Fear gauges throttle back after rollercoaster run; Another 11% Swing in the Dow Average Shows Value Still a Mystery

Mar 25, 2020

Lead Stories

Fear gauges throttle back after rollercoaster run
Saikat Chatterjee, Thyagaraju Adinarayan and April Joyner – Reuters
Stock and currency fear gauges that soared to levels of the 2008 global financial crisis have become less frantic since central banks and governments stepped up efforts to combat spreading economic damage from the coronavirus epidemic.
The Cboe Volatility Index, known as Wall Street’s fear gauge, was at 61.67 points on Tuesday, well below its March 16 record closing high of 82.69. It was the biggest drop over a six-day period in the index since November 2008.

Another 11% Swing in the Dow Average Shows Value Still a Mystery
Elena Popina – Bloomberg
As Wall Street celebrates the Dow Jones Industrial Average’s biggest surge in nine decades, spare a thought for the people paid to figure out value in the stock market.
A lot of them are just giving up, sick of trying to make sense of a market whose view of a company like Boeing Co. changes by tens of billions of dollars a day. Volatility is just too high: the Dow has swung an average of 7% a day since March 12 — that’s well over $1 trillion of market value gained or lost in each session — compared with 0.6% in 2019.

Inside Volatility Trading: March 24, 2020
Kevin Davitt – Cboe blog
The financial and global health systems are giving us quite a few signs lately. Most of them are very concerning. One of the most frequently referenced is the research and visual that the Johns Hopkins research center put out about global cases of COVID-19.

Regulation & Enforcement

Crypto Margin Trading Challenged by U.S. Derivatives Regulator
Benjamin Bain and Matthew Leising – Bloomberg
The main U.S. derivatives regulator is taking a significant step in defining the sometimes blurry line between cryptocurrency futures and trading in the spot market.
The Commodity Futures Trading Commission on Tuesday laid out its view on what it means to take “actual delivery” of a digital asset. The long-awaited guidance is significant because it means that there could be penalties for trades that don’t let the buyer take physical possession and control of a coin within 28 days — the cut off line for when trades in commodities like wheat and oil start to be considered futures contracts.

Options Regulatory Alert #2020 – 8 UPDATED – PHLX, NOM, BX, ISE, GEMX and MRX – Quarterly Quote Spread Parameter Relief through June 19. 2020
Effective March 25, 2020, the updated market maker quarterly quote width requirements on Nasdaq PHLX (PHLX), The Nasdaq Options Market (NOM), Nasdaq BX (BX Options), Nasdaq ISE (ISE), Nasdaq GEMX (GEMX) and Nasdaq MRX (MRX) will be effective through June 19, 2020. The exchanges may, in their discretion, amend these requirements by providing notice to members.


Amendments to Certain CME and CBOT Options on Equity Index Futures Contracts Concerning Settlement after a Level 3 (-20%) Market-Wide Circuit Breaker (MWCB)
CME Group
Effective Tuesday, April 7, 2020 for trade date Wednesday, April 8, 2020, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME”) and The Board of Trade of the City of Chicago, Inc (“CBOT”) (collectively, the “Exchanges”) will amend the Exercise and Assignment rules of the Options on Equity Index Futures contracts listed in Tables 1 and 2 below (the “Contracts”) to modify the settlement of the Contracts after a Level 3 (-20%) Market-Wide Circuit Breaker (“MWCB”).

TRADERS Q&A: Stino Milito, DASH Financial Technologies
John D’Antona Jr. – Trader’s Magazine
The COVID-19 pandemic has affected the options market along with equities. While the broad financial media has focused on the vacillations of the stock market and red ink posted by thousands of securities, there is one derivative market that is holding up relatively well – options.


What Do You Buy After Rule Book Is Torn Up? Here Are Some Ideas
Shares slumped. Credit plunged. And even gold, the Japanese yen and Bitcoin took a hit. In the burning carnage of global markets, there’s hardly anywhere to hide.
For a few traders, the old Warren Buffett adage of being greedy when others are fearful still applies. Historic dislocations spurred by a mad dash to safety during the coronavirus pandemic represent, in this view, lucrative opportunities for those betting on an eventual return to normality as policy makers unleash unprecedented stimulus to keep the global economy afloat.


Trends in market structure and industry concerns
Join FIA on Thursday, March 26 for a webinar on trading and clearing trends in derivatives markets. The webinar will discuss findings from an industry survey conducted in partnership with Greenwich Associates, a provider of data, analytics and insights for the financial services industry. Although the survey was conducted well before the impact of the Coronavirus (COVID-19), the findings reveal important insights on several long-term trends affecting the global derivatives markets, including the impact of capital requirements, the adoption of central clearing, the transition away from Libor, and the implementation of margin requirements on uncleared derivatives. Attendees will come away with insights on how their peers in the industry are setting priorities for their longer-term business plans.


Europe’s Richest Man Gains $11 Billion on Day Stocks Surged
Devon Pendleton and Benjamin Stupples – Bloomberg
Luxury-goods mogul Bernard Arnault has been hard hit by the spread of the coronavirus, losing more financially than anyone else in the world.
He’s directly enlisted his conglomerate — which controls Christian Dior and Louis Vuitton — in the battle against the virus by financing the delivery of millions of medical masks to France from Chinese suppliers and converting a Dior perfume factory outside Orleans into a producer of hand sanitizer.

How Bill Ackman Turned $27 Million Into $2.6 Billion During the Coronavirus Crisis
Carleton English – Barron’s
Billionaire investor Bill Ackman announced earlier this month that he had been hedging his portfolio against market volatility spurred by the coronavirus. The bet paid off handsomely.
Ackman’s Pershing Square Capital Management hedge fund laid out $27 million to buy credit protection on global investment-grade and high-yield credit indexes. The purchases, which were made late last month when credit spreads were tighter, carried limited downside risk but the potential for significant upside. Ackman said Wednesday that he finished unwinding the hedges on Monday, reaping $2.6 billion in proceeds.

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