Hedging in High Demand as Wall Street Questions S&P 500’s Bounce; Euro Bulls Put $1.10 Back in Sight as Lagarde Talks Up Hikes

May 23, 2022

Lead Stories

Hedging in High Demand as Wall Street Questions S&P 500’s Bounce
Demand for single-stock protection is highest since March 2020
S&P 500 will bottom near 3,500, results of MLIV’s survey show
Elena Popina – Bloomberg
Risk appetite is making its way back in the stock market, but among options traders, concern is high that the selling isn’t over yet.
One of the key signals for the options market — demand for hedging against losses in individual companies — shows that a seven-week rout did little to tame traders’ appetite for the hedges. In fact, the ratio of put to call contracts on individual stocks on the Cboe rose to the highest level since March 2020. While protection appetite subsided on the index level after a 19% S&P 500 slump, traders are still guarding against single-stock blowups.

Euro Bulls Put $1.10 Back in Sight as Lagarde Talks Up Hikes
Vassilis Karamanis – Bloomberg
The euro rose to its highest level in four weeks, boosted by hawkish comments from European Central Bank President Christine Lagarde, with options traders positioned for further gains.
Lagarde said that the Governing Council is likely to start raising interest rates in July and exit sub-zero territory by the end of September. The euro extended an early advance and rose by as much as 1.2% to $1.0688, a level not seen since April 26. A popular bet in the options market is looking for the euro to extend its rally to $1.10.

Options Traders Target Microsoft Stock Amid Big Tech Pullback
Puts have been more popular than usual in the options pits
Jake Scott, Assistant Editor – Schaeffer’s Investment Research
Technology stocks have come crashing back down to earth amid Wall Street’s 2022 selloff, with Microsoft Corporation (NASDAQ:MSFT) and Big Tech shedding a combined $2.5 trillion in market cap year-to-date. Microsoft stock is brushing off a price-target cut to $325 from Jeffries earlier today, and was last seen 1.4% higher at $256.14. Despite today’s gains, MSFT still sits 23.7% lower in 2022, and has logged six weekly losses in the last seven.

How to stop margin calls from blowing up markets
Liam Proud – Reuters
LONDON (Reuters Breakingviews) – Margin makes the financial system safer, but margin calls can be problematic. That’s the paradox regulators, traders and clearing houses are grappling with in the wake of the March 2020 panic and recent volatility in energy prices. The fix is to boost margin during good times, even if that makes trading costlier.
The structure of today’s global derivatives market dates back to 2009. The previous year, an opaque web of bilateral “over-the-counter” (OTC) contracts, such as credit default swaps, dragged systemically important lenders to the brink of collapse. Policymakers by forcing banks to clear more derivatives through central counterparties (CCPs). These bodies, typically owned by bourses like the London Stock Exchange, stand between buyer and seller and protect either party if the other blows up.


Building the market for ESG derivatives
ESG is among the fastest growing segments of capital markets today. However, many challenges remain from fragmentation of data to low liquidity in listed instruments. Eurex spoke with Julien Nizard, European Head of Equity Derivatives Trading at J.P. Morgan, about the market for ESG derivatives in equities and how the firm was helping clients meet their mandate.

Regulator’s Column: Live engagement and voting expected at all AGMs for FYs ending 30 June 2022 or after
Shareholders must be able to make decisions on an informed basis. This is true when making decisions on whether to buy, hold or sell securities, as well as when voting on corporate actions and other resolutions at shareholder general meetings.
Amid the COVID-19 pandemic, virtual general meetings have become the norm following the introduction of temporary legislative relief. The virtual format of meetings has its benefits, not least enabling public health and safety. Yet it also has challenges. In recognition of these aspects, we issued a Regulator’s Column on 16 December 2021 to introduce practices aimed at ensuring shareholders remain well-informed even as general meetings go virtual.

First Week of LNG July 15th Options Trading
Investors in Cheniere Energy Inc. (Symbol: LNG) saw new options become available this week, for the July 15th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the LNG options chain for the new July 15th contracts and identified one put and one call contract of particular interest.

Lhyfe lists on Euronext Paris
EUR110 million raised
Market capitalisation of EUR410 million
3rd listing of a cleantech company on Euronext Paris in 2022
13th listing on Euronext Paris in 2022
30th listing on Euronext in 2022
Paris – 23 May 2022 – Euronext today congratulates Lhyfe, an independent producer of green hydrogen to reduce carbon emissions in the transportation and industry fields, on its listing on Compartment B of Euronext’s regulated market in Paris (ticker code: LHYFE).

MIAX Exchange Group – Holiday Schedule – Memorial Day 2022
Please be advised that the MIAX Options Exchange, MIAX Pearl Options Exchange, MIAX Emerald Options Exchange and MIAX Pearl Equities Exchange will be closed on Monday, May 30, 2022 in observance of Memorial Day.

Regulation & Enforcement

MiFID II: More Harm than Good?
MiFID II superseded MiFID in 2018, covering a wider EU financial market.
The UK is considering drifting away from MiFID II with competition-friendly regulations.
Finance Magnates
MiFID II has changed the European financial regulatory landscape in 2018. It was one of the most fundamental and far-reaching regulatory regimes that impacted everyone with business relations with the European Union.
However, the industry did not accept the regulations with open arms. Many have pointed out some of the critical aspects of such rules: one being the regime’s ability to kill competition in the European financial market.

[et_social_follow icon_style="slide" icon_shape="circle" icons_location="top" col_number="4" counts="true" counts_num="0" total="true" outer_color="dark"]
Speedier Wall Street Trades Are Putting Global Finance On Edge

Speedier Wall Street Trades Are Putting Global Finance On Edge

First Read Hits & Takes John Lothian & JLN Staff Today we have part three, the final segment, of our Open Outcry Traders History Project interview with George Hanley. Hanley talks about some of the educational and charitable endeavors he has funded to promote...

We visit more than 100 financial news websites daily (Would YOU do that?)

The Spread

Past Options Newsletters