Big Volatility Wagers Hit Markets
Gunjan Banerji – WSJ
As U.S. stocks logged one of the most volatile days in recent weeks Tuesday, some investors positioned for bigger swings. They turned to derivatives on the Cboe Volatility Index, or VIX, an options-based gauge of expected stock moves over the next month. At least one options investor dished out $4.3 million for bullish bets on the VIX that would pay out if the gauge jumped to 23 by October, a huge advance from its current level, according to data provider Trade Alert. Another large trade would pay out if the gauge jumped to 25, a level it hasn’t closed at since early January.
VIX Above 2019 Average On Trump Impeachment Inquiry: Chart
Vildana Hajric and Sarah Ponczek – Bloomberg
There were the usual suspects and then a newcomer rattling U.S. stocks on Tuesday. The Cboe Volatility Index, a measure of expected price swings for the S&P 500 Index known as the “fear gauge,” climbed above its 2019 average as a formal impeachment inquiry of President Donald Trump added to markets whipsawed by his remarks on trade and social-media platforms before the United Nations.
****JB: The least surprising thing so far this week, but investors probably do not need to worry overly much (about the impeachment anyway)…see next story.
Trump impeachment? History suggests Wall Street ought not worry
Noel Randewich – Reuters
The move by Democrats in the U.S. Congress on Tuesday to launch a formal impeachment inquiry into President Donald Trump has caused nervousness on Wall Street – but history suggests investors need not worry.
There Are 2 Oil Markets Now — One Calm, the Other Jumpy
Avi Salzman – Barron’s
Oil prices spiked and then sunk in the aftermath of an attack on two major Saudi Arabian oil facilities on Sept. 14. It was a wild two days, but volatility has mostly been muted since then.
The market’s “laissez faire” reaction, however, belies a more frantic response behind the scenes, writes RBC Capital Markets analyst Michael Tran. Both Brent and West Texas Intermediate crude futures have slid back from their highs since the attacks and have traded in a relatively narrow range. On Tuesday, Brent was down 0.5% to $64.07, while WTI was down 0.8% to $58.01.
Pound tumbles 1% as investors fear never-ending limbo in UK politics
Saikat Chatterjee and Sujata Rao – Reuters
The pound fell 1% on Wednesday against the dollar, ceding gains made the previous day after the Supreme Court’s ruling against Prime Minister Boris Johnson, as investors priced many more months of Brexit and general election risk.
Johnson was dealt a blow by the court, which ruled on Tuesday he had unlawfully suspended parliament, sending the pound half a percent higher.
Bakkt’s Slow Start Doesn’t Mean Bitcoin Futures Have Flopped
Galen Moore – Coindesk
It’s a lively time for bitcoin derivatives – or at least for those writing about them. For those trading them, it may be business as usual. The Chicago Mercantile Exchange (CME) announced Friday it is preparing to offer options trades on its bitcoin futures contract. It’s a surprising move, because options volume to date rounds to zero, as a percentage of reported volume in futures and swaps. Still, nobody in crypto has had an options counterparty as reliable as CME before.
Exchanges and Clearing
London Stock Exchange defends pricing of market data
Huw Jones – Reuters
The pricing of stock market data could be more transparent but no “substantive” changes were needed by European Union regulators, London Stock Exchange Chief Executive David Schwimmer said on Tuesday.
The price of market data has become a battle ground between exchanges, who generate data, and investment managers and brokers who need the data to meet a requirement to demonstrate they are getting the best deals for their customers.
Regulation & Enforcement
Routing Transparency in Focus
Terry Flanagan – MarketsMedia
Regulators are pushing brokers to disclose more information about how and why they route equity trades. Some industry practitioners want to go a step further.
The Routing Transparency Initiative aims to boost transparency in the routing of ‘child’ orders — trades that cleave from the initial ‘parent’ order between order and execution — by better understanding the intention, or reason behind the routing. RTI can be applied globally for all asset classes leveraging the Financial Information eXchange (FIX) protocol.
Incredible Python coder? This top hedge fund wants to hire you
Sarah Butcher – eFinancialCareers
If one hedge fund has done anything to popularize the use of Python in the pursuit of alpha, it’s Man Group. Starting with its AHL quant fund, Man began using Python back in 2011. It’s been looking for exceptional Python coders ever since.
****JB: We have seen several stories recently suggesting that being able to program is fast becoming a must-have for anyone seeking a career in financial trading, and Python seems to be at the top of the list of programming languages worth learning (not the only one, though).
Goldman Sachs Says Buy Health-Care Options Amid Warren’s Surge
Cristin Flanagan and Gregory Calderone – Bloomberg
Investors should use options to hedge against the rising prospects of Elizabeth Warren’s bid for the Democratic presidential nomination as that risk seems to be underestimated in the market, according to Goldman Sachs Group Inc.
Here’s How to Trade on the Impeachment Inquiry
Daren Fonda – MarketWatch
We won’t know for a while what the market impact of impeachment proceedings against President Donald Trump will be, but as long as impeachment is in the news, it’s likely to heighten market volatility. And it could send investors running for cover into low-volatility stocks and bonds.
A Thoughtful Vixperiment
We’ve all been rather trained to be very cautious around the VIX, you know – with infographics like this one showing you’ll likely lose all your money and VIXmageddon last February and all. But those who trade the VIX don’t just buy the VIX and hope for the best, or sell it and pray there’s no spike.
Your Money: How to use ETFs as a buffer in volatile markets
Beth Pinsker – Reuters
NEW YORK (Reuters) – When it comes to investing, how much are you willing to put on the line for the biggest possible gains? If bumpy markets are making you nervous, there is a middle ground emerging between being all-in or sitting on the sidelines. Defined outcome exchange-traded funds (ETFs) offer a buffer against losses – meaning, if the market goes down, you do not necessarily lose money.
Two-Thirds of Investors Are Worried About Economic Downturn or Recession
Fang Block – Barron’s
Amid an economic slowdown and heightened market volatility, investors are more concerned about protecting the value of their assets than looking for growth opportunities, according to a survey released by Wilmington Trust Tuesday.
About 61% of investors surveyed with a household income of $225,000 or more say that they would give up growth opportunity for downside protection. And among those who have an annual household income of $500,000 or more, 76% say they would make this trade-off.