Hedge fund Gammon gains 600% with well-timed bets on volatility; Eurex’s incoming options speed bump could disadvantage liquidity takers, HFT firm warns

Aug 21, 2020

Observations & Insight

Ivan Brown, head of options at NYSE, sat for an interview with Mark Longo at The Options Insider to talk about NYSE’s reopening of its trading floors, options market structure, and some of the dynamics making 2020 unique.~JJL

Lead Stories

Hedge fund Gammon gains 600% with well-timed bets on volatility
Laurence Fletcher – Financial Times
Hedge fund Gammon Capital has chalked up a 600 per cent gain so far this year, ranking it as one of the world’s best performers, thanks to well-timed bets on volatility during the coronavirus-driven market ructions.
The New York-based firm, headed by Michael Mescher, a former Barclays trader, correctly wagered on soaring volatility in early March as risky assets slumped. The $25m-in-assets firm also took options positions that rose sharply as markets rebounded in the second half of the month.

Eurex’s incoming options speed bump could disadvantage liquidity takers, HFT firm warns; As Eurex prepares to launch its PLP speed bump initiative on the DAX index options market next week, HFT firm Optiver has warned the scheme could harm liquidity takers.
Hayley McDowell – The Trade
European proprietary firm Optiver has warned the launch of a speed bump to slow down aggressive high-speed trading on the Eurex DAX index options market could disadvantage liquidity takers.

NatWest joins FX novation platform Capitolis amid record volumes; Capitolis has seen record transaction volumes of $417 billion in the second quarter of 2020 on its FX options novations platform.
Annabel Smith – The Trade
Foreign exchange novation platform provider Capitolis has confirmed that NatWest is the latest major institution to join its network, following record volumes earlier this year. Capitolis said it achieved a record $417 billion in notional for FX options novations during the second quarter, almost doubling the volume from the year prior.

Bitcoin Options Open Interest Nears All Time High – But Rise in Puts Could Presage Drop
Omkar Godbole – Coindesk
While open positions in bitcoin (BTC) options have risen to near record-high levels, it’s not necessarily a good thing for those hoping for the rally in the cryptocurrency to continue. The total number of outstanding BTC options contracts – open interest (OI) – increased to $2.10 billion Thursday – just shy of the all-time high of $2.11 billion in late July, per data from Skew.

Finding the Right Technology Product
Frank Kaberna – TastyTrade
The technology sector is up 400% in the last decade, and, while there’s no telling where tech stocks go from here, it’s evident that they are some of the most prominent names in the market. In 2010, Exxon (XOM) was the S&P 500’s largest component, and Apple (AAPL) and Microsoft (MSFT) were the only technology stocks in its top five. Today, the index’s top five is all tech, and there isn’t an energy company in its top thirty names.

Exchanges and Clearing

Competition to heat up among U.S. stock exchanges with new entrants
John McCrank – Reuters
Three new U.S. stock exchanges are set to launch by the end of September, vying for market share against incumbents like the New York Stock Exchange and Nasdaq Inc (NDAQ.O), which have benefited from elevated trading volumes during the coronavirus pandemic.
Silicon Valley-based Long Term Stock Exchange (LTSE) goes live on Aug. 28, starting with two stocks and then ramping up to include all securities by Sept. 9. The Members Exchange (MEMX), which is backed by a who’s who of Wall Street firms, begins a phased launch on Sept. 4, and MIAX Pearl Equities debuts on Sept. 25.

Parameter Updates Pertaining to the Concentration Margin Program – Effective August 21, 2020
CME Group
Effective August 21, 2020, CME Clearing will enact parameter revisions to its concentration margin program for futures and options. No changes will be made to the concentration margin program methodology.


The Euro’s Strength Against the Dollar Might Become Contagious
Marcus Ashworth – Bloomberg
The euro is becoming the go-to currency for safety and liquidity as we approach the U.S. presidential elections and investors bet on a rocky time for the dollar. This may be a source of pride for European policy makers in how they’ve handled the pandemic so far. Unfortunately, it’s a potential problem for exporters on the continent, not least its manufacturers. As Kit Juckes, a currency analyst at Societe Generale SA, puts it: “The dollar’s very overvalued but the euro isn’t very undervalued.”


How to avoid blowing up your trading account using options
Jonathan Garber – FOXBusiness
Options are a great tool for investors who want to limit risk but can prove costly for those who don’t know how to use them properly, according to one market pro. An option’s value is determined by a number of factors, including price, time to expiration and volatility, and investors who may be less tuned in to financial markets could be caught off guard by sudden shifts that result in the value of their purchase going to zero or even lower.


FLASH FRIDAY: Where Are They Now?
Traders Magazine Editorial Staff
Here at Traders Magazine, our weekly On the Move column is reliably one of the week’s most-read articles. This is no surprise; after all, as people we care deeply about our own careers, and we’re also very interested in what clients, colleagues and competitors — present and past — may be up to these days. But what about the long view, i.e. who’s doing what, much, much later? Is he or she still in the business? Retired? Perhaps no known forwarding address? Read on for a 1996 Traders Magazine On the Move equivalent article, with updates to the current day in parentheses. Sourcing is LinkedIn, employer websites, or media reports.

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