Hedge Funds Pile Into Option Bets Yen Will Weaken Back to 160

May 9, 2024

Observations & Insight

In its latest trading update, Miami International Holdings, Inc. (MIH) revealed significant growth across its exchange platforms, with record-breaking volumes reported for April 2024. The MIAX Exchange Group, encompassing MIAX, MIAX Pearl, and MIAX Emerald exchanges, saw its multi-listed options volume soar to 142.8 million contracts for the month, marking a 26.5% increase from the previous year, and a cumulative year-to-date increase to 565.6 million contracts. Notably, MIAX Options experienced a 30% jump in monthly volume, reaching 57.4 million contracts. In contrast, MIAX Pearl Options, despite a 7.4% rise in monthly volume, faced a decrease in both market share and year-to-date volume. MIAX Emerald Options, however, reported a significant 59.4% rise in monthly volume to 35.5 million contracts. Additionally, MIAX Pearl Equities saw a 67.5% increase in monthly volume to 5.1 billion shares, underscoring a robust performance in U.S. equities trading. On the futures front, the Minneapolis Grain Exchange (MGEX) registered a 41.5% year-over-year increase in volume, totaling 339,956 contracts, with a substantial 98.4% increase from March 2024. ~JJL


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Lead Stories

Hedge Funds Pile Into Option Bets Yen Will Weaken Back to 160
David Finnerty – Bloomberg
Hedge funds are renewing their attack on the yen. Days after suspected government intervention to support the currency, leveraged funds are re-entering bets the yen will slump back toward a 34-year low in the coming weeks, according to option traders. Short-term funds have started buying one- to three-month so-called reverse knock-out call-option contracts this week, which gain in value if the dollar-yen rises. They differ from regular call options in becoming worthless if a specific level is reached, suggesting traders see officials stepping in again soon after a breach of 160 per dollar.

Poll Jitters Hit Indian Stocks as Nifty Breaks Crucial Support; Key benchmark index tests crucial 100-day moving average; There’s growing speculation about Modi’s lower seat tally
Chiranjivi Chakraborty and John Cheng – Bloomberg
Indian stocks suffered their worst day in about four months as the nervousness over the outcome of the ongoing general elections persisted.
The benchmark NSE Nifty 50 Index tumbled 1.6%, the most since Jan. 17, to fall past its 100-day moving average. In October, when the gauge closed below the crucial support, it went on to extend its fall over the next few sessions.

Crypto Monthly Trading Volume Drops for First Time in Seven Months to $6.58T
Omkar Godbole – CoinDesk
Cryptocurrency trading volume cooled in April, registering the first decline in seven months as escalating geopolitical tensions and slower inflows into U.S.-listed spot ETFs weighed over the digital assets market. The cumulative volume in spot and derivatives markets fell by 43.8% to $6.58 trillion, a sharp retracement from March’s record high of $9.12 trillion, according to a report by London-based digital assets data provider CCData.

Cocoa Futures Erase Earlier Rally as Severe Volatility Persists; Low liquidity leaves prices more vulnerable to big moves; Huge supply shortages have roiled the market this year
Celia Bergin and Gerson Freitas Jr – Bloomberg
US cocoa futures relinquished almost all their gains from earlier Wednesday, with hedge funds exiting bullish bets after a rally that sent prices surging as much as 20% in the past two days.
In another example of how the hottest commodity market this year continues to grapple with wild volatility, contracts of the chocolate ingredient for July delivery fluctuated between gains of as much as 5.4% and losses of as much as 2% in New York on Wednesday.


Cboe Global Markets and Metaurus Advisors, LLC Announce Plans to Launch Three New Innovative Equity Indices
Cboe Global Markets, Inc. (Cboe: CBOE), the world’s leading derivatives and securities exchange network, and Metaurus Advisors, LLC (Metaurus), an asset management company focusing on financial innovation, today announced plans to collaborate on three new US equity indices: the Cboe US Large Cap 100 Index, the Cboe US Large Cap Lead 50 Index (the Cboe Lead 50), and the Cboe US Large Cap Lag 50 Index (the Cboe Lag 50). The indices are targeted to launch by the end of 2024.

CME Group Reaches Multiple Records Across U.S. Crude Oil Futures
CME Group
CME Group, the world’s leading derivatives marketplace, today announced that trading in its U.S. Crude Grade futures, which are Argus-settled and trade as a differential to the global benchmark WTI Crude Oil futures, reached several records in April 2024:

Singapore wants to shake up its stock market; SGX needs help despite the country’s role as a thriving financial centre
FT Podcast
Shares in Arm drop after it reports lacklustre revenue projections, Singapore is studying proposals to shake up its struggling stock market, EU countries have agreed to use an estimated EUR3bn in profits from Russia’s frozen state assets to buy weapons for Ukraine, and a newly expanded pipeline in Canada breathes life into the oil industry. Plus, hedge fund manager Sir Paul Marshall has lost a legal battle with the South African government over shipwrecked treasure.

Robinhood Stock Jumps After Company Reports Record Revenue and Profit
Hannah Miao – The Wall Street Journal
Shares of Robinhood rose about 6% in postmarket trading Wednesday after the online brokerage reported record quarterly revenue and profits that topped Wall Street expectations.
The company posted net income of $157 million, or 18 cents a share, on revenue of $618 million. Analysts were expecting a profit of 6 cents per share on revenue of $553 million, according to FactSet consensus estimates.

Regulation & Enforcement

Crypto Wallet Provider Exodus’ NYSE American Stock Listing Postponed for SEC Review; Exodus was supposed to uplist to NYSE American on Thursday morning, but this is now delayed, the company said.
Nikhilesh De – CoinDesk
Crypto wallet company Exodus Movement will not be listing on NYSE American, the New York Stock Exchange’s sibling market, on Thursday as planned, the company announced late Wednesday.
NYSE American told Exodus on Wednesday that U.S. Securities and Exchange Commission staff were still reviewing Exodus’ registration statement, which the company said had gone effective at the end of April, according to an Exodus press release.


Retail traders are using 0DTE options again — and this is what they’re doing
Steve Goldstein – MarketWatch
According to JPMorgan, retail interest in so-called zero-day-to-expiration options rose, with selling of the Nasdaq 100 QQQ and S&P 500 SPY exchange-traded funds seeing the largest weekly sales since the beginning of the year.

Cboe (Video)
Watch #Vol411, where Scott Bauer @cboesib gives updates on yesterday’s equity options trading activity for $AAPL and $UBER (post-earnings) and more.


What is the VIX? – When volatility spikes think quality bonds
Over time, the VIX has earned the moniker of “fear index”. In this note we provide a brief explainer on the VIX, discuss some of the recent market volatility, and highlight the importance of quality bonds in times of turmoil.


Crypto Exchange FTX Is the Rare Financial Blowup That Will Repay Victims in Full; Once viewed as a near-total loss for customers, FTX’s assets have rebounded since its 2022 bankruptcy filing
Becky Yerak, Soma Biswas and Andrew Scurria – The Wall Street Journal
Defunct crypto exchange FTX said it will have more than enough money to fully repay its millions of swindled customers with interest, an outcome that seemed unthinkable when it collapsed into bankruptcy in 2022.

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