Fund nicknamed ’50 Cent’ made $2.6 billion hedging the coronavirus sell-off; VIX futures point to coronavirus worries for months to come

Apr 9, 2020

Observations & Insight

Buck Haworth – Open Outcry Traders History Project – Part One

Buck Haworth has been a consultant, a CPA, a back office accountant, an exchange audit department executive, a foreign exchange arbitrage desk manager, an exchange member, a scalper, a spreader, an exchange board member and officer, and a technology executive.

He sat down with John Lothian News for an interview for the MarketsWiki Education Open Outcry Traders History Project. He talked to us about starting as an accountant at a big national firm but not being happy with his career trek. His father always loved the stock market, so he turned his attention to the markets. He rejected an opportunity to start at the CBOE with a job for a mere $300 a month, as he had a mortgage and three kids at home.

Instead, he eventually joined trader Ralph Peter in a back office role. After long hours and many projects, he left and joined the Chicago Mercantile Exchange to help build out a professional audit unit. He eventually left the CME to take a job running an FX arbitrage operation, where he got his first taste of the trading floor.

Haworth talked to us about his experiences trading, his role with the board of directors, and the demutualization and inside politics of the CME board. He gives a clear and simple explanation about the realities of the trading floor and why you had to deal with that reality.

This is part one of a two-part interview not to miss.

Watch the video »

Lead Stories

Fund nicknamed ’50 Cent’ made $2.6 billion hedging the coronavirus sell-off
Theron Mohamed – Markets Insider
An investment fund nicknamed “50 cent” made $2.6 billion hedging the coronavirus sell-off, according to the Financial Times.
London-based Ruffer – which manages roughly $23 billion in assets – invested $22 million in derivatives tracking the VIX volatility index, commonly known as Wall Street’s “fear gauge.” When coronavirus fears tanked stock markets, the VIX spiked to decade highs, netting the fund more than $800 million, the Financial Times reported.

****JB: Financial Times on the same story, ’50 cent’ fund makes $2.6bn from buying protection against collapse

VIX futures point to coronavirus worries for months to come
April Joyner – Reuters
Investors are betting on stocks to remain volatile well into the year, suggesting that many expect the long-term economic and public health impact of the pandemic caused by the novel coronavirus to continue roiling markets despite a recent rally. The Cboe Volatility Index, known as Wall Street’s fear gauge, recently traded at 43.36 on Wednesday from a record closing high of 82.69 on Mar. 16.

Volatility Anomaly Is Turning Perceptions of Safety Upside Down
Luke Kawa – Bloomberg
Investors are redefining what constitutes safety in the stock market as the unprecedented lockdown of the U.S. economy takes hold.
Options pricing is showing traders have more faith in Inc. holding up than they do in the broader market. The anomaly, never before seen in data going back to 2010, puts the three-month implied volatility of the e-commerce giant below that of the SPDR S&P 500 ETF Trust. It has been an average of 15.6 points higher during the past decade.

Fuel Demand Is Cratering Like Never Before
Matthew C. Klein – Barron’s
The coronavirus crisis continues to break records for energy consumption—and some segments of the market have further to fall.
For the week ended April 3, American consumers used an average of 5.06 million barrels of finished motor gasoline each day, while airplanes used an average of 755,000 barrels per day of jet fuel, according to the U.S. Energy Information Administration’s latest weekly estimate of demand for petroleum-based fuels. These figures are down about 50% from comparable periods in recent years.

Too Quiet? The 2008 Analog For The Market Does Not Look Good With Implied Volatility Falling to 35%
ORATS blog
The options market implied volatility (IV) is good at reflecting the sentiment of the market. The old Wall Street refrain is that the market climbs a wall of worry and slides down a slope of hope. Looking at the implied volatility graph since news of the corona virus, the market turned bullish when worry was at its greatest. IV hit 75% in the S&P 500 ETF SPY. Now with implied falling to 35%, it seems the market is hoping the worst has passed.

Exchanges and Clearing

OCC Re-Elects Executive Chairman, Member and Public Directors at 2020 Stockholder Meeting
OCC, the world’s largest equity derivatives clearing organization, today announced the re-election of Craig S. Donohue as Executive Chairman of the Board of Directors, along with the election of three Class I Member Directors and one Class II Public Director. The vote occurred during OCC’s annual stockholder meeting on April 7.

CME Clearing Plan to Address the Potential of a Negative Underlying in Certain Energy Options Contracts
CME Clearing
The purpose of this advisory is to assure CME clearing firms and end clients that if major energy prices continue to fall towards zero in the coming months, CME Clearing has a tested plan to support the possibility of a negative options underlying and enable markets to continue to function normally.

Equity Index Highlights – April 2020 edition
March was, given the highly volatile markets, of course, bursting with hedging activity on Eurex. However, rather than discussing volumes, I’d like to focus on the performance of the Eurex market infrastructure in this briefing.

SGX reports market statistics for March 2020
Singapore Exchange (SGX) today released its market statistics for March 2020. As global markets continued to be buffetted by heightened volatility amid the COVID-19 pandemic, investors actively managed their positions on the exchange across asset classes – from equities to foreign exchange (FX) to commodities. During the month, the benchmark Straits Times Index (STI) fell 17.6% to 2,481.23. On 31 March, the STI’s 30-day volatility increased to 51.7%. That was the highest level since December 2008, on par with regional markets, while lower than the U.S. and European markets.

CME Globex Notices: April 6, 2020
CME Group

Regulation & Enforcement

Derivatives Regulator Warns of Fee Scams During Coronavirus Pandemic
Mengqi Sun – WSJ
Fraudulent schemes that promise high returns from trading complex financial products—but force victims to pay excessive fees and taxes to collect earnings—increasingly target people working from home or who have lost jobs amid the coronavirus pandemic, a U.S. regulator said.
The Commodity Futures Trading Commission said it has received hundreds of complaints about such fee frauds in recent months and warned individual investors should be particularly aware of the schemes, which promise easy ways to make money with no trading experience, the agency said in an advisory note.

Options Regulatory Alert #2020 – 11 Establishment of the CMRWG
Nasdaq BX, Inc. (“BX”), Nasdaq GEMX, LLC (“GEMX”), Nasdaq ISE, LLC (“ISE”), Nasdaq MRX, LLC (“MRX”), Nasdaq PHLX LLC (“Phlx”), and The Nasdaq Stock Market LLC (“Nasdaq”) are issuing this regulatory alert to inform their Members of the existence and role of the Cross-Market Regulation Working Group (“CMRWG”), which was established under the U.S. Subgroup of the Intermarket Surveillance Group (“ISG”) to focus on ways to reduce unnecessary regulatory duplication.

Options Trader Alert #2020 – 10 Nasdaq Options Markets implements changes to Standard 3rd Friday Expiration Listing Timing
Effective Thursday, May 14, 2020, Nasdaq Options Markets will begin listing the next series of standard 3rd Friday monthly expirations for Equity and Index options on the Thursday prior to the standard 3rd Friday expiration, instead of the current handling which introduces the new expiries on the first business morning after standard expiration. This change will be effective across all six Nasdaq US Options Markets; Nasdaq PHLX (PHLX), Nasdaq Options Market (NOM), Nasdaq BX (BX), Nasdaq ISE (ISE), Nasdaq GEMX (GEMX) and Nasdaq MRX (MRX).


StanChart Says FX More Efficient Than Stocks to Trade Swings
Joanna Ossinger – Bloomberg
Investors who want to trade big swings in risk sentiment may want to venture outside the typical U.S. stocks play and consider currencies, according to analysts at Standard Chartered Plc.

Facebook Is Winning the Pandemic. How to Bet on It With Options.
Steven M. Sears – Barron’s
When we no longer fear that we have entered the twilight of our way of living, a great reckoning will occur.
Many people will look inside themselves and assess their lifestyle and how they acted when most of humanity was forced to hide inside their homes so they weren’t killed by a deadly virus. This mass introspection will affect all areas of society. Investors will try to identify pandemic-proof companies.


Worried about Zoom’s privacy problems? A guide to your video-conferencing options
Kari Paul – The Guardian
With offices and schools around the world temporarily shut amid the coronavirus crisis, the video platform Zoom has seen overnight success. But growing concerns over security across the platform have many consumers wondering about tech alternatives.

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