Meme Stocks’ Latest Frenzy Isn’t About a Short Squeeze

Jun 11, 2021

Lead Stories

Meme Stocks’ Latest Frenzy Isn’t About a Short Squeeze
Anna Hirtenstein – WSJ
Meme stocks have made a comeback, with one big change: this time around, short sellers aren’t a big player in the market.
Individual investors have been gearing up for some weeks to take on hedge funds that are betting against their favorite stocks. In January, their strategy of banding together online to send a handful of shares like GameStop Corp. “to the moon” allowed them to deliver sharp losses to their deep-pocketed opponents and claim a victory over Wall Street pros.

Bitcoin at $200K by Year’s End? Some Crypto Options Traders Make That Bet
The long-term bullish bet is akin to buying a lottery ticket.
Omkar Godbole – Coindesk
Some bitcoin options traders are making outlandish wagers, betting on a rally to a six-figure price by year end even as the cryptocurrency continues to struggle following last month’s 35% drop.
According to data provided by Laevitas, the dominant cryptocurrency options exchange Deribit saw a total of 425 bitcoin (BTC, -0.67%) call option contracts, with a strike price of $200,000 and an expiration date of Dec. 31, change hands on Thursday. That strike price is roughly five times the current level.

Opinion: How GameStop, AMC and other meme stocks are in control of market volatility
Mark Hulbert – MarketWatch
Close correlation is another sign that the U.S. market is now riskier
Forget “FAANG” stocks — this is a market of “BANG” stocks.
In fact, the biggest of these so-called meme stocks — social media favorites GameStop GME, 1.11% and AMC Entertainment AMC, 5.09% — appear to hold the key to the U.S. market’s volatility. When their share prices rise, so does the broad market’s volatility — and vice versa.
The best way to show this development is the growing correlation between the CBOE’s Volatility Index (VIX) VIX, -1.49% and the share-price movement of GameStop and AMC. As is evident from the chart below, these two stocks’ trailing 26-week correlation coefficients with the VIX have shot up in recent weeks.

Treasuries’ Defiant Rally Thrusts Risk Assets Back Onto Menu
Ishika Mookerjee and Abhishek Vishnoi – Bloomberg
The strongest Treasuries rally in a year is encouraging investors to pile back into riskier assets as they grow more confident the Federal Reserve is right to call a surge in consumer prices transitory.
Strategists are turning bullish on investments that experienced bouts of underperformance since yields started rising in August last year. Expensive growth stocks, especially technology companies and emerging-market assets have solidified their place on investors’ shopping lists amid the newfound comfort about inflation.

Coinbase Partners with 401(k) Platform ForUsAll To Offer Crypto Options
Retirement investment platform ForUsAll partnered with Coinbase to offer employees exposure to cryptos, in what the company said is a first of its kind.
“For too long, too many Americans haven’t had the same access to alternative investments that wealthy and professional investors have had. Our mission is to provide every American with the tools necessary to build a brighter financial future, and making these alternatives more readily available is a key step towards that,” Jeff Schulte, CEO of ForUsAll, said in a statement. “By introducing the Alt 401(k), we are democratizing access to what drives wealth for the wealthy — alternative investment options, combined with our original core offering of low-cost index funds, and personalized help.”


SGX reports market statistics for May 2021
Economic optimism bolsters derivatives demand; Singapore stock market continues to outpace global benchmark
Singapore Exchange (SGX) today released its market statistics for May 2021. Optimism of a sustained economic recovery from the global health crisis bolstered derivatives demand, while cash equities were actively traded even as inflation concerns moderated gains. Derivatives traded volume on SGX rose 6% year-on-year (y-o-y) to 18.1 million contracts in May. SGX’s suite of pan-Asia benchmark equity derivatives climbed 8% y-o-y to 13 million contracts. SGX FTSE China A50 Index Futures increased 13% y-o-y to 6.9 million while SGX FTSE Taiwan Index Futures, launched in July 2020, advanced 28% month-on-month (m-o-m) to a four-month high of 1.8 million. SGX MSCI Singapore Index Futures added 24% y-o-y to over 1 million contracts.

Regulation & Enforcement

SEC tells investors to be wary of bitcoin futures due to volatility and fraud, as regulators ramp up crypto scrutiny
Harry Robertson – Markets Insider
The US market regulator has warned investors about investing in funds with exposure to bitcoin futures, saying the market is volatile, unregulated and has the potential for fraud.
The Securities and Exchange Commission released a notice on Thursday urging those considering bitcoin futures funds “to weigh carefully the potential risks and benefits of the investment.” The notice was issued with the Commodity Futures Trading Commission.


When Buying Calls is a Terrible Idea…
David Borun – Zacks (via Nasdaq)
When most investors learn about the options markets for the first time, they tend to have the same first impulse – they want to buy calls. Most of the time, that impulse is wrong.
It’s understandable. The leverage aspect of long call options means that you get to participate in the upside profit when a stock (or other asset) appreciates and that your risk is limited if the stock declines instead.

Don’t bet on Fed to reignite FX markets – options aren’t
Price action in one-week expiry FX options since capturing the June 16 Federal Reserve announcement suggests U.S. policymakers are unlikely to reignite any actual volatility or directional moves in FX markets.


The Powerful Impact of ‘Triple Witching’
Phil Mackintosh, Senior Economist, Nasdaq – Traders Magazine
There are many reasons for market trading volumes to increase. For example, we know from previous work that market volumes tend to be higher on index rebalance dates or when broader macroeconomic events cause an increase in trading. Triple Witching, or the expiration of multiple derivatives products simultaneously, is another key event that causes volumes to be higher than average.


Personal Wealth: To Succeed at Investing, Think of Dennis Rodman
Jared Dillian – Bloomberg Opinion
Dennis Rodman is one of the greatest basketball players of all time, but you would never know by looking at his numbers. He averaged only 7.3 points per game in his professional career, and is the lowest-scoring inductee in the National Basketball Association’s Hall of Fame. He’s better-known for his tattoos, piercings, hairstyles and excursions to North Korea. But Dennis Rodman can teach us a lot about portfolio construction.
Though he was a great player, a team full of Dennis Rodmans would have been terrible because he didn’t score enough. But when you add a Dennis Rodman, who was a great rebounder and defender, to four other players who can score, he makes them a lot better. He was a member of five championship teams, including the 72-win Chicago Bulls team of 1995-96 that is widely considered to be the best ever.

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