One Trader Defies ECB With Bet Rates Back at Zero Within a Year

Mar 24, 2023

Observations & Insight

Lead Stories

One Trader Defies ECB With Bet Rates Back at Zero Within a Year
James Hirai – Bloomberg
One trader is defying the European Central Bank’s tough talk on inflation by betting that interest rates will be back at zero by this time next year.
If the wager comes off, it would return EUR56 million ($60.2 million) at zero cost, according to details of the options-based deal provided by two London-based traders.
/jlne.ws/3LNRPoW

India Hikes STT on Options Selling to Dampen Retail Frenzy
Chiranjivi Chakraborty and Adrija Chatterjee – Bloomberg
India raised the transaction tax on certain equity derivative products, a move that may help reign in the frenzied activity in such instruments from retail investors.
Selling an option on a security will attract a tax of 0.0625% from April 1, compared with 0.05% previously, a Finance Ministry official told reporters after amendments to the Finance Bill were approved by parliament on Friday. Tax on sale of a futures contract will be 0.125% against 0.01% now.
/jlne.ws/3ZekPcA

New-crop CBOT soybeans notch longest losing streak in over 50 years
Karen Braun – Reuters
November soybean futures on the Chicago Board of Trade ended lower for a thirteenth consecutive session on Thursday, the longest such streak since at least 1973 for new-crop soybeans within their expiration year.
The recent losses are far from records by magnitude, though the selling is the most extreme for new-crop beans in March since 2008.
/jlne.ws/3FNmzm8

Traders Rushed Thursday to Bearish Options Bets on Deutsche Bank
Gunjan Banerji – WSJ
Put options trading tied to Deutsche Bank stock surged to a multiyear high Thursday, according to Cboe Global Markets data.
/jlne.ws/3FPwAQ0

SEC Warns Investors Crypto Assets Are at Risk of ‘Significant’ Losses
Matthew Fox – Markets Insider
Long after a brutal bear market kicked off in cryptocurrencies, the Securities and Exchange Commission is warning investors that cryptocurrency investors are exposed to extreme risks that could ultimately lead to significant losses.
The bulletin from the SEC on Thursday comes more than a year after the crypto market erased $2 trillion in market value, as bitcoin, ethereum, and thousands of other crypto tokens plummeted as the Federal Reserve aggressively hiked interest rates and sparked a risk-off environment among investors.
/jlne.ws/3ni0ki7

Wall Street recovers as Fed officials calm bank fears
Stephen Culp – Reuters
Wall Street bounced back from an earlier sell-off on Friday at the end of a tumultuous week as U.S. Federal Reserve officials calmed investor skittishness over a potential liquidity crisis in the banking sector.
While all three major U.S. stock indexes started the session sharply lower on the heels of a sell-off among European banks, those losses reversed by early afternoon, repeating the intraday roller coaster ride of recent sessions.
/jlne.ws/3n9Nd2c

Europe’s Stock Slump a Sign Recession Trade is in Full Swing
Jan-Patrick Barnert and Jess Menton – Bloomberg
This week’s dizzying stock-market swings have made one thing clear for stock investors: the recession trade has arrived.
Traders are quickly shifting their bets from last year’s focus on inflation to the risks posed by an economic slowdown. That was evident once again on Friday after a renewed bout of volatility gripped equity markets around the globe, capping a volatile week after the financial sector was rocked by fears that more US and European banks could be headed for trouble as interest rates continue to rise globally.
/jlne.ws/40vSiAn

Hedge Fund Behemoths Show Boring Is Best in March Market Tumult
Nishant Kumar – Bloomberg
Double-digit losses suffered by several star traders last week is a dramatic reminder why investors are rapidly migrating towards bigger hedge funds run by an army of risk takers.
They may be less glamorous, but multi-strategy hedge funds such as Eisler Capital, Citadel, Verition Fund Management and Millennium Management have escaped the worst of the volatility sparked by the collapse of Silicon Valley Bank. They’ve recorded small gains to low single-digit losses, softening blows to portfolios hit by declines elsewhere.
/jlne.ws/3LOYGyn

Opinion: ‘Every time the bulls think they can celebrate, the Fed or the Treasury throws cold water on the party.’
Lawrence G. McMillan – MarketWatch
The stock market, as measured by the S&P 500 Index SPX, 0.25%, has tried to rally since March 12th, when the heavily oversold market began to bounce. This rally has generated several buy signals, but the fact remains that the chart of SPX is still negative — lower highs and lower lows.
It seems that every time the bulls think they can celebrate, the Fed or the Treasury throws cold water on the party by pointing out something negative about rates or about not saving every bank in the country if it goes under.
/jlne.ws/3FPWcMA

Exchanges

MIAX Exchange Group – Options Markets – Delisting of EVO Payments, Inc. (EVOP)
MIAX
EVO Payments, Inc. (EVOP) will be de-listed from the MIAX Options Exchange, MIAX Pearl Options Exchange and MIAX Emerald Options Exchange effective on Monday, March 27, 2023.
/jlne.ws/42Axppx

Strategy

Regional Bank Stocks Are in Turmoil. Here’s How to Profit From It.
Steven M. Sears – Barron’s
Every financial panic shows how little most people understand about what is happening around them in the markets and the economy.
The recent failure of two major regional banks has unleashed thousands of articles, sell-side analyst reports, and investment strategy notes that act as if the issues now before us were easily identifiable.
/jlne.ws/3JIp7mW

Traders Taking Positions in June 2024
Cboe
In the #RUTreport, @AngieMiles has your weekly update on small cap index #options – the most actively traded contracts, put/call ratios & expected moves. $RUT
/jlne.ws/3JBex0M

Education

Know Your Options: The Potential Advantages of Uncapped Structures
Michael Loukas – Cboe
For retirees and risk-averse investors, structured outcome strategies may serve as an effective risk management tool as part of a conservative investment strategy. The theory behind a structured outcome strategy is to provide access to a broad-based index, such as the S&P 500 Index, while limiting both downside losses and upside gains in the market, with particular benefit lying in the mitigation of losses.
A structured outcome strategy uses a well-defined option-based strategy to target a specific return, allowing for a specific or defined risk, at a set point in the future. Investors are protected from risk beyond their comfort zone, but their payoff is also limited to a preset maximum.
/jlne.ws/3n9RToM

Miscellaneous

How the SVB Banking Panic Recalls the Northern Rock Bank Run
Irene Finel-Honigman – Barron’s
The demise of three banks within just one week this month bears eerie resemblance to September 2007. That month saw Northern Rock, the U.K.’s fifth-largest mortgage lender, succumb to a bank run. The immediate crisis faded, but in hindsight Northern Rock was the proverbial canary in the coal mine for the global financial crisis that followed soon after.
On Sept. 13, 2007, the BBC evening news announced that the Bank of England had provided Northern Rock with emergency liquidity support. Instead of reassuring the public of the bank’s soundness, the news bulletin instigated a full-scale bank run.
/jlne.ws/3FPUzOY

How Bank Oversight Failed: The Economy Changed, Regulators Didn’t
Andrew Ackerman, Angel Au-Yeung and Hannah Miao – WSJ
On March 8, Silicon Valley Bank and Signature Bank were both, according to public disclosures, “well capitalized,” the optimal level of health by federal regulatory standards.
Days later, both failed.
“The question we were all asking ourselves over that first week was, ‘How did this happen?'” Federal Reserve Chair Jerome Powell said Wednesday.
/jlne.ws/42EOfU5

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