Big Yen Option Bet Risks Crushing Traders as Intervention Looms

Mar 27, 2024

Observations & Insight

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Lead Stories

Big Yen Option Bet Risks Crushing Traders as Intervention Looms; $2.85 billion of dollar-yen options expire Thursday at 150.5
David Finnerty and Ruth Carson – Bloomberg
The imminent expiry of nearly $3 billion in dollar-yen options has traders on edge as the Japanese currency trades at levels that might trigger government intervention.
The yen slid to the weakest in about 34 years Wednesday, reaching 151.97 per dollar, prompting Finance Minister Shunichi Suzuki to warn of potential “bold measures” to contain further losses. That was after Japan’s top currency official, Masato Kanda, delivered his strongest intervention threat in months earlier this week.
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Max pain $51K? Bitcoin options worth over $9.4B set to expire Friday; The max pain Bitcoin price is at around $50,000 as over 134,000 BTC are set to expire on Deribit on March 29.
Zoltan Vardai – Cointelegraph
Over $9.4 billion worth of Bitcoin options are set to expire on the Deribit cryptocurrency exchange on March 29, with some analysts suggesting that Bitcoin’s “max pain” price could be around the $50,000 range. Max pain Bitcoin price closer to $50,000 Over 134,000 BTC worth of open interest is set to expire on the Deribit exchange at 8:00 am UTC on March 29, suggesting a max pain price of $50,000, according to data shared by Unfolded in a March 27 X post.
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Deribit anticipates $15b in crypto options to expire this week
Bralon Hill – crypto.news
Crypto options exchange Deribit is poised for a record-breaking week with over $15 billion in options set to expire for Bitcoin and Ethereum. The statement highlighted that “over USD 15 billion in options notional open interest (OI) will expire this week,” marking a historic event in Deribit’s operational history. This Friday is poised to witness one of the platform’s largest expirations of options contracts. The expiration includes $9.5 billion in BTC options open interest out of $26.3 billion and $5.7 billion in ETH options open interest out of $13.2 billion, accounting for 40% and 43% of the total OI, respectively.
/jlne.ws/4atL0lE

Embracing market volatility in an election year
Paul Feinstein – Audent Global Asset Management via LinkedIn
Every year we say the same thing, it’s a different year than any other we’ve had historically. This year – with the impending 2024 presidential election – will be no different. In an election year, market volatility becomes an inevitable companion, shaping the investment landscape in unprecedented ways. For example, Super Tuesday was a key indicator of not only how this year’s election will play out, but also how the markets will be impacted. Given the ebb and flow of political rhetoric, it can send ripples across financial markets, triggering fluctuations and amplifying volatility. Investors should be paying careful attention.
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A Turbocharged Bitcoin ETF Is More Popular Than TSMC in Korea; South Koreans have poured $122 million into BITX in March; It is the fifth most bought foreign security this month
Sidhartha Shukla and Jaehyun Eom – Bloomberg
A risky exchange-traded fund in the US that aims to deliver twice the daily performance of short-term CME Bitcoin futures is seeing strong demand from Korean investors. The VolatilityShares’ 2X Bitcoin Strategy ETF – ticker BITX – aims to generate exceptionally high returns, thanks to an effect known as “leverage compounding.” On the flip side, it suffers from “volatility drag” which may hurt investors over the long term.
/jlne.ws/3vk98bD

Fidelity Files for Ethereum Spot ETF with Staking Option
Soumen Datta – bsc.news
With the approval of spot bitcoin ETFs earlier this year, Fidelity’s move into Ethereum ETF territory represents an important step towards mainstream crypto adoption. Fidelity Investments, managing $4.5 trillion in assets filed an S-1 Form with the SEC for a spot Ethereum exchange-traded fund (ETF), complete with staking capabilities. Following the triumph of bitcoin ETFs, industry observers anticipated an Ethereum offering from major players like Fidelity. The asset manager initially filed for a Spot Ethereum ETF in November of the previous year, joining the ranks of firms like BlackRock, VanEck, and ARK Invest. Fidelity’s Ethereum ETF aims to issue shares that will trade on the Chicago Board Options Exchange (CBOE), offering investors exposure to Ethereum’s potential upside while incorporating staking features.
/jlne.ws/3xecWM6

Donald Trump’s Social-Media Company is a Meme Stock Now
Gunjan Banerji – The Wall Street Journal
A skyrocketing share price. Bold, bullish bets. And a growing buzz around the company.
Donald Trump’s company has turned into a meme stock.
Options trading tied to Truth Social’s parent company soared on Tuesday, according to Henry Schwartz, a vice president at exchange-operator Cboe Global Markets, eclipsing past activity in the special-purpose acquisition company previously associated with the social-media operation.
/jlne.ws/4aPcvqb

Exchanges

Future-proofing your FX portfolio
Eurex
Tobias Rank, Head of FX Product Sales at Eurex, looks at the increasing cost of trading in the dealer-to-client (D2C) FX market and how future-proofing your business can alleviate the effects of regulatory requirements.
Under Basel III, the cost of doing business in the dealer-to-client FX market is increasing for many participants. The Standardized Approach for Counterparty Credit Risk (SA-CCR), which is used to determine the regulatory credit exposure for derivatives trades, results in conservative capital requirements for FX forwards and FX swaps books. Meanwhile, Uncleared Margin Rules (UMR), which were created to reduce the risk of derivatives exposure, has added a funding requirement for buy-side firms for cash-settled FX derivatives. More importantly, buy-side firms are increasingly being requested to voluntarily post margin for physically-settled FX transactions to reduce the capital burdens for banks under the SA-CCR regime, despite these products being exempt from margin requirements under UMR.
/jlne.ws/3xmMa3Z

Daily Options on the CAC 40 Index for short-term trading strategies and exposure to the main index of Euronext Paris
Euronext
Euronext launches Daily Options on the CAC 40 Index. The Daily Options on the CAC 40 Index are complimentary to the weekly and regular monthly options already traded. Euronext already offered Daily Options on the AEX Index. The new Daily Options provide traders with unparalleled opportunities to capitalise on short-term market movements.
/jlne.ws/3VydztR

LIST completes migration to Euronext’s Optiq; The move follows Euronext’s acquisition of the Borsa Italiana cash and derivatives markets exchange in April 2021.
Claudia Preece – The Trade
LIST – owned by ION – has completed the migration of its Borsa Italiana clients to Euronext’s Optiq trading platform. Through this move, Euronext is replacing Borsa Italiana’s previous Millennium and SOLA technologies with the new Optiq trading platform. The move comes after Euronext’s acquisition of the Borsa Italiana cash and derivatives markets exchange in April 2021. The third and final phase follows the successful rollout of the equity and bond segments, prior to this most recent migration of its derivatives clients.
/jlne.ws/4adW8DE

Cboe Canada Extends Support of Mining Industry with Uplisting of Denarius Metals
Cboe
Cboe Canada Inc. (“Cboe Canada”) is excited to welcome polymetallic mining company Denarius Metals Corp. (“Denarius Metals” or the “Company”) as they uplist to Cboe Canada, a Tier 1 stock exchange. Denarius Metals begins trading today under the ticker symbol DSLV. “Congratulations to the team at Denarius Metals as they take the next step in the company’s evolution” Post this Headquartered in Toronto, Canada, Denarius Metals is a mining company focused on the acquisition, exploration, development, and eventual operation of four mining properties in Spain and Colombia. The Company’s projects are located near existing infrastructure and provide exposure to a wide range of high-demand metals including copper, nickel, zinc, lead, gold, silver, cobalt, palladium, and platinum.
/jlne.ws/4a8Ozhp

How Cboe’s Hybrid Trading Model Bridges Past And Future
Cboe
The trading floor, or “the pit” as it’s often called, has been the heart of financial markets for decades. This bustling environment, where traders use shouts and hand signals to trade stocks and options, embody the energy and dynamism of the financial markets – from New York’s Wall Street to Chicago’s LaSalle Street. The pit is where the action happens with traders in colorful jackets representing different brokerages working hard to get the best prices for their clients amidst the seeming chaos.
/jlne.ws/3VFaEzF

CBOE’s VIX Futures Product Was Launch 20 Years Ago
Rick Steves – Finance Feeds
Yesterday, March 26, 2024, marked the 20th anniversary of Cboe Futures Exchange (CFE) and the trading of Cboe Volatility Index (VIX) futures. Launched in 2004, CFE was established to offer a transparent and liquid marketplace for volatility futures, with VIX futures being its inaugural product. This launch marked a significant milestone in making volatility a tradable asset class and opened the door for a range of volatility-based derivatives, including options and exchange-traded products (ETPs).
/jlne.ws/3TUE1Ni

Trading schedule on the Moscow Exchange during the May holidays
MOEX
The Moscow Exchange has determined the rules for the operation of markets during the May holidays in 2024. On holidays, April 29-30 and May 10, trading will be held on the foreign exchange market, precious metals market, stock market, deposit market, loan market, derivatives market and standardized derivatives market (SDFI). Concluding over-the-counter transactions with a central counterparty (CCP) on the SPFI market on these dates will be carried out with settlements for all instruments, with the exception of SPFI contracts that provide for obligations expressed in Russian rubles.
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Regulation & Enforcement

Retail Revolution: How retail brokers are planning to counter CFD restrictions
ION Group
In association with ION, Acuiti studied the retail and institutional trading of listed derivatives to understand how brokers view regulatory challenges, along with their strategies to respond. The results varied by region, yet showed a high likelihood of expansion and growing offerings. Download the report to see why attention on the retail trading market has been increasing.
/jlne.ws/3vk7CGv

Regulator’s Column: SGX RegCo requires large issuers to take lead to reduce AGM crunch SGX
AGMs – Enabling Shareholders to Participate
An issuer’s annual general meeting (“AGM”) is an event keenly anticipated by many shareholders in each calendar year. AGMs serve as an important platform to enhance communication between shareholders, and the issuer’s board of directors (“Board”) and management. It provides an avenue for shareholders to receive updates from the Board and management, vote on key matters as well as engage in direct dialogue with them. It is therefore important that shareholders can attend the AGMs of all the issuers that they hold shares in.
/jlne.ws/4cKMqdF

CFTC Charges KuCoin with Operating Illegal Digital Asset Derivatives Exchange
CFTC
The Commodity Futures Trading Commission today announced it filed a civil enforcement action in the U.S. District Court for the Southern District of New York charging Mek Global Limited, PhoenixFin PTE Ltd., Flashdot Limited, and Peken Global Limited, which collectively operate a centralized digital asset exchange under the name KuCoin, with multiple violations of the Commodity Exchange Act (CEA) and CFTC regulations. The complaint charges KuCoin illegally dealt in off-exchange commodity futures transactions and leveraged, margined, or financed retail commodity transactions; solicited and accepted orders for commodity futures, swaps, and leveraged, margined, or financed retail commodity transactions without registering with the CFTC as a futures commission merchant (FCM); failed to diligently supervise its FCM activities; operated a facility for the trading or processing of swaps without registering with the CFTC as a swap execution facility (SEF) or designated contract market (DCM); and failed to implement an effective customer identification program (CIP).
/jlne.ws/4avPqZa

Strategy

Volatility shape-shifters: arbitrage-free shaping of implied volatility surfaces; Manipulating implied volatility surfaces using optimal transport theory has several applications
Valer Zetocha – Risk.net
Valer Zetocha introduces a framework for generating arbitrage-free transformations of an implied volatility surface based on optimal transport maps between suitable distributions. He exemplifies his approach by solving standard tasks related to volatility surface alterations, such as time-extrapolation with past market information, modification of the volatility term structure and handling of a market event.
/jlne.ws/3xo3aa0

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