Nasdaq ‘Fear Gauge’ Flashes Warning Signs About Tech Rally

Jul 15, 2020

Observations & Insight

How T3 Index’s “VIX-Like” Index for Bitcoin Works
By Matt Raebel

T3 Index, the creators of the SPIKES Volatility Index have created a new volatility index, which uses bitcoin options to track the volatility of the world’s first and most widely-traded cryptocurrency, bitcoin (BTC).

The index, called the BitVol Volatility Index (“BitVol”) uses strike prices from tradable bitcoin options on a popular cryptocurrency derivatives exchange to determine the expected 30-day implied volatility of bitcoin, the world’s first and biggest digital asset by market cap. Simon Ho, the CEO of T3, said via email that BitVol currently sources its data directly from Deribit, a Panama-based cryptocurrency derivatives exchange that produces the lion’s share of bitcoin options trading volume globally (at time of writing). Ho also said that T3 Index is currently working on building out an aggregated data feed from multiple digital asset exchanges, but that data from institutional platforms like the CME’s bitcoin options and Bakkt will “likely not be used at this stage.” Ho declined to comment on this topic further.

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Lead Stories

Nasdaq ‘Fear Gauge’ Flashes Warning Signs About Tech Rally
Joanna Ossinger – Bloomberg
There are more signs of possible trouble ahead for high-flying technology stocks, this time from gauges of expected volatility.
One alert stems from the widest spread since 2004 between the Cboe NDX Volatility Index, a measure of implied equity swings for the Nasdaq-100, and the counterpart so-called “fear gauge” for the S&P 500. Another comes from unusual simultaneous gains in the technology index and the NDX recently.

Farewell, Fees? How Zero-Cost Investing Caught On
Claire Ballentine and Annie Massa – Bloomberg
Investors have gotten used to paying lower fees to buy and hold stocks and funds. But the trend entered a whole new phase this past year as U.S. brokers and fund managers began offering stock trades and investments at zero cost. Any suspicion that zero-cost investing was a gimmick was quashed in October when industry titan Charles Schwab Corp. announced plans to eliminate commissions for U.S. stocks, exchange-traded funds and options. Its competitors soon followed suit — but it soon turned out that the trend could have some limits.

Virus worries and FOMO drive options bets on surging tech giants
April Joyner – Reuters
Options investors are ramping up bets on some of this year’s biggest winners, including Inc (AMZN.O), Netflix Inc (NFLX.O) and Tesla Inc (TSLA.O), even as they turn cautious on the wider market amid a resurgent U.S. coronavirus outbreak. Investors are betting that tech-related stocks will remain comparatively resilient to the coronavirus-fueled economic disruptions that have battered sectors such as retail and travel, despite growing concerns about stretched valuations following steep rallies.

Huobi’s decision to launch options trading… a strategic move?
Akash Girimath – AMB Crypto
Cryptocurrency exchange Huobi Global revealed its plans to launch Bitcoin Options. The announcement comes at a time when Bitcoin has been coiling-up and in an extended bear market, awaiting a bull run. Huobi Global’s entry into Bitcoin Options isn’t a surprise considering its dominance in the Futures market. At press time Huobi’s 24-hour Bitcoin Futures volume was the highest [$1.89 billion]. BitMEX, the derivatives pioneer stood fourth while Binance came in third.

UK firms rethink FX hedging as coronavirus and Brexit fog outlook
Olga Cotaga – Reuters
Coronavirus and the end-2020 Brexit deadline have left UK firms facing historic uncertainties, prompting many to find more flexible ways to protect their foreign exchange exposure — even if these come at a higher initial cost. The pandemic is expected to cause Britain’s biggest economic contraction in 300 years and swell unemployment, debt and corporate bankruptcies. An added risk is that Britain could cast off from the European Union next year without having agreed any trade deals.

Exchanges and Clearing

Traders Q&A – Cboe’s Harkins Discusses Trading Floor Reopen
John D’Antona Jr. – Traders Magazine
COVID-19 wreaked some degree of havoc on the exchanges and business of trading. While some operators were able to maintain status quo operations others, such as the New York Stock Exchange and Cboe Global Markets had to shut their physical trading floors and shift gears away from voice trading and open outcry amid the COVID-19 pandemic. Temporarily. The Cboe’s historic open outcry C1 trading floor was shuttered on March 13 and then amid new precautions and safeguards on June 15. Bryan Harkins, Executive Vice President and Head of Markets at Cboe Global Markets, spoke with Traders Magazine Editor John D’Antona Jr. about the reopen process.

Initial Listing of Six (6) Options on Micro E-Mini Standard and Poor’s 500 Stock Price Index Futures and Six (6) Options on Micro E-Mini Nasdaq-100 Index Futures Contracts
CME Group
Effective Sunday, August 30, 2020, for trade date Monday, August 31, 2020, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will list six (6) Options on Micro E-mini Standard and Poor’s 500 Stock Price Index Futures and six (6) Options on Micro E-mini Nasdaq-100 Index Futures contracts (the “Contracts”) for trading on the CME Globex electronic trading platform (“CME Globex”) and for submission for clearing via CME ClearPort as more specifically described in the table below.

New Product Summary: Initial Listing of Six (6) Options on Micro E-Mini Standard and Poor’s 500 Stock Price Index Futures and Six (6) Options on Micro E-Mini Nasdaq-100 Index Futures Contracts – Effective: August 31, 2020
CME Group
Initial Listing of Six (6) Options on Micro E-Mini Standard and Poor’s 500 Stock Price Index Futures and Six (6) Options on Micro E-Mini Nasdaq-100 Index Futures Contracts


Don’t Let Investing Biases Trip You Up
Jonathan R. Blau – Barron’s
Many investors and financial advisors, regardless of age or socio-economic status, too often make the same predictable investment mistakes, being bound by one critical commonality, the immutability of human nature.
These very human biases – whether cultural (conventional “wisdom”), emotional (feelings-based) or cognitive (faulty reasoning) – can induce destructive behavior when attempting to make rational financial decisions under conditions of uncertainty. As I point out below, the “smart money,” as illustrated by the actions of the Tiger 21 investment group, may be more susceptible to these biases than the rest of us.

Seeking Options Expertise
RCM Alternatives Blog
There was an interesting back and forth between our own Jeff Malec and Sean Brown of YCharts on a recent episode of ‘The Derivative’, talking what the responsibilities of a FinTech software platform are in terms of balancing nice looking GUIs and gamifying investing, and the responsibility to make sure that the users actually know what’s going on and the risks they are taking. This was brought into sharp relief last month with the tragic death of a young trader who was way over levered on Robinhood. For the nasty bits of what’s going on there, check this NY Times article.


(Podcast) The Crypto Rundown 67: BitVol vs. VIX
Crypto Rundown – Options Insider Podcast

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