Low Treasury Volatility Is Key to Equity Rally, Tallbacken Says; A record $3.7 billion in Bitcoin options are set to expire on January 29 as interest in cryptocurrencies surges

Jan 19, 2021

$25,851/$300,000 (8.6%)
Barbara Wierzynski and Doug Harris

Lead Stories

Low Treasury Volatility Is Key to Equity Rally, Tallbacken Says
Joanna Ossinger – Bloomberg
Investors should be alert to risks for the stock market from any significant increase in a gauge of U.S. bond volatility, according to Tallbacken Capital Advisors LLC. The ICE BofA MOVE Index, a measure of implied volatility in the Treasury market, is near September’s record low. That suggests confidence in the Federal Reserve’s ability to becalm U.S. sovereign bond yields, providing a bedrock for elevated equity valuations. While the reading also signals that markets view the outcome of the U.S. election as relatively benign, the index should be monitored closely given that some major stock markets are around all-time highs, Tallbacken Chief Executive Officer Michael Purves said in a phone interview.

A record $3.7 billion in Bitcoin options are set to expire on January 29 as interest in cryptocurrencies surges
Harry Robertson – Markets Insider
Bitcoin options worth a record $3.7 billion are set to expire at the end of the month. The surge in the Bitcoin price has helped the options market expand rapidly. Investors remain bullish about Bitcoin, according to options data, despite recent volatility.

Brexit drives swaps trading to US platforms
Robert Mackenzie Smith – Risk.net
Up to 50% of euro and sterling interest rate swaps trading has moved from European and UK venues to platforms in the US since the start of the year, in Brexit’s latest impact on derivatives markets, sources report. The UK’s transition period with the European Union ended on December 31 without an equivalence arrangement for large parts of the financial services industry.

China’s Virus Flare-Up Before Holiday Stokes Oil Demand Fear
Bloomberg News
The resurgence of Covid-19 in China has led to lockdowns and calls for citizens not to travel during the upcoming Lunar New Years holidays, stoking concern that oil and fuel demand will take a near-term hit. People are being encouraged to remain in their cities to prevent the spread of the coronavirus, with some provinces offering cash incentives, or hongbao, and food vouchers to those who choose to stay home. China State Railway Group Co. cut its estimate for the number of travelers over the festive period to 296 million from 407 million amid low train ticket bookings, Xinhua news agency reported. While it’s a significant drop, it’s still higher than 2020.

Trading boom drives record revenues at Goldman Sachs
Laura Noonan and Robert Armstrong – Financial Times
A trading and investment banking boom swept Goldman Sachs to record fourth-quarter revenues, helping the Wall Street bank to more than double its profits and endorsing management’s year-old strategic plan to lift returns.
Goldman on Tuesday posted net income of $4.5bn for the final three months of 2020, up 135 per cent year on year. Revenue rose 18 per cent to $11.7bn, the highest ever for a fourth quarter. Earnings per share, at $12.08, were well above the $7.06 expected by analysts in a Bloomberg poll, in a results season in which the other big banks, such as JPMorgan Chase, also beat expectations but by smaller margins.

Hedge funds returns at 11-year-highs in 2020: data
Maiya Keidan – Reuters
Global hedge funds posted average returns last year of 11.6%, the best year for the industry since 2009, as they took advantage of market volatility due to the pandemic, according to data from industry tracker Hedge Fund Research (HFR).
Hedge fund assets rose to $3.6 trillion at the end of 2020 after adding another $290 billion in the final three months of the year, according to the data.

Exchanges and Clearing

CME Group Achieves Record International Average Daily Volume of 5.2 Million Contracts in 2020, Up 8 Percent from 2019
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that it achieved record international average daily volume (ADV) of 5.2 million contracts in 2020, up 8 percent from 2019. This record, reflecting all trading done outside North America, was driven largely by growth in Equity Index and Agricultural products, up 85 percent and 28 percent respectively.

2020 Options Year in Review
By all accounts, 2020 was extraordinary for options trading. The year began as a continuation of two straight record years for options volumes and growth that would only continue and accelerate. Case in point: the top 10 multi-list equity and ETF volume days all came in 2020, as did 23 of the top 25 days. Previously, multi-list volume had never breached 40 million contracts, and yet all top 10 volume days for 2020 exceeded that 40 million mark. This trend has thus far continued into 2021. On January 15, 2021, a new record high was set for daily multi-list volume (48.3 million contracts), which smashed the previous record set just the week prior by nearly 3 million contracts. Including the new record, the 2nd, 4th, and 6th highest days ever were all recorded in these first weeks of 2021. The highest recorded weekly options volume occurred in the second week of trading in January 2021, and the next highest weekly total occurred in the first week.

Regulation & Enforcement

What to Know About Gary Gensler, Wall Street’s New Watchdog
Liz Moyer – Barron’s
President-elect Joe Biden’s nominee to be Wall Street’s watchdog is returning to familiar ground.
Gary Gensler, nominated to be chairman of the Securities and Exchange Commission, the campaign announced on Monday, is a former Goldman Sachs partner and Treasury Department official who led the Commodity Futures Trading Commission during President Barack Obama’s administration.


CME Group Completes Migration of BrokerTec EU Government Bond and EU Repo Trading Platform to CME Globex
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that BrokerTec, a leading provider of electronic trading platforms and technology services in fixed income markets, has successfully migrated its European government bonds and repo trading platform to CME Globex.

*****It has been a long time coming, but a major accomplishment for the CME Group and Executive Chairman and CEO Terry Duffy.~JJL


Netflix’s Earnings Report Will Be a Blockbuster. How to Play It With Options.
Steven M. Sears – Barron’s
Netflix’s earnings report is about to be released into the middle of so much drama that it could easily be turned into an edgy show about the pressures of corporate America, high-stakes investing, and political intrigue.
The company, which cemented its place as one of the key content producers and distributors in the world during the ravages of Covid-19, has become a hot stock for investors. Now, the passion of the market mob faces a moment of truth at the same time that major political controversies threaten the stability of the U.S.


2021 Educational Series: The Foundations of Options Investing
As a brand new year gets under way, The Options Industry Council (OIC) is thrilled to present another round of educational webinars for investors at every level of experience. All throughout the first quarter of 2021, OIC will focus on explaining the core concepts of options investing – by defining key terminology, examining pricing theory and detailing the impact of the option Greeks. During each of our webinars in January, February and March, OIC instructors will draw on their years of real-world professional trading experience to provide investors with thorough, unbiased presentations about the benefits, and the risks, of exchange-listed equity options. Whether an investor is considering options as part of their financial plan for the first time, or is already using options and wants to learn more about these unique assets, OIC’s new, live webinars will help provide the building blocks for making informed decisions.


2020 Annual Trends in Futures and Options Trading
Description: This webinar will highlight the main trends in trading activity in 2020 in the global exchange-traded derivatives markets, with category and regional breakdowns as well as exchange and contract rankings.
Presenter: Will Acworth, Senior Vice President of Publications, Data & Research, FIA
Time: Jan 27, 2021 10:30 AM in Eastern Time (US and Canada)


London Metal Exchange Wants to Close Its Iconic Trading Floor
Mark Burton and Jack Farchy – Bloomberg
The London Metal Exchange is proposing to permanently close its open-outcry trading floor, putting an end to the century-old practice of setting the world’s metals prices in a daily shouting match. The iconic trading floor known as “the Ring” is one of the last of its kind in the world, where deals take place face-to-face, in a chaotic daily ritual of barked commands and arcane hand gestures. It has been closed since the U.K.’s first Covid-19 lockdown in March, when the LME switched to an electronic system for establishing the world’s benchmark prices for industrial metals including copper, aluminum and zinc.

(Podcast) Volatility Views 430: Strange Inauguration Volatility Plus Vanishing TSLA Puts
Volatility Views – Options Insider Network

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