Day Trader Army Loses All the Money It Made in Meme-Stock Era

May 9, 2022

Observations & Insight

Cboe Completes Acquisition of ErisX; CME Group to Launch options on Micro WTI Crude Oil futures; Cboe FX Markets’ Trading Volume Drops

“Alex Perry’s Optionstopia” takes a look at this week’s options news highlights: Cboe Completes Acquisition of ErisX; CME Group to Launch options on Micro WTI Crude Oil futures; Cboe FX Markets’ Trading Volume Drops.

TERM OF THE WEEK: This week’s Term of the Week presented by Euronext Knowledge Centre is Exposure on the full underlying value.

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Lead Stories

Day Trader Army Loses All the Money It Made in Meme-Stock Era
Lu Wang – Bloomberg
It’s ending as fast as it began for retail day traders, whose crowd-sourced daring was the pre-eminent story of pandemic equities.
Nursing losses in 2022 that are worse than the rest of the market’s, amateur investors who jumped in when the lockdown began have now given back all of their once-prodigious gains, according to an estimate by Morgan Stanley. The calculation is based on trades placed by new entrants since the start of 2020 and uses exchange and public price-feed data to tally overall profits and losses.

Stocks Slide, Extending This Year’s Losses
Caitlin Ostroff, Akane Otani and Serena Ng – WSJ
A broad selloff in U.S. stocks accelerated Monday, leaving investors with few places to shelter from the market’s tumult.
The S&P 500 fell 2.6%, adding to losses after closing out its longest streak of weekly declines since 2011. The Nasdaq Composite tumbled 3.4% and the Dow Jones Industrial Average shed 517 points, or 1.6%, to 32381.

Nasdaq tumbles as rate-rise concerns collide with growth worries
Adam Samson and Naomi Rovnick – Financial Times
Global stocks were hit with a fresh jolt of selling on Monday as investors fretted about signs of slowdowns in the world’s large economies at a time when central banks are reining in crisis-era stimulus measures.
Wall Street’s blue-chip S&P 500 index slid 2.6 per cent and the tech-focused Nasdaq Composite dropped 3.4 per cent. Europe’s regional Stoxx 600 index fell 2.9 per cent.

Stagflation Makes for Summer of Discontent With Nowhere to Hide
Tassia Sipahutar and Ruth Carson – Bloomberg
The growing risk of stagflation is leaving investors without many places to hide, with havens looking few and far between, according to Standard Chartered Plc.
Risks are building everywhere as central banks will raise rates to battle inflation “until something breaks,” according to Eric Robertsen, global head of research. Treasuries are getting sold, while Chinese sovereign bonds and commodities are flawed haven plays given their volatility, he wrote in a weekend note.

ETF investing plummets to lowest level since Covid crisis hit
Steve Johnson – Financial Times
Purchases of exchange traded funds fell in April to their lowest level since the depths of the Covid crisis as the war in Ukraine and spiralling global inflation sapped demand.
Net inflows to ETFs and exchange traded products globally slipped to $27.4bn in April, according to data from BlackRock, down from $117.4bn in March and the lowest figure since March 2020.

Volatility And Wild Market Swings (Radio)
Bloomberg (Audio)
Katerina Simonetti, Senior VP at Morgan Stanley Private Wealth Management, talks about the markets and investment strategies in 2022 amid volatility. Hosted by Paul Sweeney and Matt Miller.

Cash Is the Only Winner in a Stock Market Gripped by Stagflation Fear
Denitsa Tsekova and Cecile Gutscher – Bloomberg
Investors are eschewing almost everything except cash in this selloff.
The Bloomberg Dollar Spot Index has trumped all other assets this month, notching a 0.6% advance at a time when stocks and bonds are tumbling. Investors have poured cash into an exchange-traded fund tracking Treasury bills for five weeks, clocking up the biggest inflows since 2020.

Veteran bull Edward Yardeni sees S&P 500 rebounding to a record high next year with the economy avoiding recession
Brian Evans – Business Insider
“I don’t recall so much stock bearishness in a very long time,” he said in the Financial Times.The veteran stock market bull also pointed to a strong US dollar as a reason for optimism.
Edward Yardeni is optimistic that the S&P 500 will rebound to new highs next year after entering a correction this year, as the US economy avoids a recession.

Hedge funds adjust to new normal in oil
John Kemp – Reuters
Investors made few changes to their petroleum positions last week as prices remained poised between fears of a reduction in supply from Russia and a global slowdown in demand.
There are signs traders have absorbed much of the initial shock from Russia’s invasion of Ukraine and the threat of sanctions, with positions, prices and volatility establishing new reference points.

Funds trim bullish CBOT bets again, some shorts creep in
Karen Braun – Reuters
Speculators have held a historically low number of short positions across U.S. grain and oilseed futures for more than a year now, though they started to add a bit more at the turn of the month, cementing a second consecutive week of net selling in most products.
Risk removal has been more prominent among money managers in the last couple weeks, but an uptick in gross shorts could signal their increasing comfort with upcoming supplies.

Cost of Default Hedges in Europe Tops Level Last Seen in 2020
Hannah Benjamin and Tasos Vossos – Bloomberg
A risk gauge on Europe’s safest companies has breached 100 basis points for the first time in more than two years, as the spectre of rampant inflation mixed with an economic slowdown spooks investors.
An index of credit default swaps for investment-grade firms in Europe climbed as high as 100.2 basis points, a level not seen since the coronavirus pandemic first roiled markets in the first half of 2020, according to data compiled by Bloomberg. A similar gauge for the region’s junk-rated firms has hit the highest since May 2020.


Miami International Holdings, Inc. Announces Confidential Submission of Draft Registration Statement Related to Proposed Public Offering
Miami International Holdings, Inc. (MIH) today announced that it has confidentially submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”) relating to the proposed initial public offering of its common stock. The number of shares to be offered and the price range for the proposed offering have not yet been determined. The registration statement is expected to become effective after the SEC completes its review process, subject to market and other conditions.

Euronext announces volumes for April 2022
Euronext is the leading pan-European market infrastructure, connecting European economies to global capital markets, to accelerate innovation and sustainable growth. It operates regulated exchanges in Belgium, France, Ireland, Italy, the Netherlands, Norway and Portugal. With close to 2,000 listed issuers and around EUR6.6 trillion in market capitalisation as of end March 2022, it has an unmatched blue-chip franchise and a strong diverse domestic and international client base. Euronext operates regulated and transparent equity and derivatives markets, one of Europe’s leading electronic fixed income trading markets and is the largest centre for debt and funds listings in the world. Its total product offering includes Equities, FX, Exchange Traded Funds, Warrants & Certificates, Bonds, Derivatives, Commodities and Indices. The Group provides a multi-asset clearing house through Euronext Clearing, and custody and settlement services through Euronext Securities central securities depositories in Denmark, Italy, Norway and Portugal. Euronext also leverages its expertise in running markets by providing technology and managed services to third parties. In addition to its main regulated market, it also operates a number of junior markets, simplifying access to listing for SMEs.


S&P 500 hits one-year low as higher bond yields pressure growth stocks
Devik Jain and Amruta Khandekar – Reuters
The S&P 500 index fell to its lowest since April 2021 on Monday as higher U.S. Treasury yields hit growth stocks amid prospects of aggressive policy tightening, while investors grappled with fears of a sharp economic slowdown in China.

This Lending Stock’s Bull Signal Has Never Been Wrong
Lillian Currens – Schaeffer’s Investment Research
Lending name Mr Cooper Group Inc (NASDAQ:COOP) has seen a volatile couple of months, though it’s shined as a relative outperformer, up 5.3% in 2022, and 33.5% in the past 12 months. The equity’s most drastic pullback was captured by a familiar floor at the $40 level in mid-April, while the $42- $43 area has emerged as support in recent weeks. On top of this, COOP recently pulled back to a historically bullish moving average that could help it weather the storm that is the current broader-market selloff.


Why It’s Harder to Reduce Volatility in a Stock Portfolio; Adding more stocks can get you a reduction. But not to the level that it used to.
Mark Hulbert – WSJ
Reducing your stock portfolio’s volatility is getting increasingly difficult. That’s the conclusion of researchers who—at the top of the internet-stock bubble around 22 years ago—calculated that a stock portfolio needed to own at least 50 stocks to ensure that its volatility was no greater than that of the market as a whole. That was a much greater number than in previous decades, when as few as 15 stocks would have done the trick. But a 50-stock portfolio would still have had about the same level of volatility, since the overall market’s volatility hadn’t changed much from earlier decades at the turn of the century.

6 financial advisers and pros answer one question: ‘If a client came to you with $1,000 to invest right now, what would you tell them to do with it?’
Alisa Wolfson – MarketWatch
Imagine this: You’ve got $1,000 to invest, but you don’t know what exactly to do with it. We asked 6 financial advisers what they’d do if a client came to them with $1,000 — here’s what they advise.

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