Hedge Funds Brave Stock Chaos to Lift Bets by Most in Five Years

Sep 20, 2022

Observations & Insight

According to a post on a Cboe Alumni page on Facebook, Lee Tenzer has passed away. He was surrounded by his wife Marilyn and daughters Katie, Becca and Missy at a hospital in Madison, Wisconsin. Lee was the founder of the trading firm LETCO. JLN interviewed Lee for our Open Outcry Traders History Project video series.

Lee’s first clerk was Jon Najarian and later he hired Don Wilson. He formed LETCO so he and Najarian could both trade, as an entity was required to do that. At its peak, LETCO had 75 traders and 150 employees.

I asked Don Wilson for a comment on Lee’s passing and he shared this with me:

“The Chicago trading community owes a great debt to Lee Tenzer, and I’ll put myself at the head of that list. Lee hired me as a 20-year-old graduate of the University of Chicago to join LETCO. After nine months he said, “I think you are going to do well – you tell me what you want to trade”, and shortly thereafter I found myself on a seat in the Eurodollar option pit. What I’ll most remember about Lee was the way he operated — he was a man of great integrity who always treated people fairly.”

~John Lothian

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MWE SHORT: Julie Lerner – Disruptive Tech and Entrepreneurship
JohnLothianNews.com

In this video from MarketsWiki Education’s World of Opportunity event in Chicago, Julie Lerner, CEO of PanXchange, discusses the convergence of global markets and being a successful entrepreneur. Lerner maintains that not only do you need passion, you need a specific niche. She realized she found hers when she learned how to embed options into cash contracts while working for Cargill trading Latin American sugar. Lerner’s passion is commodities, but her niche is business development. Any entrepreneur trying to develop a business must have the network and reputation to give the endeavor legs. A great idea is useless in a vacuum.

Watch the video »

Lead Stories

Hedge Funds Brave Stock Chaos to Lift Bets by Most in Five Years
Lu Wang and Melissa Karsh – Bloomberg
Professional speculators are refusing to surrender to a punishing stock market prone to choppy trends and endless volatility — boosting bullish and bearish positions at the fastest rate in five years.
As the S&P 500 plunged almost 5% last week after a surprisingly hot inflation reading, hedge funds snapped up single stocks while betting against the broad market with products like exchange-traded funds, data from Goldman Sachs Group Inc.’s prime brokerage show. Taking their long and short exposures together, the total gross trading flow rose for a fifth straight week in the largest notional increase since 2017.
/jlne.ws/3UnAntn

Oil Falls as Traders Wait For Looming Central Bank Rate Hikes
Ilena Peng and Julia Fanzeres – Bloomberg
Oil fell ahead of several global interest-rate decisions that are expected to see further monetary tightening.
The Fed and other central banks from Europe to Asia are expected to deliver interest-rate hikes this week as they seek to tame rampant inflation that’s hit demand. Liquidity thinned, leading to volatile price swings, while a stronger dollar has added to headwinds. Brent crude futures dropped to trade near $91 a barrel alongside declining equity markets.
/jlne.ws/3DAgJo6

Stocks are set to be pummeled by more volatility as companies head into a season of weak earnings, Charles Schwab says
Jennifer Sor – Business Insider
It pointed to a low rate beat-rate and low earnings growth estimates in the S&P 500 as cause for concern.Shares of companies that missed earnings estimates were down about 4% in the last quarter.
Stocks could get pummeled by more volatility through the rest of this year, as companies head into what is shaping up to be a weak earnings season, Charles Schwab warned.
/jlne.ws/3UjL5kJ

Shrinking margins could spell trouble for stock-market returns: Goldman Sachs
Isabel Wang – MarketWatch
Shrinking margins are a downside risk to stock-market returns as hotter-than-expected inflation readings and what’s expected to be another outsize interest-rate hike bring mounting uncertainties to earnings, according to Goldman Sachs strategists.
Last week’s hot inflation print “stoked concerns about the outlook for equity valuations and profitability,” wrote strategists led by David Kostin, chief U.S. equity strategist. The analysts expect the S&P 500’s SPX net profit margins “will contract by 25 bp (basis points) in 2023 to 12%, alongside positive but decelerating economic growth,” they said, in a Sept. 16 note.
/jlne.ws/3DDJP5W

Has The Market Finally Bottomed?
Eric Wallerstein – WSJ
Yes, at least according to strategists at JPMorgan Chase & Co.
In a note on Monday, a team led by Marko Kolanovic detailed why they see “limited downside for risk assets” after last week’s 4.8% decline in the S&P 500. Here’s why:
/jlne.ws/3DFrLsg

Exchanges

MEFF launches new underlying for derivatives on Acciona Energía, Applus, Unicaja, Vidrala and Rovi
BME-X
MEFF, the BME Spanish derivatives exchange, has launched futures and options contracts on Acciona Energía, Applus, Unicaja, Vidrala and ROVI shares. With their incorporation, BME’s derivatives market extend the list of contracts available for both institutional and retail investors. Following these additions, the total number of Spanish underlyings that derivatives contracts can be traded on MEFF is 51. MEFF’s suite of Financial Derivatives products is complemented by Futures and Options on IBEX 35©, and futures on the IBEX Impacto Dividendo index and on Stock Dividends from the companies with the largest trading volumes.
/jlne.ws/3dzELoq

Regulation & Enforcement

A Futures Industry Perspective – How EU Policymakers Should Respond to the Energy Crisis
FIA
With Europe facing an extraordinary shortage of energy triggered by Russia’s invasion of Ukraine, prices for natural gas and electricity have reached record highs. Political leaders are urgently discussing solutions to this crisis, including several measures that would affect the trading and clearing of futures.
/jlne.ws/3SmJetI

Education

Sell To Open vs. Sell To Close: Understand The Difference
Thomas Streissguth – Nasdaq
In options trading, investors deal in contracts to buy and sell stocks at a specific price within a limited period. Options are available on many stocks, as well as some exchange-traded funds.
Brokers and financial managers must perform due diligence on customers interested in trading options. That usually means investors must request options trading permission from their brokers or online trading platforms.
“Sell to open” is an instruction to sell or short an option to open a transaction, while “sell to close” means the reverse: closing a transaction by selling an option purchased for the account.
/jlne.ws/3dwD0bM

Miscellaneous

AMC and GameStop Round Out the Top 10 Companies Held by Robinhood Users
Matthew Fox – Markets Insider
Robinhood’s near 23 million user base is considered smart money by some, so it makes sense to track what stocks the retail group is buying.
That data is now available after Robinhood unveiled its Robinhood Investor Index, a portfolio meant to track the 100 most popular holdings on its platform.
/jlne.ws/3BWcdz6

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