Is the VIX Broken? Draghi Hands Masterclass in Volatility Control Over to Lagarde

Oct 24, 2019

Lead Stories

Is the VIX Broken?
Nicholas Colas – TABB Forum
Despite an investment environment that is anything but ordinary, the VIX is far from its long-run average of 19. But the volatility index isn’t broken, says DataTrek’s Nicholas Colas. You just need to look a little deeper to see the options market’s red lights.
bit.ly/2okkf1K

Draghi Hands Masterclass in Volatility Control Over to Lagarde
Tanvir Sandhu – Bloomberg
Looking through the lens of rates market volatility, Mario Draghi has performed a masterclass in the art of keeping it very low. Incoming European Central Bank President Christine Lagarde will have a challenge to achieve the same effect as monetary policy nears its limits.
A successful central bank will aim to keep market volatility controlled by the predictability of its policy. Draghi has been in the business of keeping euro rates volatility suppressed, by communicating policy shifts effectively and deploying large-scale monetary easing.
/bloom.bg/366EHnU

Chinese banks look at swaptions pricing
Blake Evans-Pritchard – Risk.net
China’s four large state-owned banks are looking at pricing renminbi interest rate swaptions – a move some see as an indication that the authorities are paving the way for cheaper and more flexible hedging for domestic firms. Doubts over liquidity in the underlying swaps market are tempering optimism over the new instrument, though.
bit.ly/2odWUi1

Bakkt to Launch Options on Its Bitcoin Futures Dec. 9
Nikhilesh De – Coindesk
The Intercontinental Exchange (ICE) is launching bitcoin options contracts through its subsidiary Bakkt. Bakkt announced Thursday that it would “launch the first regulated options contract for bitcoin futures,” adding a new product to its current slate of physically-settled bitcoin futures contracts. CEO Kelly Loeffler said in a Medium post that the contracts were built in response to customer feedback, and that ICE Futures US self-certified the contract through the U.S. Commodity Futures Trading Commission (CFTC).
bit.ly/2MGMssN

Fed to Increase Temporary Liquidity Available to Markets
Michael S. Derby – WSJ
The Federal Reserve Bank of New York is boosting the amount of temporary liquidity it is willing to make available to financial markets starting this week, the bank said on Wednesday.
It said that as of Thursday, the minimum size of its overnight repurchase-agreement, or repo, operations will rise to $120 billion, from what had been at least $75 billion. Longer-term operations will rise from a minimum daily offering size of $35 billion and go up to $45 billion in interventions scheduled for Thursday and Oct. 29. The longer-term repo operations are scheduled to carry over into November.
/on.wsj.com/2p98bAA

Regulation & Enforcement

Banks are right to say that clearing houses are ripe for reform
Gillian Tett – Financial Times
Big banks do not usually gang up to demand more financial regulation, least of all with asset managers in tow. But this week some Wall Street banks are doing precisely that — albeit not in relation to their own operations, but to the clearing platform where they settle trades.
Today nine financial giants — Allianz, BlackRock, Citi, Goldman Sachs, Société Generale, JPMorgan, State Street, T Rowe Price and Vanguard — release a joint statement calling for the reform of central counterparty clearing groups (CCPs).
/on.ft.com/31GGbBx

****JB: Shots fired.

Technology

Networks of Tomorrow: Harnessing Some of Today’s Cutting-Edge Tech Trends
Matthew Lempriere – TABB Forum
The cloud, FPGA, open source and other emerging technologies are creating a much richer and more dynamic conversation around low-latency networking than ever before.
bit.ly/2MIsvBM

Strategy

Options Trade Idea on Berkshire Hathaway From Tribeca Trade Group’s Fromhertz
Bloomberg (VIDEO)
In this edition of “Options Insight,” Tribeca Trade Group’s Christian Fromhertz discusses the latest trends in financial markets and his investment strategy for Berkshire Hathaway Inc. with Bloomberg’s Abigail Doolittle on “Bloomberg Markets: The Close.”
/bloom.bg/33YatS0

Best earnings season options trades from JPMorgan quant guru Kolanovic
Akin Oyedele – Business Insider
Wall Street analysts notoriously set a low bar for corporate America when it comes to quarterly earnings.
The third quarter was likely no exception, according to quant strategists at JPMorgan who anticipate that companies will once again outperform analysts’ conservative forecasts.
bit.ly/2BHVrna

A PutWrite Can Be Much Better When Things Are Bad
Scott Nations – Nasdaq
The Nations NDX PutWrite Index closed yesterday, October 23, 2019, at 960.75 which is a gain of 13.8 percent for the year. The Nations NDX PutWrite Index is designed to generate returns which are similar to the underlying Nasdaq-100 Index but with less volatility. The result, over time, has been substantially superior risk-adjusted returns.
bit.ly/2MKh64L

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Past Newsletters

November Rally Weighs on Low-Volatility Funds

November Rally Weighs on Low-Volatility Funds

Lead Stories November Rally Weighs on Low-Volatility Funds Gunjan Banerji - WSJ Investors are dumping strategies often tapped for protection—like exchange-traded funds promising lower volatility—the latest sign that they are embracing riskier...

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