GameStop and AMC Stocks Bounce Back. Short Sellers Got Burned Again.

Jul 21, 2021

Observations & Insight

Lead Stories

GameStop and AMC Stocks Bounce Back. Short Sellers Got Burned Again.
Connor Smith – Barron’s
After a lackluster month for shares of AMC Entertainment Holdings and GameStop, both roared higher on Tuesday, burning short sellers along the way.
On Tuesday, AMC Entertainment stock (ticker: AMC) surged 24% to $43.09 while GameStop stock (GME) closed up 10% to $191.18. Both posted their highest close since July 9. GameStop stock is still down 10.7% month-to-date, while AMC stock is down 24% in July, according to Dow Jones Market Data.
/bit.ly/3xVRoiT

3 Reasons the Selloff in Stocks Isn’t Over Yet
Jacob Sonenshine – Barron’s
Stocks rebounded Tuesday from a plunge on Monday, but the pain for investors may not be over.
A recent rise in volatility indicates there is more to come. The Cboe Volatility Index (VIX) rose as much as 42% from June 30 to Monday, when the S&P 500 fell 1.6% for its worst day in months. Climbing Covid-19 cases spooked investors, who were already concerned that the economic recovery has peaked.
/bit.ly/3xV08Ws

Hedge Funds Won Big On OPEC Spat
Markets Insider
Money managers continue to take profits on oil futures and options contracts after crude prices hit multi-year highs in early July.
Hedge funds and other portfolio managers were net buyers of the most traded petroleum contracts in the latest reporting week, but most of the purchases consisted of buying back to close out short positions at a profit.
/bit.ly/2ToYsoW

Billionaire investor Leon Cooperman rules out an imminent market crash, trumpets ‘big tech’ stocks, and sounds the national-debt alarm in a new interview. Here are the 10 best quotes
Theron Mohamed – Markets Insider
Leon Cooperman ruled out an imminent market crash, warned that stimulus efforts are ballooning the national debt to dangerous levels, and emphasized the appeal of “big tech” stocks in a CNBC interview this week.
The billionaire investor, who converted his Omega Advisors hedge fund into a family office in 2018, also dismissed government bonds as virtually worthless and some meme stocks as ridiculously overvalued.
/bit.ly/36TflLz

Exchanges

Nasdaq profit tops Wall St. view, helped by robust trading
John Mccrank and Niket Nishant – Reuters
Nasdaq Inc (NDAQ.O) on Wednesday reported quarterly profits that topped Wall Street expectations, helped by strong trading levels and increased demand for its financial technology and investment-related products as the economy reopened from the pandemic.
/reut.rs/2UyjLVK

Nasdaq Earnings Are Surging on Retail Trading and a Covid Recovery
Bill Alpert – Barron’s
Nasdaq reported a 21% rise in June revenue and 41% jump in earnings. Shares are outperforming those of the parent of the NYSE.
Michael Loccisano/Getty Images
The waves are arriving beautifully these days for Nasdaq, the trading-market operator.
Surfing a rise in individual trading, new listings and the recovering economy, the New York-based Nasdaq (ticker: NDAQ) reported a 21% increase in its June quarter revenue, and a 41% jump in earnings.
/bit.ly/3iEC9V8

Regulation & Enforcement

Archegos Blowup Spurs House Democrats’ Demands for Tougher Rules
Robert Schmidt – Bloomberg
A push by Democrats to tighten market rules in response to the implosion of Archegos Capital Management and this year’s meme-stock mania is gaining traction in the U.S. House.
The Financial Services Committee, led by Representative Maxine Waters of California, may hold votes as soon as next week on legislation that could have broad consequences for hedge funds, online brokers and powerful trading firms, said people familiar with her plans.
/bloom.bg/3f0hYzZ

U.S. SEC chair says agency to restart swaps regulation effort
Pete Schroeder – Reuters
The U.S. Securities and Exchange Commission is likely to embark on a renewed effort to write “long overdue” rules for the registration and regulation of security-based swap execution facilities, Chair Gary Gensler said on Wednesday.
/reut.rs/2UqPvMF

Strategy

Benchmark Indices Series: Income Generation and Smoother Returns with Cboe’s BXM, BXMD, PUT and CMBO Indices
Matt Moran – Cboe
This article is part of our three-part series: “How to Utilize Cboe’s S&P 500 Index Options Benchmark Indices,” which highlights the hedging, income-generation and spread strategies investors may explore, with analysis of more than 35 years of data history of Cboe’s benchmark indices. Read part one, “Hedging Downside Exposure with PPUT, CLL and CLLZ Indices.”
In recent years, the yields on both stocks and bonds reached relatively low levels, and U.S. stock market volatility (as measured by the Cboe Volatility Index (VIX Index)) hit a record daily closing high of 82.69. Risk-averse investors in search of investments that generate income, offer smoother returns and have the potential to generate relatively strong risk-adjusted returns in this type of market environment may find utility in strategies that include the covered writing or selling of S&P 500 Index (SPX) options.
/bit.ly/3zrw6tP

Education

Derivative: Definition, Explanation, and Types
Melanie Lockert – Business Insider
When you think of investing, you may be more familiar with stocks and bonds. Another type of investment vehicle that you may not be as familiar with is derivatives. While all investing in the stock market comes with inherent risk, some types of investments tend to be riskier than others. Derivatives fall into that camp.
/bit.ly/3BnhLAp

Miscellaneous

Record call options selling may fuel market to new high
Palak Shah – Mumbai – The Hindu Business Line
Traders sold call options worth ?1.36-lakh crore on Tuesday
The selling of call options has reached a fever pitch hitting a new record this week, indicating low possibility of a sharp market crash. The pace of trading in index options is seen as a barometer of stock market sentiment.
The Nifty index, India’s key equity benchmark, is down only 2 per cent from its lifetime high, but stock market data show that at the net level (net of options buying and selling), traders have sold call options worth nearly ?1.36-lakh crore on Tuesday. A similar high was last seen before the 2019 general elections.
/bit.ly/3wWbnwj

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Past Options Newsletters

The Spread – July 30, 2021

The Spread – July 30, 2021

Earnings season in full bloom; Options lead year-to-date derivatives volume; Robinhood’s IPO; John gets real with Get Real VR: Conflicting factors underpin volatility; Cboe cleared for fall European competition; and the Cboe Options Institute’s Kevin Davitt talks about vega in this week’s “Term of the Week.”

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