‘Fear gauge’ futures close to signaling U.S. stock selling crescendo
Saqib Iqbal Ahmed – Reuters
Futures tied to Wall Street’s fear gauge are close to sending a signal of growing fear that has sometimes preceded past stock market rebounds.
With investors awaiting a consequential Federal Reserve announcement on Wednesday afternoon, October VIX futures were trading only 0.20 points lower than November futures, the slimmest margin since mid-June, when the S&P 500 (.SPX) marked a bottom.
Fed Raises Interest Rates by 0.75 Percentage Point for Third Straight Meeting
Nick Timiraos – WSJ
The Federal Reserve approved its third consecutive interest-rate rise of 0.75 percentage point and signaled additional large increases were likely at coming meetings as it combats inflation that remains near a 40-year high.
The decision Wednesday—unanimously supported by the Fed’s 12-member rate-setting committee—will lift its benchmark federal-funds rate to a range between 3% and 3.25%, a level last seen in early 2008.
A $29 Billion Derivatives Market Faces Squeeze in Japan; Financial regulator has been clamping down on structured bonds; Move deals blow to lucrative business for banks, brokerages
Takashi Nakamichi and Taiga Uranaka – Bloomberg
Japan is intensifying a clampdown on its $29 billion structured products market, threatening a lucrative business for banks and brokerages after it saddled mom-and-pop investors with losses. The country’s financial regulator wants to largely eliminate sales to individual investors of so-called structured bonds, which offer higher returns than regular debt but at significantly higher risk, people familiar with the matter said, asking not to be identified as the information is private. Some big financial institutions have already scaled back or stopped selling the securities in the face of pressure from the Financial Services Agency.
Jamie Dimon will raise the prospect of economic disaster to Congress – and sound the alarm on painful inflation
Theron Mohamed – Business Insider
The JPMorgan CEO will also bemoan inflation’s devastating impact on Americans, his written testimony shows.Dimon will tout JPMorgan’s critical role in the US economy as well.
JPMorgan CEO Jamie Dimon will tout the US economy’s strength but warn its challenges could end in disaster, during a hearing in front of the House Financial Services Committee on Wednesday.
Wall Street Traders Gorge on Short-Term Stock Options as Fed Day Looms
Lu Wang – Bloomberg
Betting on Federal Reserve-spurred market fireworks, but lack conviction on where stocks are headed in the months ahead as news bombs hit the tape? You’re far from alone.
Stocks retreated Tuesday, with the S&P 500 sinking more than 1% on the eve of the Federal Open Market Committee decision. Wild daily market moves have been so common of late that options traders are loading up on short-term bets at a pace unseen in the post-lockdown era.
**** The Federal Reserve has made its decision since this article was posted (applies to the next two articles as well). ~JB
Currency Volatility Surges in Options Market Before Fed, BOJ
David Finnerty – Bloomberg
Currency traders are girding for the biggest price swings in months in the build up to this week’s crucial Federal Reserve and Bank of Japan policy decisions.
Dollar-yen was the most volatile, with the implied rate surging as high as 31.90, the highest since June 16 when the Fed hiked its benchmark rate by 75 basis points. Traders are watching if the BOJ will maintain rock-bottom interest rates a day after another expected rate hike by the Fed on Wednesday.
Close All Shorts Echoes Across Trading Floors Into Fed Meeting
Ruth Carson and Ishika Mookerjee – Bloomberg
Some investors have a message for anyone looking to bet big before one of the most pivotal Federal Reserve policy meetings of this year: don’t, or risk getting burned.
“Close shorts on equities and bonds,” said Stephen Miller, a four-decade market veteran and investment consultant at GSFM, a unit of Canada’s CI Financial Corp. in Sydney. “I’d be closing long dollar positions too — the next 24 hours are so uncertain when the market has already worked itself into such a pessimistic lather into the meeting.”
FEX Global Readies Australian Large-Scale Generation Certificate (LGC) Futures and Options Contracts
FEX Global, which operates a licensed Australian Futures Exchange this week successfully launched its $500 Strike 5MS Cap Power Quarterly Futures and Options contracts. The contract adds to the existing FEX Global energy futures offering and has been listed in response to persistent higher prices and increased volatility in Australian wholesale power markets. It is anticipated that the new contract will give energy market participants an additional targeted risk management tool in addition to providing risk margin efficiencies.
Regulation & Enforcement
Commissioner Johnson Participates in a Candid Conversation with Women in Derivatives (WIND)
Commissioner Kristin N. Johnson discusses a range of topics, including her perspectives on market risk and evolving market structure in domestic and global commodities and derivatives markets, at a Women in Derivatives event.
Trade associations sign letter on safeguarding the EU ETS
FIA has co-signed a letter with seven other trade associations on the importance of safeguarding the EU Emissions Trading System (ETS) following recent proposals by the European Parliament, which risk undermining the efficient functioning of the EU ETS and put at risk the EU’s ability to meet its climate goals in an efficient manner.
Markets Are Volatile. Here Are the Strategies Advisors Recommend.
Andrew Welsch – Barron’s
Investors have their work cut out for them this year, with markets tumbling and inflation soaring. The Fed looks set to impose another large interest-rate hike Wednesday, and Treasury yields are rising rapidly—which means more red ink for bond portfolios this quarter. But an uptick in volatility is not necessarily a bad thing—there are opportunities to be found even in this whirlwind, advisors say.
5 Bullish Options Strategies to Consider
Stock traders who believe an underlying asset will increase in price can utilize bullish options strategies to make a profit. Options contracts are much more complex than equity, but there is also potential to make more money. The trader must determine how high they think the stock will go and within what timeframe.
Since options have expiration dates, you can be right to believe the stock will move up, but if it doesn’t happen before the expiration date, you can lose money on a bullish options strategy. Additionally, factors like implied volatility can play a part in the price of options.
Citadel’s Ken Griffin Brings Billions to Make Miami ‘Wall Street South’
Amanda L Gordon – Bloomberg
In a few years and change, if everything goes to plan, Miami will look far different than it does today.
There will still be nightclubs, Little Havana, perhaps even the crypto diehards. But alongside them: programmers and portfolio managers filling the streets of Brickell and driving breathtaking profits inside the state-of-the-art, built-from-scratch global headquarters of Citadel and Citadel Securities. Plus legions of lawyers, accountants and hedge-fund hopefuls following the money to an enduring Wall Street South that outlives the Covid-19 pandemic.