Observations & Insight
Patrick Kenny and Paul Nockels
JPMorgan Isn’t Sure Why VIX Curve Has Notable December Bump
Joanna Ossinger – Bloomberg
The Cboe Volatility Index’s futures curve jumps higher in December, and JPMorgan Chase & Co. strategists aren’t sure that makes sense.
Some analysts have flagged the possibility of bets on market swings shifting to December over concerns about a disputed U.S. election result. President Donald Trump has questioned the credibility of this week’s vote and launched lawsuits.
New CME futures contract looks to help traders limit risks in the pork-meat market
Myra P. Saefong – MarketWatch
Livestock traders will be able to better hedge prices risks tied to pork when the CME Group launches futures and options on pork cutouts on Monday.
The new contracts are “designed to give the U.S. pork industry and export markets tailored risk-management tools on the cutout,” said the CME, which defines a “cutout” as the value of a hog calculated by using prices paid for wholesale cuts of pork, which include the loin, ham and belly.
What Options Tell Us About Stock Splits
Phil Mackintosh – Nasdaq
Something that not many people know is that high-priced stocks tend to have above-average options activity. Given recent reports of large options positions increasing volatility (or at least momentum) in tech stocks, we thought we’d take a look at what the data shows.
UBS’s Novelli Sees More Volatility on Potential Virus Setbacks
Patrick Winters – Bloomberg
Negative surprises on the Covid-19 crisis may fuel further market volatility in Europe, including potential corporate defaults next year, according to Piero Novelli, co-head of UBS Group AG’s investment bank.
Lockdowns in Europe and restrictions on mobility will cause a double dip in growth in the fourth quarter, he said in an interview with Bloomberg TV’s Francine Lacqua. Setbacks on a Coronavirus vaccine such as delays in approval could impact markets that had surged in recent days with greater clarity the U.S. election.
‘The bounce will fail next week’: Why investors should brace for stock selling amid technical red flags, according to one analyst
Matthew Fox – Markets Insider
Investors should brace for a sell-off in stocks next week after this week’s strong strong post-election day rally, according to Fairlead Strategies founder Katie Stockton.
The S&P 500 pushed up against short-term resistance of 3509 on Thursday, and trading could get choppy from here, she said in a note to clients Thursday.
Virtu quarterly profit tops views on expenses, higher trading volumes
John McCrank – Reuters
Virtu Financial Inc VIRT.O on Friday reported better-than-expected third-quarter profits, helped by lower expenses and higher trading volumes amid pandemic-driven volatility and an ongoing surge in market participation by retail investors.
Virtu, one of the world’s largest market makers, provides a nearly continuous stream of buy and sell quotes in global assets, including equities, options, and fixed income, for investors to trade against, profiting from bid-ask spreads. The company also executes trades for institutions, banks and broker dealers.
Exchanges and Clearing
LSE and Refinitiv make commitments on trading to secure EU approval for deal
Philip Stafford and Javier Espinoza – Financial Times
The London Stock Exchange and Refinitiv have made commitments to Brussels antitrust authorities to keep trading and clearing of interest rate derivatives separate, according to documents seen by the Financial Times, in an effort to satisfy one of the regulator’s key concerns with their $27bn deal.
The formal offer was part of a package of measures the two sides submitted on Thursday and included the EUR4.3bn sale of Borsa Italiana to Euronext, which is intended to fend off another significant issue flagged by European regulators.
HKEX to Launch Hang Seng TECH Index Futures, Options
The HKFE (Hong Kong Futures Exchange) is planning to introduce futures and options contracts based on the Hang Seng TECH Index on 23
November 2020 and 18 January 2021 respectively, subject to regulatory approval and market readiness.
Hang Seng Indexes Company launched the Hang Seng TECH Index in July 2020. The index tracks the 30 largest technology companies listed in Hong Kong, including Tencent, Alibaba, Meituan and Xiaomi.
Regulation & Enforcement
House Republicans introduce bill to forbid financial transaction taxes
Brian Croce – Pensions & Investments
Two key Republican House members have introduced a bill that would prohibit states from imposing taxes on financial transactions.
Rep. Patrick McHenry, R- N.C., ranking member on the House Financial Services Committee, and Rep. Bill Huizenga, R-Mich., ranking member on the Investor Protection, Entrepreneurship and Capital Markets Subcommittee, unveiled the Protecting Retirement Savers and Everyday Investors Act on Oct. 27.
Different implied Volatilities on Different Strikes. Why?
David Borun – Nasdaq
The Black-Scholes option pricing model was revolutionary when it was introduced in 1973 and has been the gold standard for options pricing ever since. Robert Merton contributed real-world modifications to the basic equation and with Myron Scholes was awarded the 1997 Nobel Prize in Economic Sciences. Regrettably, Fisher Black had passed away before that particular recognition of his ideas and efforts.