Morgan Stanley Sees Two Big Reasons Low Volatility Will End

Apr 15, 2019

Observations & Insight

The Spread – Gavel Action

There was some big courtroom news this week – we give all the updates in this episode of “The Spread.”

Watch the video and see the stories referenced here »


Which markets are closed on Good Friday
Chris Matthews – MarketWatch
Major U.S. exchanges will be closed on Good Friday, while the most-watched European markets will be closed on both Good Friday and Easter Monday.

****SD: There will not be a JLN Options newsletter on Friday.

Lead Stories

Morgan Stanley Sees Two Big Reasons Low Volatility Will End
Joanna Ossinger – Bloomberg (SUBSCRIPTION)
A combination of low liquidity and high complacency mean cross-asset volatility won’t stay at historic lows for much longer, according to Morgan Stanley.
“There are still two things that argue against the current levels of volatility being correct or sustainable,” cross-asset strategist Andrew Sheets said in an interview Friday. “The first is that market liquidity is still not great. The second: I’m not sure that the market in its newfound optimism has taken the story to the logical conclusion” about where asset prices are headed, he said.

****SD: Non-paywalled repost via here.

BitMEX to Open a Crypto Options Platform, the CEO Reveals
Arnab Shome – Finance Magnates
The peer-to-peer crypto trading platform BitMEX is considering to expands its services by launching a cryptocurrency options platform.

****SD: Meanwhile, another crypto options exchagne is making news – LedgerX Reveals Bid to Beat Bakkt to Physical Bitcoin Futures Launch.

Japan’s ‘Golden Week’ Has Traders and Markets Worried
Shoko Oda – Bloomberg (SUBSCRIPTION)
Japan’s extended spring vacation, when a series of national holidays bunch up, is known as “Golden Week.” This year adds the May 1 accession of the new emperor, Crown Prince Naruhito, to the mix. The result: a 10-day stretch that wipes out six trading sessions — the longest market closure since the end of World War II. What might sound like a nice, relaxing break actually has traders and regulators alike fretting about the potential for cash shortages, market volatility or even the kind of “flash crash” that happened during Japan’s last New Year holiday. That was only four days long.

BofA extends financing for activist Bramson’s Barclays stake; Investor widens duration of ‘put’ and ‘call’ options, according to US securities filing
David Crow and Owen Walker – Financial Times (SUBSCRIPTION)
Edward Bramson, the activist investor targeting Barclays, has extended the duration of a controversial arrangement with Bank of America that allowed him to build the majority of his stake with a $1.4bn loan.

****SD: Duration extended from October this year to December 2020.

Hedge funds’ oil positions start to look stretched
John Kemp – Reuters
Hedge fund managers continue to accumulate positions in crude and gasoline in the most sustained bull market since 2017 but the market is starting to look stretched and the balance of risks is shifting to the downside.

Exchanges and Clearing

Nairobi bourse to establish derivatives exchange by end of 2019
Kenya’s Nairobi Securities Exchange (NSE) plans to establish a derivatives exchange by the end of 2019, an official said on Monday.

Indian bourses shine in derivatives
Ashish Rukhaiyar – The Hindu
Indian exchanges do not offer trading in exotic derivative instruments like their counterparts in the developed markets in the U.S. and Europe, but that has not stopped the bourses from becoming one of the largest derivative trading centres globally.


IG Group seeks new chair as Andy Green steps down
Sarah Provan and Cat Rutter Pooley – Financial Times (SUBSCRIPTION)
IG Group chairman Andy Green will step down in September, as the online derivatives trader overhauls its management in the face of a regulatory clampdown.
IG, the biggest online provider of “contracts for difference”, appointed a new chief executive, June Felix, the former president of Verifone in Europe, last October.


Carry Trade Lifts Emerging Markets Still on Lookout for Growth
Netty Idayu Ismail and Lilian Karunungan – Bloomberg (SUBSCRIPTION)
If the muted reaction to the flurry of potentially market-moving events last week is anything to go by, emerging-market currencies are unlikely to be headed into a period of major price swings. But that’s just fine for the carry trade.

BNP’s Shing Says Investors Haven’t Loaded Up in Bull Recovery
Bloomberg (VIDEO)
Edmund Shing, global head of equity derivative strategy at BNP Paribas, discusses volatility and liquidity as he sees investor caution in spite of the bull market.


Funds hit new record short in CBOT corn but load up on hogs
Karen Braun – Reuters
Speculators established yet another record bearish position in Chicago-traded corn last week, but any short-covering rally in futures that might result is likely to be lackluster.

Quiet Quarter on Wall Street Hurts Goldman’s Results
Goldman Sachs Group Inc.’s first-quarter profit fell 21% from a year ago as quiet trading and underwriting took a toll across Wall Street.
Goldman posted a quarterly profit of $2.25 billion, or $5.71 a share, on revenue of $8.81 billion. Both are lower than a year ago, when a newly amped-up market generated outsize trading fees.

INTRODUCING: The 10 people transforming investing
Business Insider
….During his time as head of derivatives strategy at Macro Risk Advisors, Pravit Chintawongvanich provided investors with an entry-level education to the complicated world of volatility. Along the way, he brought splashes of color by chronicling the moves of traders like “50 Cent” and the “VIX Elephant.”

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