GameStop, The Second Surge: Anatomy Of A ‘Gamma Swarm’; Harley Bassman Wants to Prove History Wrong With a New CDS Fund

Mar 11, 2021

$31,376/$300,000 (10.5%)

Observations & Insight

BitVol, A “VIX-Like” Volatility Index for Bitcoin, Makes Its First Trade
Matt Raebel – John Lothian News

The first-ever over-the-counter (OTC) trade of BitVol, the options-fuelled volatility index for bitcoin developed by T3 Index, the creators of the SPIKES index, was executed Wednesday by LedgerPrime, a quantitative digital asset investment firm owned by Ledger Holdings (the parent company of LedgerX). The counterparty for the trade was a cryptocurrency asset manager that was not named.

Simon Ho, CEO of T3 Index, said in a press release that the trade consisted of a March expiry 1X2 BitVol call spread, in which the counterparty client bought the spread at even premiums (or “zero cost”).

“This is a milestone for crypto investors, who will now be able to trade Bitcoin volatility as a distinct asset class,” Ho said.

To read the rest of this story, go here.

Lead Stories

GameStop, The Second Surge: Anatomy Of A ‘Gamma Swarm’
George Calhoun – Forbes
GameStop is not following the script. Despite the confident predictions by almost all the sideline observers (including myself) that the January frenzy in GME shares would end predictably, and badly… this “Stonk” has suddenly surged a second time, embarrassing the conventional wisdom once again. When GME first erupted in January, I thought it looked like just a clever way to accelerate a conventional short squeeze. (The mechanics of a short squeeze, and the “gamma” accelerant using call options, are described in my previous column.) On that basis, I expected that it would soon deflate and “return to normal.” The battlefield would be littered with the carcasses of small investors who bought at the top.

Harley Bassman Wants to Prove History Wrong With a New CDS Fund
Katherine Greifeld – Bloomberg
Making cash in the world of credit insurance typically involves a special license and strategies that cost millions of dollars to run. Rates expert Harley Bassman wants to do it in a low-cost exchange-traded fund. Bassman, who created the MOVE Index to track Treasury volatility, is co-manager for the Simplify Credit Hedge ETF (ticker CDX), a proposed new fund that will invest up to 50% of its assets in credit-default swap index payer options, according to a filing Tuesday. Those are derivatives that allow investors to either hedge their position in a company’s bonds or to make a directional wager.

Hedge-Fund Short Covering Seen as Big Driver of Nasdaq Rally
Lu Wang and Melissa Karsh – Bloomberg
The recent rally in the Nasdaq 100 has been referred to as an oversold bounce aided by a drop in bond yields. Beneath the surface, however, the surge was largely driven by hedge funds who were forced to pare their bearish bets to limit losses — rather than genuine interest.
While those funds were net buyers of stocks for a fifth straight day, short covering outpaced long sales by a ratio of 4 to 1 on Tuesday, according to data from Goldman Sachs Group Inc.’s prime brokerage unit. As the spike in the tech-heavy gauge didn’t reflect appetite for risk, some analysts say those gains would likely be short-lived.

GameStop stock hit with 6 trading halts as volatility spike results in $176 daily trading range
Matthew Fox – Markets Insider
Shares of GameStop experienced a wild trading session on Wednesday reminiscent of the late January short-squeeze that sent shares flying and led to a congressional hearing.
GameStop traded up as much as 41% in afternoon trades with no official news from the firm. The move higher was likely an extension to news earlier in the week that activist investor Ryan Cohen would be leading an initiative to transform the video game retailer into a specialized e-commerce company.

The meme-stock roller coaster just reached new heights of volatility
Wallace Witkowski and Jeremy C. Owens – MarketWatch
If you thought the meme-stock roller coaster had reached its craziest twists and turns, you were proved wrong Wednesday.
GameStop Corp. shares were on track for their highest closing price in history and their longest winning streak since the videogame retailer’s stock became the poster child for Reddit-inspired investment frenzies, but they suddenly plunged and lost more than a third of their value while being halted repeatedly, then reversed and headed higher again. Other meme stocks followed a similar pattern — gains in the morning, sudden plunges just after noon Eastern time, and an afternoon recovery.

Regulation & Enforcement

Gary Gensler, Biden’s Pick to Head SEC, Approved by Senate Committee
Paul Kiernan – WSJ
President Biden’s nominee to oversee Wall Street firms and public companies, Gary Gensler, cleared a key hurdle to Senate confirmation, garnering support from two Republicans in a vote Wednesday.
The Senate Banking Committee voted 14-10 in favor of sending Mr. Gensler’s nomination for chairman of the Securities and Exchange Commission to the Senate floor for confirmation. Republican Senators Mike Rounds of South Dakota and Cynthia Lummis of Wyoming joined all 12 Democrats in supporting the nomination.

Labor Department Holds Off Enforcement of ESG Rule for 401(k)s
Dieter Holger and Dawn Lim – WSJ
The U.S. Department of Labor said Wednesday it won’t be enforcing a Trump-era rule that makes it tougher for 401(k) plans to invest in socially minded funds. The agency is reviewing a rule finalized in the fall that prevented corporate 401(k) plans from using funds with nonfinancial goals as default investments for employees. This rule also put the onus on 401(k) overseers to show that environmental, social and governance-focused funds would have just as strong returns as competing funds. The Labor Department signaled that new rules it is exploring might be more friendly to ESG investments.

U.K. ‘Blazing Trail’ in Libor Shift for Global Derivatives
Stephen Spratt and William Shaw – Bloomberg
A clear leader is emerging in the migration away from Libor for the vast global derivatives industry.
Trading activity pegged to the U.K.’s Libor replacement stood at 46% in February with the remainder linked to the discredited benchmark, according to the latest data from the International Swaps and Derivatives Association. That compares with just 3.5% pegged to new reference rates for the Japanese yen, and about 5% for those on the U.S. dollar — markets that are worth more than $200 trillion collectively.


(Podcast) OBC 126: Fractional Options, Cash-Settled Puts, Dividend Adjustments and More
Options Boot Camp – Options Insider Radio Network
So many questions! On this episode, Mark and Dan dive into your deluge of questions about: cash-settled options mini/fractional options surprise dividend adjustments options strategies for hot stocks amazing options visualizers and much more…


Webinar: Understanding the Option Greeks
For options investors at any level, a solid understanding of the Greeks is required knowledge. In fact, The Options Industry Council (OIC) is focusing a full webinar entirely on the Greeks – one of the most important concepts in options. If you’re looking for more clarity on how the Greeks can impact positions, join OIC on March 10th for a live session led by former trader Ken Keating. We will go over: how the Greeks can affect pricing, details on Delta, Theta, Gamma, Vega and Rho, why time decay can’t be overlooked.

Registration is open! – FIA Boca 2021

A New Virtual Experience
The Options Industry Conference is Going Virtual in 2021. Join OCC and the options exchanges for the 39th annual Options Industry Conference, April 28-29, 2021. While the conference will be held virtually for the first time in history, the focus will continue to be the key topics facing the options industry today, from the regulatory shifts in the U.S. and Europe to the technological developments that are driving monumental change in markets around the globe.


Billionaire and Celebrity Endorsements Lure Retail Investors to the SPAC Craze; Once the domain of investment bankers, blank-check firms have become something even people who aren’t avid stock traders are talking about.
Charlie Wells – Bloomberg
These days it seems everyone and their mother is investing in SPACs. For Joe Kunkle, that’s literally the case. Kunkle, of Philadelphia, runs a website for options traders. He’s used to spending his days talking about trades with people who see themselves as being on the vanguard of investing trends. So he was struck last month when he got a text about a special-purpose acquisition company — or SPAC — from his mother, who isn’t an avid trader.

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