Funds That Use Options Can Offer Protection From the Slide in Stocks

Jun 10, 2022

Lead Stories

Funds That Use Options Can Offer Protection From the Slide in Stocks
Randall W. Forsyth – Barron’s
Investors may be feeling a bit seasick from this year’s volatile markets. But how can they assuage their queasiness while navigating these rough waters?
John Silvia, who retired as chief economist at Wells Fargo to head Dynamic Economic Strategy, blames those at the helm of the Federal Reserve for the current unpleasantness. The central bank’s policy of reacting to, rather than anticipating, inflation, even when indicators pointed to intensifying price pressures, forced it to tack sharply, he writes in a client note.
/jlne.ws/3aMenWK

Dow Logs Second-Straight Loss as VIX Charges Higher
Nasdaq
Stocks logged another dismal session on Thursday, as investors eyed tomorrow’s consumer price index (CPI) for May and digested worse-than-expected jobless claims data. Investors are particularly worried about the repercussions the inflation data may have on interest rates, amid soaring energy prices and persistent supply chain issues.
/jlne.ws/3zwKHaC

Everything in Stock Market Is Being Sped Up, Including the Crash
Lu Wang – Bloomberg
When the nineties ended, an overvalued stock market took three long years to rid itself of its accumulated excess in what is now known as the dot-com crash.
That a similar reckoning has needed just 14 months to play out now is a sign of how fast moving this market is — and how dangerous it’s become for anyone believing they can pick a moment to buy and sell.
/jlne.ws/3xH4SRT

Inflation Hits 40-Year High: Stock Investors React
Vildana Hajric and Denitsa Tsekova – Bloomberg
So much for peak inflation.
US consumer prices surged to a 40-year high, defying expectations that gains would start to moderate after the Federal Reserve began tightening. Stocks sank, short-dated Treasury yields spiked and the dollar jumped on Friday as traders priced in three straight Fed rate increases of 50 basis points each.
The jaw-dropping data — an annual rate of price gains that hit 8.6% last month — drew instant reaction across Wall Street.
/jlne.ws/39mj21k

Billionaire investor David Einhorn sees gold rising much higher — and says the Fed is bluffing about its ability to tame inflation
George Glover – Business Insider
The Federal Reserve is only “bluffing” as it tightens monetary policy to curb inflation, Einhorn said.Gold is up 1.8% this year and currently trades at just under $1,850 an ounce.
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Trafigura posts record half-year profit as commodities volatility intensifies; One of world’s biggest traders says fallout from Ukraine war has also created strains
David Sheppard and Tom Wilson – FT
Trafigura reported record half-year profits as volatility and disruption in commodity markets, exacerbated by the war in Ukraine, supercharge earnings for the world’s biggest traders. The group’s net profit for the six months to the end of March was $2.7bn, up 27 per cent from last year, with the company trading a record volume of oil and metals, its two key divisions. The results offer the first glimpse of how some of the largest commodity traders have fared as a result of soaring prices and the redrawing of trade flows following Russia’s invasion of Ukraine.
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Watch NN Group CEO David Knibbe Expects ‘Lots of Volatility’ Ahead
Bloomberg (Video)
NN Group Chief Executive Officer David Knibbe said inflation, China lockdowns, and the ongoing invasion of Ukraine means he expects a “lot of volatility” going forward, while noting the insurance sector traditionally benefits from higher interest rates. He spoke to Anna Edwards on “Bloomberg Markets: Europe” on June 7, 2022.
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Oil’s Weekly Gain Blunted as Raging US Inflation Roils Markets
Julia Fanzeres and Alex Longley – Bloomberg
Oil was headed for a weekly gain with tight fuel supply balances sustaining bullish fundamentals, though accelerating US inflation sent broader markets tumbling and capped crude’s advance.
West Texas Intermediate fell as much as 3.2% on Friday, reversing earlier gains that were driven by signs of China starting to ease virus curbs in key cities. The US Labor Department reported inflation quickened to a 40-year high, chilling broader markets and potentially signaling to the Federal Reserve to extend an aggressive series of interest-rate hikes.
/jlne.ws/3NHP0Ed

Fed Interest Rate Hikes Expected to Stay on Path After Inflation
Steve Matthews – Bloomberg
May’s red-hot inflation hardened expectations the Federal Reserve will keep raising interest rates in half-point steps through September, with talk of an even larger move mounting in the conversation.
Investors increased bets on a 75 basis point hike after data Friday showed consumer-price growth accelerating to a fresh 40-year high, though Fed watchers generally doubt Chair Jerome Powell would take that step next week.
/jlne.ws/39kbITT

The world must brace itself for a further surge in oil prices
David Sheppard – Financial Times
JPMorgan’s chief executive Jamie Dimon thinks oil prices could surge to $175 a barrel later this year. Jeremy Weir, the head of commodity trader Trafigura, says oil could go “parabolic”.
Energy Aspects, a consultancy with clients stretching from hedge funds to state energy companies, says we are facing “perhaps the most bullish oil market there ever has been”. Goldman Sachs thinks oil prices will “average” $140 a barrel in the third quarter of this year.
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Exchanges

ETD Revolution: Building in Flexibility for the Next Generation of ETD Products
First published on DerivSource the 9th June 2022.
Eurex
In a DerivSource commentary, Markus Schiller, project lead and Thomas Winter, head of Trading Design, discuss how Eurex is revolutionising its ETD infrastructure to build a scalable and future-proof platform capable of supporting the trading needs of today and tomorrow. They explore changes that enable initiatives that directly benefit both buy and sell-side market participants: better basis trading, delta neutral volatility strategies in single stock options and an improved setup for weekly options.
/bit.ly/3zqim5H

Cash Liquidity Provider Incentive Program for Currency Derivative Products in 2022
HKEX
Hong Kong Futures Exchange Limited (“the Exchange” or “HKFE”) is pleased to announce the Cash Liquidity Provider Incentive (“Cash LP”) Program for trading USD/CNH Futures, Mini USD/CNH Futures, USD/CNH Options and INR/USD Futures contracts from 4 July 2022 (T session) to 30 December 2022 (T session)1
/bit.ly/3xdouva

SGX Group reports market statistics for May 2022
SGX
Derivatives volume rises amid optimism over China recovery
Securities daily average value climbs
Singapore Exchange (SGX Group) today released its market statistics for May 2022. Derivatives volume rose amid broad optimism over China’s economic recovery alongside higher volatility in global markets.
/bit.ly/3aRBdfS

Strategy

Investors are hedging for less downside in the stock market, a bullish signal that builds the case for 8% upside in the S&P 500, JPMorgan says (edited)
Matthew Fox – Business Insider
The bank said with signs that inflation volatility is peaking, the S&P 500 should trade at a fair value of 4,400.”Reduced demand for hedging equity risk is a bullish signal as it likely reflects low equity positioning by investors,” JPMorgan said.
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Watch Morgan Stanley’s Skelly Sees Market Downside Limit at 5%-10%
Bloomberg (Video)
Daniel Skelly, head of market research and strategy at Morgan Stanley Wealth Management, predicts the lack of a US recession will act to limit to the recent decline in equity markets. “There’s probably a volatile summer ahead of us but we still don’t see an economic contraction. And with that you’re probably going to be limited to maybe 5%-10% further downside,” he says on “Bloomberg The Open.”
/jlne.ws/3xDBR9u

Here’s the ‘defensive twist’ BlackRock recommends for ETF investors in a slowing economy
Christine Idzelis – MarketWatch
Hi! For this week’s ETF Wrap, I spoke with Gargi Chaudhuri, BlackRock’s head of iShares investment strategy for the Americas, about which exchange-traded funds investors might consider in a slowing economy amid concerns over high inflation.
/jlne.ws/3tvpGJn

The Best ETFs to Buy & Trade in June 2022
Ryan Sullivan – tastytrade
Exchange Traded Funds (ETF) are securities that pool stocks into one tradable instrument. Usually, ETFs track an index and are comprised of the individual stocks that make up that index. However, ETFs can be structured to track anything.
The very first ETF was the SPDR S&P 500 ETF (SPY), which began trading in 1993 and tracks the S&P 500 Index.
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Miscellaneous

The wild, hair-raising ride of a rookie investor who battled NFT hackers and dodged the crypto crash. ‘The question every trader has is — when do you sell?’
Quentin Fottrell – MarketWatch
Vinny Zane has a taste for life — and an appetite for risk.
The 38-year-old teacher and father of a 2-year-old son on Brooklyn’s Coney Island got into crypto in 2017 with $4,000 worth of Bitcoin, and jumped into NFTs, or non-fungible tokens, last year.
“It was a learning curve for me,” he told MarketWatch. “We’re still fairly new in the cryptocurrency space even though it’s been around for over a decade. I started FOMO-ing into all these little coins, and everything was doing well at the time. I was, like, ‘Whoa, it’s incredible. I’ve no idea what I’m buying, but I’m going to keep buying.’ My $25,000 ballooned to $63,000 super-fast. I was like, ‘OMG, this is amazing.'”
/jlne.ws/3O58rqe

Are you overreacting to the volatile stock market? These are the four questions you need to ask yourself
CD Moriarty – MarketWatch
Is this the time you have been waiting for to make a move? Or are you just reacting?
Procrastinators may find the current investing-market conditions to be an advantage, while reactors may do something without considering the whole picture.
We know that selling because the market is down is not a rational approach to rebalancing investments. Despite your head spinning with the rise in mortgage rates, drop in the stock market and acceleration in inflation, do not let fear set in.
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