale – Best Execution
Narrowing the gender gap and eliminating ethnic, age and disability related bias in the workplace have met with, at best, only moderate success across the global financial services spectrum. Is a level playing field unobtainable, or is the future brighter than we think?
Even so, acceptance of D&I is not ubiquitous across financial services. Clearing and settlement services rank highly in the equality stakes. The Options Clearing Corporation (OCC), for instance has five female directors out of 20 seats and 33% of the clearer’s officers are women, some way above the norm. Explains John Davidson, OCC’s CEO, “The products that institutional investors, pension funds, mutual funds, exchange-traded funds need, [require…] a whole variety of different approaches. Those different approaches are most available if you have a diverse number of perspectives in your organisation.”
Hedge Funds Not Led by White Men Outperform Nearly 2 to 1
Jeff Green – Bloomberg
Hedge funds not controlled by white men had returns almost double their peers the last three years, according to a Bloomberg analysis of hedge fund data.
Within Bloomberg’s database of 2,935 funds, the analysis found 35 managed by minorities or women and compared them with 908 peer funds. The database includes over 65% of the industry’s top 1,500 managers by assets under management.
Top hedge funds post biggest gains in at least a decade
Laurence Fletcher – Financial Times
The top 20 best-performing hedge fund managers of all time made $59.3bn for their investors last year, their biggest annual gains in at least a decade, as hedge funds took advantage of a strong tailwind in stock and bond markets.
20 for 20: Things to Watch in 2020
Phil Mackintosh – TABB Forum
As we start a New Year and a new decade, there is a lot to look forward to. Nasdaq’s Phil Mackintosh highlights the top 20 trends to watch in 2020.
As we start a New Year and a new decade, there is a lot to look forward to. Here are our top 20 trends to watch in 2020.