Euro Could Be Facing a Dark Winter With Options Traders Spooked

Nov 19, 2021

Observations & Insight

FIA Expo 2021: Exegy Merger Seen As Solid Marriage Of Products, Businesses

Why bring Exegy Inc. and Vela Trading Systems together? The firms combined forces last May and two of their executives talked to JLN about the reason behind their merger at the FIA Expo 2021 in November.

David Taylor, Exegy’s chief technology officer and co-president, said the combination allows the companies to have more scale in the marketplace, more tools and more opportunity to invest in the expansion of the company’s offerings. “Growing organically and inorganically was always part of our agenda,” he said.

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Lead Stories

Euro Could Be Facing a Dark Winter With Options Traders Spooked
Robert Fullem – Bloomberg
Foreign-exchange traders are forecasting a cold, stormy winter for the euro.
Markets are increasingly nervous about the common currency with the pandemic resurgent, geopolitical tensions rising and gas supply issues mounting.

FX options wrap – FX volatility risk is growing towards year end
Implied volatility gauges actual volatility expectations and is a key determinant of FX option premium – it’s significantly higher, with limited setbacks and renewed demand warning FX investors to stay alert.

Currency Market Volatility Makes Comeback as Europe Faces New Lockdowns
Ven Ram – Bloomberg
Volatility in the currency markets is back with a bang, stoked by Europe coming face to face with lockdowns all over again.
The component currency-weighted three-month volatility index of the dollar has shot up to levels last seen in March, when markets were roiled by surging Treasury yields. At current levels, traders are bracing themselves for average daily moves of about 0.42% on the Dollar Index over the next three months.

Bond investors numb to risk, says ‘scared’ veteran Dan Fuss
Robin Wigglesworth – Financial Times
The strong rally in corporate debt markets triggered by a flood of central bank stimulus is spooking veteran bond investor Dan Fuss, who warns that investors are taking the most risks he has seen in the past six decades.
Central banks last year sharply cut interest rates and unleashed vast bond-buying programmes to soften the economic impact of the pandemic, at a scale that even dwarfed measures taken to combat the financial crisis.

Bitcoin Nears 20% Drop as Volatility Remains a Constant
Bloomberg (VIDEO)
Kraken Chief Legal Officer Marco Santori and Bloomberg’s Justina Lee discuss the market impact of new U.S. legislation on cryptocurrency and volatility in the Bitcoin market as it slides nearly 20% since October.

Markets are showing signs of frothing over
The editorial board – Financial Times
They may not ring a bell at the market top, as the aphorism goes, but perhaps sports advertising is worth watching as an early warning signal. In 2000, the Super Bowl, pinnacle of the American football year, was nicknamed the dotcom bowl when internet companies bought 20 per cent of all the television spots that aired during the game. Lehman Brothers, in 2006, decided it was a smart use of funds to sponsor the annual varsity rugby match between Oxford and Cambridge universities, presumably with an eye to recruiting would-be investment bankers. That same year insurance company AIG signed what was at the time a record-breaking sponsorship deal with Manchester United.

Stock Market Volatility Is About To Massively Ramp Up
Seeking Alpha
November 19 is options expiration.
The options and futures market see much more volatility coming to the stock market.
Typically, options expiration leads to trend changes in the market.
November 19 is the monthly options expiration date, allowing the stock market to have a lot more movement starting next week. The S&P 500 has been stuck in a trading range around the 4,700 level since the beginning of November.
The 4,700 level happens to have the most significant options open interest level currently, which means it also has the most significant concentration of gamma, which market makers are hedged against, which results in the market getting pinned.


NYSE US Exchanges to Close in Observance of Thanksgiving Holiday
In observance of Thanksgiving, the New York Stock Exchange, NYSE American Equities, NYSE Arca Equities, NYSE Chicago Equities, NYSE National Equities, NYSE Arca Options, NYSE American Options, and NYSE Bonds markets will be closed on November 25, 2021, and will operate on a shortened trading schedule on November 26, 2021. Regular trading sessions will close for all markets at 1:00 p.m. Eastern Time (ET).

Regulation & Enforcement

Judge Dismisses Meme-Stock Lawsuit Against Robinhood and Citadel Securities
Ruling says evidence found by investors’ lawyers wasn’t strong enough to support accusations of illegal collusion
Alexander Osipovich – WSJ
Robinhood Markets Inc. HOOD -3.01% scored a victory as a federal judge dismissed a lawsuit accusing the brokerage of colluding with electronic trading firm Citadel Securities to stop investors from buying GameStop Corp. and other meme stocks in January.
The lawsuit had been filed on behalf of investors who lost money when Robinhood and other brokerages imposed trading restrictions in GameStop, AMC Entertainment Holdings Inc. and several other stocks on Jan. 28.

ESMA amends derivatives and clearing trading obligations to aid LIBOR transition
The proposed changes come as part of the benchmark transition away from EONIA and LIBOR and onto new alternative risk-free rates benchmarks such as EURSTR.
Wesley Bray – The Trade News
ESMA has proposed changes to the clearing obligation (CO) and derivative trading obligations (DTO) to support the market’s ongoing transition away from the EONIA and Libor benchmarks.
In its report, the European securities regulator has suggested draft regulatory technical standards (RTS) that amend the scope of the trading obligations for over the counter (OTC) interest rate derivatives (IDR) denominated in EUR, GBO, JPY and USD. The draft changes have now been submitted to the European Commission for approval.


Acadia Launches new suite of Payment Workflow Automation Tools for Buy and Sell-Side Firms
Acadia, the leading industry provider of integrated risk management services for the derivatives community, announced the introduction of Payments Manager, a new suite of workflow automation services centered around payments.
The new payment service leverages Acadia’s position as the market leader in the global derivatives marketplace where thousands of firms and over 80% of all bi-lateral OTC derivative margin calls are initiated and cash or securities collateral are pledged to meet those obligations daily.


FIA Asia Derivatives Conference
7 December 2021 – 8 December 2021 • 8:00 AM – 2:00 PM SGT
Our annual Asia Derivatives Conference provides unique opportunities for the cleared derivatives community to build an understanding of how global trends along with regional issues combine to shape the Asia-Pacific markets. Make plans to join us virtually, this 7-8 December, to gain insights into what’s on the horizon for the Asia-Pacific region.

When The Stock Market Is Closed for Thanksgiving, Christmas, New Year’s
The stock market is closed on Thanksgiving, but open on Black Friday; and Christmas and New Year’s fall on weekends in 2021.
Veronika Bondarenko –
With the holiday season at our door, it is important to remember when the financial markets are closed and open.
To keep it simple, there are only two market holidays coming up: Thanksgiving and Christmas.
Is the stock market closed on Thanksgiving or Black Friday?
For Thanksgiving, both the New York Stock Exchange and Nasdaq will be closed on Thursday, Nov. 25. The markets are open on Black Friday, but close early. The stock market closes at 1 p.m. Eastern; the bond markets will close at 2 p.m. Eastern on Friday.


Storms Forecast for Thanksgiving Week Could Complicate Holiday Travel Plans
Talal Ansari – WSJ
Inclement weather could mean travel delays for Thanksgiving week, one of the busiest of the year in the U.S.
A storm is forecast to bring rain and high winds to the Great Lakes and Upper Midwest starting Sunday. The weather system will then move east, toward New York, accompanied by the coldest air of the season in the region Monday into Tuesday.

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