Discovery Chief Got Options Valued at $190 Million on Eve of AT&T Deal
Theo Francis – WSJ
Discovery Inc. gave Chief Executive David Zaslav 14.8 million stock options on Sunday, the day before the company and AT&T Inc. announced a plan to merge Discovery with AT&T’s WarnerMedia unit, according to a securities filing. The company valued the option grants at roughly $190 million on Wednesday evening, taking into account the company’s share-price volatility and potential stock appreciation over their eight-year term. The shares underlying the options were valued at $489 million on Wednesday afternoon, as Discovery’s Class A stock traded around $33 a share. Discovery shares have fallen about 16% since the start of trading on Monday, shortly after the deal was unveiled. The options are currently trading out of the money, meaning the share price would need to rise over the next eight years for Mr. Zaslav to profit from exercising them.
Option pricing using high-frequency futures prices
Stavros Degiannakis, Christos Floros, Thomas Poufinas, George Filis and Konstantinos Gkillas – Journal of Risk via Risk.net
We examine two potential routes to improve the outcome of option pricing. We extract the variance from futures prices instead of the underlying asset price. We calculate the variance in different frequencies with intraday data instead of daily closing prices. We perform the valuation of call and put options for six volatility measures. We realize that the implied volatility exhibits the lowest deviation from the market price.
Credit Suisse Weighs Retention Bonuses to Stem Flight of Talent
Ambereen Choudhury and Marion Halftermeyer – Bloomberg
Credit Suisse Group AG is considering special retention bonuses for top performers after the Greensill Capital and Archegos Capital Management scandals rocked the Swiss lender and set off a wave of departures. The firm’s top executives and board of directors are weighing moves to keep top performers — both junior employees and veteran rainmakers — after the incidents hit the value of stock awards and future compensation prospects, people with knowledge of the matter said. The Swiss lender is particularly keen to stem investment bank defections in hubs including the U.S., the people said.
Witching Days: Do They Place The Market Under A Spell?
Alan R. Elliott – Investors Business Daily
Halloween is still a long way away. But the options expirations event known as a witching day, which comes with its own sort of mystery, is never far off on the stock market. Witching days refer to sessions when multiple options and futures contracts expire simultaneously. Normally, options expire on the third Friday of each month. Witching sessions occur only four times a year, on the third Fridays of March, June, September and December. This is when stock index futures, stock index options, stock options, and single stock futures expire.
VIX ETFs Spike as Risk Trades Unravel
Max Chen – ETF Trends
As the equity markets reel, the CBOE Volatility Index and VIX-related exchange traded funds have jumped on the risk-off turbulence. On Wednesday, the iPath Series B S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) jumped 9.5% and the ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY) advanced 9.1%, both breaking back above their short-term resistances at the 50-day simple moving average. Meanwhile, the CBOE Volatility Index climbed 10.9% to 23.7. “Today is going to be all about the fall of cryptocurrencies and the crash has definitely had a spillover effect into equity markets, which are already burdened with inflation worries,” Dennis Dick, head of markets structure, proprietary trader at Bright Trading LLC, told Reuters.
Exchanges and Clearing
Customers must choose where to clear euro derivatives, panellists say
Kirsten Hyde – FIA.org
Clients should be free to choose where they clear euro-denominated derivatives, although many are ready to move business from CCPs in the UK to the EU if forced to do so, banking panellists said on an FIA webinar on 19 May. “The client decides where they want to trade and where they want to clear,” said Robbert Booij, CEO Europe, ABN AMRO Clearing. “I am not so concerned about clients moving business. I am concerned about access being cut off.” The European Commission has given temporary equivalence to three UK CCPs – London Stock Exchange Group’s LCH, ICE Clear Europe and LME Clear – until 30 June 2022, leaving the door open for a forced relocation of euro-denominated clearing once the temporary equivalence ends. During this time, European firms are being encouraged to reduce their exposure to UK CCPs by moving their euro business to Deutsche Börse’s Eurex in Frankfurt and LCH SA in Paris.
Various Amendments to the S&P 500 Stock Price Index Futures, E-mini S&P 500 Stock Price Index Futures and Related Options Contracts and Addition of Block Trade Eligibility to Options on E-mini S&P 500 Stock Price Index Futures
Effective Sunday, Sunday, June 6, 2021 for trade date Monday, June 7, 2021, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will (1) expand the listing schedule of E-mini Standard and Poor’s 500 Stock Price Index Futures contracts and related options contracts for trading on the CME Globex electronic trading platform (“CME Globex”) and for submission for clearing via CME ClearPort; (2) reduce the strike price listing schedule of the Options on E-mini Standard and Poor’s 500 Index Futures contract; (3) permission block trading in all Options on E-mini Standard and Poor’s 500 Stock Price Index Futures contracts; (4) amend certain Exchange fees for Options on E-mini Equity Futures; and (5) effective immediately, cease listings new contract months of the Standard and Poor’s 500 Stock Price Index Futures contract and related options for expiration dates of such contracts beyond trade date Friday, September 17, 2021 (collectively, the “Rule Amendments”).
Regulation & Enforcement
SEC commissioner raises idea of index provider rules
Hazel Bradford – Pensions & Investments
The recent enforcement action against S&P Dow Jones Indices could lead to regulatory controls on index providers by the Securities and Exchange Commission. The SEC on Monday announced a settlement with S&P Dow Jones Indices and a $9 million fine for charges that it was negligent overseeing a quality control feature of a volatility-related index that failed during a volatile day of trading in February 2018.
Exegy, Vela Announce Merger
Traders Magazine (press release)
May 20, 2021 – Exegy Incorporated, the market leader in low-latency solutions for global market data, predictive trading signals, and hardware-acceleration technology, and Vela Trading Systems LLC (Vela), a leading provider of data and execution technology for global multi-asset electronic trading, announced today that they have merged business operations in an agreement backed by Marlin Equity Partners, a global investment firm with over $7.5 billion of capital commitments under management. Operating as Exegy Incorporated, the combined company creates a dominant provider of premier data and execution platforms, managed services for electronic trading powered by proprietary hardware-acceleration, Artificial Intelligence (AI), and service automation technologies.
IHS Markit adds cloud-based reporting platform to thinkFolio
Annabel Smith – Traders Magazine
IHS Markit’s investment management platform thinkFolio has integrated a cloud-based performance attribution and reporting system for fixed income and multi-asset portfolio management. The partnership between IHS Markit and CloudAttribution will provide mutual institutional clients with access performance attribution through desktops, with portfolio performance evaluations for cross-asset institutional investment strategies, including environmental, social and corporate governance (ESG). “thinkFolio clients can now apply a flexible post-trade lens to unlock insights as to which levers within their decision framework impacted active returns,” said Brett Schechterman, global head of thinkFolio at IHS Markit.
Tesla, ARKK, Nasdaq 100 and S&P 500: Varying Stages of the Cycle
James Stanley – tastytrade
Are we nearing a major market turn as inflation prints beyond expectations? If so, gyrations inside of US equities may be showing us something.
How to gauge investors’ fear of inflation
What do investors fear most? In the Bank of America’s long-running survey of fund managers, the tail risk that has mostly preoccupied them until recently has been the pandemic. In this month’s survey, though, inflation rose to the top of the list of worries. It is not hard to see why. High inflation, if sustained, would require central banks to act decisively to contain it. That would mean the end of the low interest rates that have underpinned the prices of an array of expensive-looking assets, from stocks and bonds to property.
How to Bet on a Crytpo Comeback While Hedging Your Risks
Steven M. Sears – Barron’s
It doesn’t matter anymore if you think crypto is real or not. Too many people think it is, and that makes dismissing digital currencies difficult—even as their prices come under pressure. The weakness in Bitcoin, the primary cryptocurrency, creates a potentially attractive entry point for aggressive investors. It hit a low Wednesday of $30,202 on news that the People’s Bank of China banned financial and payment institutions from accepting digital currencies, having fallen from its peak price of $64,829 in April.
Options Trading – What are They and How Does it Work?
Ziga Breznik – Public Finance International
Options are one of the many financial assets that you can trade on market exchanges. Options trading can make a great addition to your trading strategy if you’re looking to diversify your portfolio. In this article, we will be discussing options, the different types of options contracts, and the pros and cons of options trading. Lastly, we will provide a brief overview of how to trade options.
Webinar: Understanding the Protective Put
Wednesday, June 09, 2021
3:30 p.m. – 4:30 p.m. CST
In the equity market, downside risk is always a consideration for investors. However, for some portfolios, certain options may help mitigate the potential for a loss of capital. One such strategy is the protective put. If you want to learn more about protective puts, and if they may be right for you, join The Options Industry Council on June 9th for a free webinar led by former professional options trader Ken Keating.
Webinar: Understanding Option Collars
Wednesday, July 14, 2021
3:30 p.m. – 4:30 p.m. CST
For many option investors, collars can be a core strategy. Generally, collars are created by combining an income opportunity with a protective aspect around a long stock position – but knowing the details is critical. On July 14, join OIC’s Ed Modla, a former market maker, to learn about traditional collars as well as variants.
International Derivatives Expo
September 27, 2021 – September 28, 2021 • 12:00 p.m. – 4:00 p.m. BST
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. That’s why IDX — the International Derivatives Expo — is the ideal place to be: an event that brings together industry leaders, vendors and policymakers to discuss what’s “now” in derivatives, and what lies ahead. We’re changing dates and changing venues to bring you IDX this fall in the City of London. Our conference team is creating a unique IDX experience that keeps you safe while allowing you to connect with clients, colleagues and friends from the local cleared derivatives community. Registration will launch after 21 June when the final step in the roadmap out of lockdown has been reached. Mark your calendar for 27-28 September and check back soon for additional details.
Asset Management Derivatives Forum 2021; Co-hosted with SIFMA AMG
June 8, 2021 – June 9, 2021 • 10:15 a.m. – 1:30 p.m. ET • VIRTUAL
FIA and SIFMA AMG are bringing you a virtual take on the Asset Management Derivatives Forum in 2021. Join us for virtual programming on June 8 and 9, during which market participants from all sides of a trade and leading regulators will examine the latest developments impacting the use of derivatives by asset managers, including business, clearing, regulatory and operations issues.
With keynote speakers and panels, this virtual Forum presents a unique opportunity to gain insights into how investors, sell-side firms and market structure operators view the landscape for derivatives activity by the asset management community, attracting attendees from the joint membership of FIA and SIFMA Asset Management Group.
Clearing 101: Exchanges, Clearinghouses and CCPs
Dates: Sep. 15, 2021 – Sep. 16, 2021, 12:00 p.m. – 1:30 p.m. ET.
Location Virtual Live. Two 90-sessions over 2 days.
Instructor: Marti Tirinnanzi
Registration is limited to approximately 20 participants to promote student participation and interaction.
Join us for a short program (90 minutes each day for 2 days) that explains the multilateral systems that provide the infrastructure for transferring, clearing and settling payments, derivatives and other financial transactions among financial institutions and end users. Following Dodd Frank, clearinghouses became designated as Systemically Important Financial Market Utilities, vital to the operations of the financial markets and subject to heightened regulatory scrutiny. Buyers and sellers in exchange transactions rely on clearinghouses to intermediate transactions and to manage credit risks between trading parties. As such, clearinghouses promote transparency, efficiency, and stability by providing market-based pricing, daily settlement, and ensuring adequate capitalization for markets to function.
Q2 2021 trends in futures and options trading
28 July 2021 • 10:00 a.m. – 11:00 a.m. ET
Moderator: Will Acworth, Senior Vice President, FIA
This webinar highlights the main trends in trading activity in the second quarter of 2021 in the global exchange-traded derivatives markets, with category and regional breakdowns as well as exchange and contract rankings.