Observations & Insight
FIA’s International Derivatives Expo is returning to The Brewery in London this coming 6-8 June. Standing still is not an option in today’s evolving cleared derivatives environment. Without adapting to new products, processes, technologies and regulations, your business won’t meet the needs of tomorrow’s industry. We’re bringing together industry leaders, vendors and policymakers to discuss what’s “now” in derivatives, and what lies ahead. Sign up here.
Buying Calls Is New Stock Hedge for Traders Eyeing a Big Bounce
Sam Potter and Lu Wang – Bloomberg
Bearish investors are snapping up bullish options to ensure that their defensively positioned portfolios won’t be left behind if the latest rebound in US stocks proves persistent.
Having slashed exposures or loaded up on hedges amid the past month’s equity turbulence, traders are now rushing to add calls that will help them participate in any upside — while retaining their defensive stances overall.
Even the Foreign-Exchange Market Is Getting Kind of Crazy
Julia-Ambra Verlaine – WSJ
Currency volatility is back.
A JPMorgan Chase & Co. index measuring swings in currencies linked to the Group of Seven countries has jumped as high as 80% this year. One measure of volatility in the euro has more than doubled since November, picking up mostly in March. Volatility gauges in foreign exchange jump when a currency rapidly loses value.
Time to consider option repricings?
Given recent declines in equity value in a variety of segments of the economy (technology in particular), a number of clients have asked us what levers are available for retaining talent. While they are rare and while we might be too early in the economic cycle for them, stock option repricings remain a possible tool in the toolkit for both public and private company issuers. Below we summarize a few key repricing and exchange concepts for both public company and private company repricings or exchanges:
Stagflation is ‘unavoidable’ and investors should prepare for a ‘significant growth slowdown,’ Mohamed El-Erian says
Will Daniel – Fortune
The U.S. is staring down the barrel of 1970s-style stagflation as economic growth slows and inflation remains elevated, Mohamed El-Erian, the chair of Gramercy Fund Management and chief economic advisor at Allianz, said on Monday.
El-Erian has been a well-known critic of the Federal Reserve since his days as a top executive at Pimco, where he and “bond king” Bill Gross were such expert Fed interpreters they came to manage around $2 trillion of assets under management.
Jerome Powell Says Fed Will ‘Keep Pushing’ Until Inflation Comes Down
Matthew Boesler and Craig Torres – Bloomberg
Federal Reserve Chair Jerome Powell, in his most hawkish remarks to date, said the US central bank will keep raising interest rates until there is “clear and convincing” evidence that inflation is in retreat.
“What we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that,” Powell said Tuesday during a Wall Street Journal live event. “If that involves moving past broadly understood levels of ‘neutral,’ we won’t hesitate at all to do that.”
University of Chicago Economics Professor Nancy Stokey Receives CME Group-MSRI Prize in Innovative Quantitative Applications
CME Group, the world’s leading derivatives marketplace, and the Mathematical Sciences Research Institute (MSRI), today announced that Nancy Stokey, Frederick Henry Prince Distinguished Service Professor of Economics, University of Chicago, is the recipient of the 2021 CME Group-MSRI Innovative Quantitative Applications Prize for her work in economics and mathematics.
Dividend Derivatives: Introduction of EURO STOXX Banks Index Dividend Options
Eurex Circular 054/22 Dividend Derivatives: Introduction of EURO STOXX Banks Index Dividend Options
The Management Board of Eurex Deutschland took the following decisions with effect from 13 June 2022: Introduction of EURO STOXX Banks Index Dividend Options, Introduction of a new Product Specific Supplement for EURO STOXX Banks Index Dividend Options. This circular contains all information on the introduction of the new products and the updated sections of the relevant Rules and Regulations of Eurex Deutschland.
Regulation & Enforcement
Architect of Allianz fraud made $60 mln as he lied to investors, U.S. says
Tom Sims, Alexander Hübner and John O’Donnell – Reuters
The star portfolio manager at the centre of a fraud at the U.S. funds unit of Allianz SE (ALVG.DE) relied on the German insurer’s good name to lure investors and thrived from a lack of oversight as he pocketed $60 million in pay, U.S. authorities said.
Gregoire “Greg” Tournant, a citizen of France and the United States, was indicted on Tuesday for securities fraud, investment adviser fraud, wire fraud and obstruction of justice in a scheme that ran from 2014 to 2020.
SEC Charges Allianz Global Investors and Three Former Senior Portfolio Managers with Multibillion Dollar Securities Fraud; Allianz Global Investors Agrees to Pay More Than $1 Billion to Resolve SEC Charges
The Securities and Exchange Commission (SEC) today charged Allianz Global Investors U.S. LLC (AGI US) and three former senior portfolio managers with a massive fraudulent scheme that concealed the immense downside risks of a complex options trading strategy they called “Structured Alpha.” AGI US marketed and sold the strategy to approximately 114 institutional investors, including pension funds for teachers, clergy, bus drivers, engineers, and other individuals. After the COVID-19 market crash of March 2020 exposed the fraudulent scheme, the strategy lost billions of dollars as a result of AGI US and the portfolio managers’ misconduct. AGI US has agreed to pay billions of dollars as part of an integrated, global resolution, including more than $1 billion to settle SEC charges and together with its parent, Allianz SE, over $5 billion in restitution to victims.
Why are stocks falling? Fragile ‘bear market’ bounce underlines investor jitters
William Watts – MarketWatch
Is that all there is?
U.S. stocks were back on the downswing in a big way Wednesday, underlining warnings from some market veterans that sharp rebounds in what has so far been a down year for equities may be little more than the sort of volatile, short-lived upside rebounds characteristic of bear markets.
Selling a Put Spread in the VIX
The Options Insider (Audio)
On this episode, Brian talks about selling a short bullish put spread in the VIX.
Jamie Dimon Dealt Rare Blow as JPMorgan (JPM) Shareholders Reject Pay Plan
Hannah Levitt – Bloomberg
Jamie Dimon was handed a rare defeat from shareholders as they rejected a pay proposal, just months after the board unfurled lucrative incentives for the JPMorgan Chase & Co. chief to stay on for a number of years.
The pay packages for Dimon and other company leaders were supported by just 31% of shareholders, a tally announced at the bank’s annual meeting on Tuesday. The preliminary result marks the first time since 2009 — when JPMorgan began seeking investor votes on pay — that a majority of shareholders declined to back the firm’s measures.