Betting Against Fear on Wall Street Has Rarely Looked This Good

Jul 23, 2020

Observations & Insight

Jen Just Tells Financial Industry Interns: “There must be a better way”
Thom Thompson – John Lothian News

The kick-off speaker at yesterday’s World of Opportunity (“WOO” – woo! woo!) was Jennifer Just, a co-founder of Peak6. Located in the CBOT building, Peak6 is an investment and trading company built with a focus on disruptive technology. Just talked about how one statement, “There must be a better way!” has motivated her intellectual and professional development. Key parts of Peak6’s brand are curiosity and flexibility.

Just spent her first day at O’Connor, one the first great listed options trading firms, sitting on the sidelines on the Cboe trading floor as traders digested the failure of Drexel Burnham. She ended that day smitten with the options trading industry, about which she still really knew nothing.

To read the rest of this report, go here.


Andre Buckles On Hiring During a Pandemic
Matt Raebel – JLN

The fourth guest speaker at MarketsWiki Education World of Opportunity 2020 was Andre Buckles, vice president of talent acquisition at the Options Clearing Corporation. Buckles has been hiring people for various companies, including Northern Trust and Zurich North America, for over two decades, and he had plenty of tips for the students in the audience looking for advice on how to get hired.

To read the rest of this report, go here.

Lead Stories

Betting Against Fear on Wall Street Has Rarely Looked This Good
Yakob Peterseil – Bloomberg
Traders who have been waiting for the right moment to bet against stock volatility have rarely seen the stars align like this.
After soaring some 500% in the pandemic crisis, a popular strategy tracking the Wall Street fear gauge, formally known as the Cboe Volatility Index, looks ripe for a fresh plunge that would deliver gains for short sellers.

Surging Silver Price Spurs Cantor to Flag Options Opportunity
Joanna Ossinger – Bloomberg
Silver’s spectacular rally this week may offer trading opportunities in equities. Prices spiked more than 16% in the past few days to an almost seven-year high as a resurgence in coronavirus cases, slowing growth and a weak U.S. dollar sparked demand for havens. To strategist Eric Johnston of Cantor Fitzgerald that’s a good sign for the Industrial Select Sector SPDR Fund. He recommends a long trade using August call options. “We think XLI is going to outperform the S&P 500 and Nasdaq-100 going forward and rally on an absolute basis,” he wrote in a note Wednesday, referring to the fund by its ticker.

Exchanges and Clearing

One of the UK’s biggest trading platforms saw a huge spike in users and revenues as day-trading booms around the world
Shalini Nagarajan – Markets Insider
IG Group, one of the UK’s biggest retail trading platforms, reported booming financial results for its fiscal year in 2020, boosted by frenzied growth of day-trading and increased market volatility during the coronavirus pandemic.
The UK-based financial derivatives platform grew its client base by 34% from onboarding 96,900 new clients in the year. IG Group currently has 239,600 active members, compared to 178,000 at the same time last year.

Nasdaq Reports Second Quarter 2020 Results, Resilient Business Adapting to Deliver Continued Growth
Second quarter 2020 net revenues were $699 million, an increase of 12% over the second quarter of 2019. Compared to the prior year period, revenues in the non-trading segments2 increased 7%, primarily due to organic growth, while Market Services revenues rose 22%, driven by record trading volumes in U.S. equities and options.

Revised Regulatory Relief Concerning Covid-19 Pandemic
CME Group
This revised Special Executive Report (SER) is being issued in connection with the June 9, 2020, CME Group Inc. press release announcing the reopening of the Eurodollar options trading pit on August 10, 2020. It is being issued to advise all members and member firms, and employees of the foregoing, that the regulatory relief provided in the original SER does not apply when parties are conducting business on the trading floor or when they are present on the premises of an entity registered to conduct customer business.

MIAX Exchange Group – Options Markets – Corporate Action Alert: The Royal Bank of Scotland Group plc (RBS) name and symbol change to NatWest Group plc (NWG)
MIAX Options
The Royal Bank of Scotland Group plc (RBS) will change its name and symbol to NatWest Group plc (NWG) effective on Thursday, July 23, 2020. All GTC orders resting on the MIAX order books in RBS will be canceled at the close of business on Wednesday, July 22, 2020.

Change to the Market for Underlying Security Used for Openings on MIAX Options, MIAX PEARL and MIAX Emerald for Symbol VHC Effective Thursday, July 23, 2020
MIAX Pearl
The following symbol will transfer primary listing from the American Stock Exchange to the New York Stock Exchange effective Thursday, July 23, 2020.

Regulation & Enforcement

U.S. derivatives rule completes Dodd Frank, clarifies regulator’s role
Huw Jones – Reuters
A new derivatives rule should clear up any uncertainty about U.S. regulators’ role in transactions involving foreign banks and foreign counterparties and so avoid clashes with other watchdogs, a senior U.S. regulatory official said on Thursday. The rule is due to be formally adopted later on Thursday and reflects seven-year old guidance on regulating cross-border derivatives transactions.

CFTC finalizes capital requirements for swap participants
Jeff Reeves –
The US Commodity Futures Trading Commission finalized a new rule on capital requirements for swaps market participants and advanced a proposed rulemaking on swaps margin in a public meeting held via teleconference on July 22. The final capital requirements for swap participants will be flexible, offering three potential methodologies for market participants to follow, and is the first such measure at the agency since it was mandated by Congress under Dodd-Frank 10 years ago. Separately, the CFTC also advanced rules on margin requirements for uncleared swaps and opened the proposal for public comment.

A proposal to amend Options 3, Section 3 to conform the rule to Section 3.1 of the Plan for the Purpose of Developing and Implementing Procedures Designed to Facilitate the Listing and Trading of Standardized Options.


TD Ameritrade’s Q2 Update: To Infinity or Oblivion?
Paul Rowady – Alphacution
Chicken or egg? For today’s story, we know which one came first. However, we may never know for sure which one was the more prominent cause of the recent sustained spike in US stock volumes: A frictionless environment brought on by a zero-commission framework or a high-volatility market brought on by a once-in-a-century global pandemic? Granted, there may be additional factors at play here. Like the gamification of market interfaces as substitution for a sports apocalypse. People need something to do.


Tesla stock options are priced for an unusually big post-earnings move—but the odds are stacked against bettors
Tomi Kilgore – MarketWatch
Tesla Inc. stock options are implying a one-day post-earnings move that is nearly 60% greater than the historical average, but the odds are currently stacked against investors willing to bet on such unusual volatility.
The electric-vehicle maker is scheduled to report second-quarter results after Wednesday’s closing bell. The average estimates of the 23 analysts surveyed by FactSet is for an adjusted loss of 14 cents a share on revenue of $5.15 billion. The range of estimates is rather wide, with the low numbers at a loss of $2.53 on revenue of $2.77 billion, while the high estimates are earnings of $1.79 a share on revenue of $6.18 billion.

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