Day-Trader Interest in Put Options Adds to Capitulation Fears

Jan 26, 2022

Observations & Insight

Calvin F. Williams Jr is Using His Business to Close the Wealth Gap
Alex Perry – John Lothian News

From creating investment management strategies to expanding financial education, Calvin F. Williams Jr. runs his business with one clear goal in mind: to close the racial wealth gap. Since age 12 when he first started his own lawn care service, he understood the value of building wealth, yet he also understood that many people lack the financial resources to do that.

Williams is the owner of FreemanCapital, the first Black-owned automated wealth management platform for retail customers that’s registered with the U.S. Securities and Exchange Commission (SEC). In 2021, Williams was named part of Investment News’ 40 Under 40, where he noted that after college, he couldn’t find a financial adviser because he “didn’t have a million bucks.” His fintech helps people of color achieve financial wellness – people who are often overlooked.

Read the rest of this article HERE.

Lead Stories

Day-Trader Interest in Put Options Adds to Capitulation Fears
Bailey Lipschultz – Bloomberg
Day traders who populate Reddit’s WallStreetBets forum are increasingly seeking protection from more pain after a selloff rocked the high-flying technology companies and meme stocks preferred by individual investors.
Sentiment on the platform has flipped with more posts and comments focusing on buying put options instead of calls, according to Vanda Research. The increase in mentions of the protective derivatives were also shown in data compiled by alternative markets data aggregator Quiver Quantitative.
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Retail Dip-Buyers Get Whiplashed Big Time by Historic Stock Volatility
Lu Wang – Bloomberg
Retail investors who netted billions in the legendary pandemic bull market are getting schooled on stock volatility at long last, as the rates-fueled rout resumes.
When major indexes were in free fall Monday, mom and pop offloaded a net $1.5 billion worth of stock by noon, according to data compiled by JPMorgan Chase & Co. strategist Peng Cheng. Yet conditioned by two years of nonstop rewards, these would-be dip buyers then poured $1.3 billion in the final hours as the megacap benchmarks wiped out steep losses.
/jlne.ws/3o41Phd

An Oil Close at $90 Would Bring 10,000 Options Into the Money
Alex Longley – Bloomberg
Brent oil is taking a fresh run toward $90 a barrel, a move that could bring a raft of options into the money.
About 10,000 March $90 calls are expiring on Wednesday. If the global benchmark closes below that key marker they’ll be worthless, but if it settles above that line, then they’ll pay out. It’s a binary risk to prices and could spur volatility into the day’s close.
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Fidelity accused of ‘unethical’ process for options trading approvals
Madison Darbyshire – Financial Times
A Massachusetts regulator has accused the brokerage arm of Fidelity Investments of having “unethical and dishonest” practices to decide which customers may trade options on its platform, at a time of surging retail demand for the derivatives.
The state securities division filed an administrative complaint against Fidelity Brokerage Services on Wednesday, alleging that the group had failed to properly vet customers who applied to trade options or use margin loans on the platform.
/jlne.ws/347UyWz

China Stock Market: Bear Market Looms for China’s Equity Benchmark
Abhishek Vishnoi – Bloomberg
China’s benchmark CSI 300 Index teetered on the edge of a bear market as the nation’s state media called for investors to hold their nerves in a global selloff.
The gauge fluctuated before closing higher on Wednesday, following a slump in the previous session that pushed it within striking distance of a 20% plunge from a February peak. Chinese stocks enjoy policy support and with looser liquidity conditions expected, corrections are buying opportunities, according to reports from at least two state-backed newspapers.
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Stock Market Outlook: a V-Shaped Recovery to New Record Highs Is Likely
Matthew Fox – Business Insider
The sharp decline in the stock market since the start of 2022 has left many investors on edge, with sentiment plunging to levels not seen since the depths of the COVID-19 pandemic sell-off in March 2020.
But they need to recognize that such a swift decline in the market can be met with as swift of a recovery, according to Fundstrat Managing Partner Tom Lee.
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Stock-market selloff is so overdone, the bar is low for a positive Fed surprise, say JPMorgan analysts
William Watts – MarketWatch
The stock-market selloff is even more severe than it looks on the surface, setting a low bar for a positive surprise from the Federal Reserve when it concludes its policy meeting Wednesday, according to analysts at JPMorgan Chase & Co.
The Fed “is likely to strike a more dovish tone relative to extreme investor expectations, which could trigger an equity rebound,” wrote strategists led by Dubravko Lakos-Bujas, in a Wednesday note.
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Exchanges

CME Group Announces Multiple Equity Index Futures and Options Records
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that its Equity Index futures and options complex reached a new, single-day trading volume record of 15,846,802 contracts on January 24, surpassing the prior record of 15,623,428 contracts set on February 28, 2020.
Additionally, Micro E-mini Equity Index futures reached a record 6,571,375 contracts traded on January 24, across all four indices – S&P 500, Nasdaq-100, Dow Jones Industrial Average and Russell 2000. This new high surpassed the prior record of 5,135,546 contracts on January 21, 2022.
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Regulation & Enforcement

US financial watchdog backs tougher rules for hedge fund disclosures
Stefania Palma, Eric Platt, Philip Stafford and Chris Flood – Financial Times
Wall Street’s top regulator has voted in favour of proposed rules that would force hedge funds to report immediately when they suffer extreme losses or large investor withdrawals, in a bid to close gaps that were exposed by market ructions last year.
The guidelines from the Securities and Exchange Commission on Wednesday are part of a suite of new standards designed to strengthen the stability of US financial markets. Commissioners also backed plans for more transparency in the $23tn market for US government debt, which underpins global finance. The rules will now be submitted for public comment.
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SEC regulatory blitz begins with proposals to tighten rules on hedge funds, private equity
Chris Matthews – MarketWatch
The Securities and Exchange Commission voted to propose new regulations requiring private investment advisers, like private equity and hedge funds, to more frequently report to the government when they suffer large investment losses or redemptions and other adverse events.
The new proposal is the first in what analysts expect to be a busy year of rulemaking for the markets regulator, with Chairman Gary Gensler eager to expand the agency’s oversight to previously unregulated corners of the financial services industry, and to require public company disclosure of risks related to climate change, workforce diversity and management and cybersecurity.
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‘Gamification’ in financial markets under scrutiny, says EU watchdog
Huw Jones – Reuters
Gamification has introduced a new generation of retail investors to financial markets who may not be aware there are few protections in assets like cryptocurrencies, the European Union’s securities watchdog said on Tuesday.
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Moves

OCC Dallas Site Leader Mike Hansen Appointed to Dallas Regional Chamber’s Board of Directors
OCC
OCC is pleased to announce that Mike Hansen, Executive Director of Market Operations and Dallas Site Leader, was appointed to the Board of Directors of the Dallas Regional Chamber (DRC). He will serve a two-year term. For several years, Mike has worked closely with the DRC in their efforts to attract quality companies and talent to the Dallas-Fort Worth area, and he is excited to join the Board and gain greater opportunities to positively impact the Dallas community.
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Strategy

How Should Investors Handle a Volatile Stock Market?
TheStreet
When the market starts the day down by hundreds of points then finishes in the green, it can be confusing and exhausting for investors and traders. The same can be said when the opposite happens and big gains end up being wiped out before the close.
Huge market moves can be hard for investors and traders to process. There’s opportunity when the share price of good companies falls, but identifying those opportunities can be a challenge.
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Miscellaneous

Opinion: Warren Buffett is teaching meme-stock players, crypto traders and other naysayers some hard lessons about why market fundamentals still apply
Lawrence A. Cunningham – MarketWatch
In early 2021, age-old investing principles of business valuation were declared passe by meme-stock buyers, SPAC enthusiasts, and crypto-traders. A new generation of market players declared that Warren Buffett’s proven wisdom on business analysis was out of touch and out of date. This time it’s different, they said, when explaining why time-honored principles had died.
As 2022 gets underway, the trendsetters are being proven wrong and the venerable tenets of business and investing as durable as ever. Such a pattern is not new. Tech stock buyers in 2000 said Buffett and traditional investing were dead. But then the internet bubble burst in 2001. Real estate and derivative traders in 2007 thought they found a market without a ceiling. Then the Great Recession hit in 2008.
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