Observations & Insight
Nasdaq’s Kevin Kennedy Discusses GEMX Launch on AWS Cloud, Highlights Latency Improvements and Future Cloud Migration Plans
Nasdaq has been moving its markets to the cloud, and it recently announced GEMX had moved to its AWS cloud infrastructure. John Lothian News interviewed Nasdaq Executive Vice President Kevin Kennedy to discuss the launch of the latest Nasdaq market.
Options Discovery Episode 26: A Deeper Dive Into 0DTE Options Trading; Jonathan Zaionz, Senior Derivatives Analyst at Cboe Global Markets, Discusses His Recent Paper, “The Rise of SPX & 0DTE Options” and More With JLN’s Asma Awass
In this episode of Options Discovery, Asma Awass discusses a hot topic in the options industry today: 0DTE trading. This episode includes a breakdown of what 0DTE options are, how they were introduced, the benefits of trading 0DTE options, and more! Asma then sits down with Jonathan Zaionz, a senior derivatives analyst at Cboe Global Market, where he discusses his recent paper, “The Rise of SPX & 0DTE Options.” Jonathan also digs deeper into the different topics of 0DTE trading. You can download Jonathan’s paper here: https://go.cboe.com
Goldman Says Sharp Drop in Volatility Is Opportunity for Hedging
Michael Msika – Bloomberg
The recent sharp pullback in volatility as year-end approaches creates hedging opportunities given the cloudy outlook for equities, according to Goldman Sachs Group Inc. strategists.
Wall Street’s “fear gauge” — the VIX volatility index — last week hit the lowest since the coronavirus pandemic. But investors continue to weigh risks to the outlook, ranging from geopolitics, next year’s busy elections calendar and the potential for shocks on the economic growth front, the team led by Christian Mueller-Glissmann wrote in a note dated Nov. 27.
Outlier Trade Bets on 250 Basis Points of US Rate Cuts in 2024
Edward Bolingbroke – Bloomberg
At least one trader in the options market is positioning for as much as 250 basis points of easing by the Federal Reserve next year.
The wagers, made using so-called SOFR options that reference the secured overnight financing rate, will start to pay off if the Fed cuts its benchmark rate to about 3% by September next year. The premium paid on the wager is around $13 million and Bloomberg options scenario analysis shows it could yield $200 million if SOFR falls as low as 2%.
Bank QIS teams take zero-day options plunge
Helen Bartholomew – Risk.net (Subscription)
Banks are beginning to incorporate zero-day-to-expiry, or 0DTE, options in their quantitative investment strategies, in a move they say could boost returns and improve downside protection.
JP Morgan is one of the first to do so with an intraday momentum strategy that incorporates same-day expiry options on the S&P 500, or SPX. The bank says the latest iteration of the popular strategy offers a better risk/reward profile compared with traditional futures-based versions.
Zero-day bets boom as short-dated options grow
Elizabeth Anderson – LeapRate
On Wednesday, the offer to sign up for one of Nasdaq’s new two-week contracts expired. The rapid expansion in short-dated options that has become a popular trend with both retail traders and hedge funds is now growing beyond common forex stocks and into other classes of assets.
Wall Street Expects Both Recession and Higher Stock Prices. Here’s How Often That Happens.
Teresa Rivas – Barron’s
November will soon draw to a close, and with it another strong month for the market. Strategists are getting increasingly bullish about 2024, even as economic fears linger. For some, not even a recession is a cause for concern, and there’s some history to suggest they could be right.
Quant hedge funds bet on China despite investor exodus
Costas Mourselas and Arjun Neil Alim in London and Hudson Lockett – Financial Times
Computer-driven hedge funds are betting that China’s financial markets offer plenty of opportunities to make money, despite an exodus of foreign investors, rising US-China tensions and growing scrutiny by regulators.
China’s CSI 300 index stock index has fallen nearly 9 per cent this year, compared with a 19 per cent rise in the US S&P 500, amid concerns about Beijing’s lack of forceful policy support in response to a crisis in the property sector. Much of the foreign money that flowed into Chinese equities earlier this year has now left.
We’ve got a data-quality problem
Alexandra Scaggs – Financial Times
Coming up with a coherent narrative about the US economy is a fraught exercise today. It’s doing well and everyone hates it. Job markets are cooling but wages are rising. Fast food and rent is too pricey but gas is cheap, and so on.
In other words, the Economic Narrative — and even the outlook for policy — seems to be changing quickly from one economic report to the next. And some of these reports have become less reliable since the pandemic, as Goldman Sachs writes in a note recently made public here.
MIAX to Debut Historic Pit Trading Alongside Electronic Venue in Miami
Quiver Quantitative – The burgeoning options trading market is about to get an infusion of old-school flair with MIAX’s introduction of a new trading floor in Miami’s trendy Wynwood district. MIAX, short for Miami International Holdings Inc., is constructing a combined electronic and physical trading venue, with a 38,400-square-foot space dedicated to options pit trading, reminiscent of the pre-digital era. The move heralds a nod to traditional trading practices, even as electronic trading dominates the industry, offering a unique blend of the old and the new.
Cboe director departs to re-join Matrix as head of options execution strategy; Incoming individual had been with Cboe for almost two years after previously serving at Matrix, Dash Financial Technologies, ConvergEx Group and JP Morgan.
Annabel Smith – The Trade
Former director at Cboe Global Markets has left the exchange operator after less than two years to re-join agency only broker-dealer Matrix Executions. Michael Sparacino has been appointed head of options routing strategy at Matrix. He re-joins the agency only broker-dealer after also previously serving as a director for almost three years from 2019 to 2022.
Crypto derivatives market structure in Europe set for change with launch of new onshore markets
Market structure for crypto derivatives trading is set to evolve rapidly over the next three years as a new generation of onshore regulated trading venues launch, a study from Acuiti has found. The Future of Digital Asset Market Structure in Europe, which was released today and produced in association with D2X Group, argues that the future market structure of crypto derivatives in Europe will incorporate elements of both crypto native and traditional markets.
CME Group U.S. Treasury Futures Open Interest Surpasses Record 21 Million Contracts
CME Group, the world’s leading derivatives marketplace, today announced that open interest in its deeply liquid U.S. Treasury futures set a new record of 21,428,757 contracts on November 24.
This year, the notional value of open interest in CME Group U.S. Treasury futures grew to $2.57 trillion, an increase of 50% year-over-year, as the average daily volume (ADV) reached 5.5 million contracts, the highest annual level ever.
Regulation & Enforcement
SEC’s in-house enforcement powers at risk in US Supreme Court case
Andrew Chung – Reuters
A challenge to the U.S. Securities and Exchange Commission’s powers to protect investors from fraud comes before the Supreme Court on Wednesday in another in a series of legal attacks against federal agencies that regulate financial markets. The justices are due to hear arguments in an appeal by President Joe Biden’s administration of a lower court’s ruling restricting the SEC’s power to enforce securities laws through the agency’s longstanding in-house tribunal system. The case involves hedge fund manager George Jarkesy, who the SEC fined and barred from the industry after determining he had committed securities fraud.
Elon Musk and Mark Cuban are backing the crusade by an ‘evasive’ hedge-fund manager to strip the SEC of its in-house judges
Greg Stohr and Bloomberg – Fortune
Hedge-fund manager George Jarkesy said he didn’t recall more than 800 times during questioning at the SEC about deceiving investors. A judge at the agency said he was so evasive his testimony was all but worthless. A decade later, Jarkesy may have the last laugh.
Stock investors must ‘go against the grain’ in 2024 ‘trader’s market,’ Wells Fargo says
William Watts – MarketWatch
Wells Fargo & Co. isn’t joining in the bullish Wall Street chorus calling for the S&P 500 to end next year at 5,000 or above, warning instead that investors should be ready to “go against the grain” as the new year gets under way.
In a Monday note, Christopher Harvey, head of equity strategy, and analyst Gary Liebowitz said the bank looks for the S&P 500 SPX to end 2024 at 4,625 — roughly 75 basis points above Monday’s close, a gain of just 1.6%.
Funds carve out most bearish CBOT corn view since June 2020
Karen Braun – Reuters
Speculators are building up big short positions in U.S. grain futures on plentiful global supplies, though a tighter oilseed market and weather concerns in South America have kept funds long the Chicago soy complex.
In the week ended Nov. 21, money managers’ combined gross short positions across CBOT wheat, corn, Kansas City and Minneapolis wheat futures and options surged 8% to 645,074 contracts, the highest since May 2019, following a notoriously bearish time in the markets.
In #Vol411, Joel Hawthorne @louiswinthrop covers Monday’s #trading action, lets us know that $TSLA has some of the most active equity #options traded today (240-strike calls expiring this Friday are currently leading all equity options) and more.
Futures Market Contango and Backwardation
If you want to trade like a tastylive trader, you have to learn how to talk like a tastylive trader. Sit down with Tom and Tony as they dish out and discuss popular trading topics that give you an edge when opening, closing and managing your trades.
Hedge Fund Chief Marshall Demands Share of Treasure Found at Sea; Paul Marshall’s salvage firm in clash with South African state; SS Tilawa sunk with loss of 281 lives and $40 million silver
Jonathan Browning – Bloomberg
A company backed by one of the UK’s most successful hedge fund managers argued at the Supreme Court that it was entitled to a salvage award following the recovery of $40 million of silver from the wreck of a ship lost to a Japanese submarine in the middle of the Second World War.