JLN Options: Options Measure Shows Investors Seeking Safety; Watch Volatility Straining Energy Markets

Nov 17, 2022

Observations & Insight

Cboe Global Markets is looking smarter and smarter for having shut down its bitcoin futures contracts affiliated with the Winklevoss twins, as Genesis Trading is one of the latest firms to be caught up in the FTX fallout. The Financial Times reported “Genesis Trading has halted withdrawals at its lending unit.”

Instead, Cboe went out and bought ErisX, which had a market model that matched Cboe’s tastes better, and renamed it Cboe Digital. At the recent FIA EXPO, Cboe Digital was well represented. Cboe did a nice job of presenting the brand. ~JJL

Lead Stories

Options Measure Shows Investors Seeking Safety
Hardika Singh – WSJ
A ratio of put options relative to call options tied to individual stocks recently hit its highest level in history, according to Cboe Global Markets and a Dow Jones Market Data analysis of data going back to 1999. The jump to 1.46 surpasses the previous 2022 high of 1.3 logged about a week ago. Typically, a greater number of put options relative to call options signals bearish sentiment among traders.

Watch Volatility Straining Energy Markets
Bloomberg (VIDEO)
Engie CEO Catherine MacGregor, Schneider Electric CEO Jean-Pascal Tricoire and Industry Capital Partners CEO Yngve Slyngstad discuss Europe’s energy crisis.

LME raises initial margins on nickel by 28% after volatility
The London Metal Exchange (LME) is hiking initial margins by 28% on nickel, which the exchange has targeted for heightened monitoring due to heavy volatility in recent days.
A notice released on Wednesday said the initial margin for nickel would climb to $6,100 a tonne effective after close of business on Friday, from $4,765 previously.

Nasdaq Drops Sharply, But Market Volatility Decreases
US stocks closed lower on Wednesday, after Target Corporation (NYSE: NYSE:TGT) posted downbeat quarterly results and issued weak holiday-sales outlook. The S&P 500 consumer discretionary sector, as a result, dipped 1.5% on Wednesday. Micron Technology (NASDAQ:MU), Inc. (NASDAQ: MU) shares dropped around 7% on Wednesday after the company announced it is reducing DRAM and NAND wafer starts by approximately 20% versus fiscal Q4 2022.

Freedom ETF Challenger Among Latest Fund Proposals
Heather Bell – ETF.com
Derivatives Strategies
Amplify has filed for the Amplify Volatility Income Strategy ETF (IVIX), which will track the Defined Risk Volatility Income Index. The strategy will allocate between U.S. Treasury securities and covered short VIX options, with the fixed income portion of the portfolio serving to preserve capital, and the VIX options strategy designed to offer upside performance when markets are flat or on a downward trend. The options will be held by a Cayman Islands subsidiary.


COP27: Cboe Global Markets and Deutsche Börse join the Net Zero Financial Service Providers Alliance
Sustainable Stock Exchanges Initiative
On the occasion of COP27, two new exchanges are joining the Net Zero Financial Service Providers Alliance (NZFSPA) to support a net zero transition of their markets and commit to becoming net zero by 2050 at the latest. Part of the Glasgow Financial Alliance for Net Zero (GFANZ), the NZFSPA is a global group of Financial Service Providers committed to supporting the goal of global net zero greenhouse gas emissions by 2050 or sooner, in line with the ambition to limit the global temperature increase to 1.5°C above pre-industrial levels. Organised into 6 sub-groups, the NZFSPA brings together 27 financial market service providers, including 6 exchanges. With Cboe Global Markets and Deutsche Börse joining, the subgroup of exchanges is now 8 members strong and the largest subgroup within the alliance.

Cboe Global Markets Declares Fourth-Quarter 2022 Dividend
Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, today announced its Board of Directors has declared a quarterly cash dividend of $0.50 per share of common stock for the fourth quarter of 2022. The fourth-quarter 2022 dividend is payable on December 15, 2022, to stockholders of record as of November 30, 2022.

Why VIX™ Index Options and Mini VIX™ (VXM) Futures Got a Tick Update
Arianne Adams, Senior Vice President, Head of Derivatives and Global Client Services, Kristin Boyd, Vice President, Derivatives Sales, and Anthony Montesano, Vice President, Market Structure – Cboe
We hear you. After extensive conversations with our market participants, we recently made changes to some of our volatility products. So, what’d we do? With the aim of increasing access for end users, we altered the tick increments for Cboe Volatility Index (VIX ) options and Mini VIX™ (VXM) futures, which went into effect a month ago (October 3). Specifically, VIX options tick increments went from nickels to pennies for bid/offers below $3 and from dimes to nickels for bid/offers above $3. VXM futures tick increments also went from nickels to pennies.

SGX Group welcomes eBest Investment & Securities Co. Ltd. as Derivatives Trading Member SGX Group
SGX Group is pleased to welcome eBest Investment & Securities Co. Ltd. as a Trading Member of its derivatives market. Founded in 1999, eBest Investment & Securities Co. Ltd is one of the top brokerage firms in South Korea providing investment brokerage and financial related services. Today, it serves some of the largest institutions and corporates, as well as retail investors in Korea.

Regulation & Enforcement

Finra Warns of Small-Cap IPO Manipulation
Michelle Chan – WSJ
The Financial Industry Regulatory Authority, Wall Street’s self-regulator, alerted its members to what it calls “a heightened threat of fraud” associated with unusual price spikes in small-cap IPOs on U.S. stock exchanges.
The regulatory notice published Thursday warned that certain small-cap issuers—typically those that raised less than $25 million—may be subjected to pump-and-dump-like schemes, which appear to be linked to social media scams.

Keynote of Chairman Rostin Behnam at the 2022 U.S. Treasury Market Conference
Good afternoon. It is a pleasure to join you today in person as we discuss some of the current issues facing the U.S. Treasury Market.[1] The Russian invasion has been top of mind for most of 2022, chasing the heels of the multi-year Covid-19 pandemic and stacked with monetary and fiscal policy shifts, environmentally and geopolitically driven supply chain disruptions, and Fintech growth, evolution, and failures. In March, I found myself speaking about market developments before a global audience of futures industry professionals. [2] I was cautious but optimistic; taking cues from the past when monetary policy, geopolitics, and technological rifts resulted in tectonic shifts in our markets that compelled resilience and sound policymaking. It is the “critically important, but not always obvious interconnections” within our markets that ensure our maneuverability as regulators so that we can pivot amid predictable ripples and waves of uncertainty.


The Fed May Actually Engineer a Soft Landing. How to Play It.
Steven M. Sears – Barron’s
Jerome Powell just might be an economic magician.
The Federal Reserve chief seems to be on the cusp of achieving what many serious people have long thought nearly impossible: lowering inflation without devastating the U.S. economy—or even sparking a recession.
A so-called soft landing is increasingly becoming part of the market’s narrative. A month ago, few would have thought that such an outcome was even possible.


Investors’ incrementalism lays them open to ambush
Abby Joseph Cohen – Financial Times
Recent trading sessions have brought sharp gains in equity prices and notable declines in bond yields. These large swings are very much in keeping with the volatility witnessed throughout 2022. But, importantly, they are in notable contrast to the “incrementalism” that described much of the previous decade, dominated investors’ views and drove behaviour. Regardless of direction, many investors seem caught out yet again by the speed and vigour of market moves.

Sam Bankman-Fried wanted to let retail investors borrow money to trade crypto derivatives: CFTC head
MacKenzie Sigalos – CNBC
Sam Bankman-Fried, co-founder of bankrupt crypto firm FTX, spent almost a year trying to convince regulators to let him introduce a derivatives product that would allow retail investors to trade with borrowed money, according to Rostin Behnam, chairman of the Commodity Futures Trading Commission. In an interview with CNBC’s “Squawk Box” on Wednesday, Behnam said Bankman-Fried had been lobbying the CFTC to amend the rules so FTX could let users trade derivatives using margin rather than paying upfront. He also wanted to offer the contracts directly to users, without having to go through a futures commission merchant.

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