Options activity hints U.S. stock market has not reached bottom

Sep 27, 2022

Observations & Insight

The Spread: OPTIONS DISCOVERY EPISODE 8; LEX LUTHRINGSHAUSEN Full interview Part 2 and Term of the week

In this episode of options discovery, JLN’s Alex Teng breaks down the options straddle. He also goes over key concepts you need to know to understand how a straddle works. In the second half of the video, Kevin “Lex” Luthringshausen from Tradier sits down for part two of an interview with JLN’s Alex Teng to explain what straddles are and how to use them as an options trader.

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Lead Stories

Options activity hints U.S. stock market has not reached bottom- Barclays
Saqib Iqbal Ahmed – Reuters
Options trading activity does not yet hint at a bottom in U.S. stocks, Barclays derivatives strategists said on Tuesday, rebutting speculation among some investors that a record surge in put option trading volumes suggested the market may be nearing a reversal.
With the S&P 500 (.SPX) marking a fresh bear market low on Tuesday, down 24% for the year, traders and investors are searching for clues as to when the market may bottom out.

Biden Team Monitoring Markets Amid Volatility, White House Says
Jennifer Jacobs and Justin Sink – Bloomberg
The White House continues to monitor global financial markets after a meeting Friday between President Joe Biden and his top economic advisers amid a slide in Britain’s pound, and the administration will continue to keep tabs on financial markets, according to the White House.
“We’re going to continue to monitor the global markets,” White House Press Secretary Karine Jean-Pierre said at a briefing Monday. “To your question about the pound, so on Friday as you all know the president and the vice president met with senior members of the economic team and got an update on the global economic developments as they regularly do.”

Volatility Bets at Highest Levels Since March 2020
Eric Wallerstein – WSJ
Over 1.1 million call-option contracts on the Cboe Volatility Index (VIX) traded on Monday, the highest since the Covid-19 crash in March 2020.
That’s over three-times the average of 313,000 contracts that exchanged hands on a daily basis for the year prior to this week.

Dow enters first bear market since March 2020 as rate, currency and economic worries reverberate
Vivien Lou Chen and William Watts – MarketWatch
The Dow Jones Industrial Average finished in a bear market on Monday for the first time in more than two years and the S&P 500 fell below its June closing low as investors fretted over a combination of interest-rate, currency and economic risks.

Financials Down as Traders Brace for More Volatility — Financials Roundup
Rob Curran – MarketWatch
Shares of banks and other financial institutions fell sharply as traders braced for a full-fledged market crisis.
The Dow Jones Industrial Average closed in bear-market territory for the first time since 2020, reflecting the speed and severity of a market rout that began in mid-August. A sudden spike in Treasury yields has destabilized global markets, with the 10-year yield set to top 4% for the first time since 2008.

Dollar Strength Creates ‘Untenable Situation’ for Risk Assets, Analyst Says
Callum Keown – Barron’s
The U.S. dollar’s recent rise creates an “untenable situation” for risk assets that has historically ended in a financial or economic crisis, according to Morgan Stanley ‘s chief equity strategist Michael Wilson.
The U.S. dollar rally paused early Tuesday but the currency remains just below the fresh 20-year highs it notched on Monday. The dollar index, which tracks the greenback’s performance against a basket of global currencies, slipped 0.4% to 113.66.

Analysis: Whipsawed forex traders say currency moves ‘remarkable’, resemble casino
Saqib Iqbal Ahmed, Carolina Mandl and Dhara Ranasinghe – Reuters
Trading in tumultuous foreign exchange markets is akin to being in a casino right now, according to some traders navigating markets that have been whipsawed as central banks and governments try to right their economies.
In the last week, sleep-deprived traders have worked flat-out advising clients on the markets’ extraordinary moves: the crash of Britain’s pound to an all-time low, the Japanese monetary intervention to prop up the falling yen, and the euro’s deeper plunge below dollar parity.

Pound Still `Extremely Vulnerable,’ Rabobank Says
Bloomberg (Video)
Rabobank Head of FX Strategy Jane Foley says the pound looks “extremely vulnerable” and susceptible to “a lot of volatility” until at least Nov. 23, when the government announces a medium-term fiscal plan alongside an economic forecast by the independent Office for Budget Responsibility. Speaking on Bloomberg Television, she also says the Bank of England could have had a “credibility issue” on its hands and in “a game of cat and mouse” with the markets if it had delivered an emergency interest-rate hike in response to the currency’s recent plunge.

Fed officials stare down markets, say inflation is top focus
Howard Schneider and Lindsay Dunsmuir – Reuters
U.S. Federal Reserve officials on Monday sloughed off rising volatility in global markets, from slumping U.S. stocks to currency turbulence abroad, and said their priority remained controlling domestic inflation.
“There are interactions there,” Cleveland Fed President Loretta Mester said, noting that financial market volatility can affect investor decisions and the value of the dollar does impact the U.S. economy.


MIAX Options: Extension Of SPIKES Options Market Maker Incentive Program Until Friday, December 30, 2022
MIAX Options has extended the monthly Market Maker Incentive Program (the “Incentive Program”) for SPIKES Options until Friday, December 30, 2022.

Risk Management Arrangements in respect of Chung Yeung Festival
All markets operated by the Hong Kong Futures Exchange will be closed for business on 4 October 2022, except MSCI Futures and Options1. In order to assure that safeguards are in place against potential market risks that may arise during the aforesaid period when some of the major markets are open, Participants are kindly reminded to adopt the following risk management measure.

Robinhood’s Crypto Push Picks Up With ‘DeFi’ Wallet and No Network-Fee Trading
Jack Denton – Barron’s
Brokerage and trading platform Robinhood Markets is accelerating its push into digital assets with a new wallet that allows customers to engage in the world of decentralized finance, or DeFi, and trade cryptocurrencies without network fees.
Robinhood (ticker: HOOD) said Tuesday that it was rolling out its Robinhood Wallet in a beta stage to the first 10,000 customers on its waitlist of more than one million. The so-called self-custody wallet will allow users to store their digital assets themselves, in addition to trading crypto and engaging in DeFi and other “Web3” applications.

Head of FTX’s U.S. Exchange Steps Down in Surprise Move
Alexander Osipovich – WSJ
The president of the U.S. arm of crypto exchange FTX said Tuesday that he was leaving the job, an unexpected move less than a year and a half after he was hired.
Brett Harrison said in a series of tweets that he would be moving into an advisory role. He voiced gratitude for his time at the company, but offered little detail on the reasons behind his departure.


Wall Street’s ‘fear gauge’ might hold the key to the timing of the next market rebound. Here’s why.
Joseph Adinolfi – MarketWatch
Now that the Dow Jones Industrial Average has joined the S&P 500 in bear-market territory, U.S. stocks appear poised for another difficult week.
As a rampaging dollar and sharply higher Treasury yields help to hammer stocks, market technicians are one again looking for signs of an incoming bounce, and some say they may have found them in the Cboe Volatility Index — along with some signs from the options market — that could offer important clues

What are single-stock ETFs, and should you buy them? ‘They’re not for the faint of heart.’
Sam Taube – MarketWatch
These days, exchange-traded funds, or ETFs, can do much more than passively track a basket of stocks. For example, recently introduced single-stock ETFs allow traders to place big bets on individual stocks.
The first single-stock ETFs hit U.S. markets in July 2022 — but since then, several ETF issuers have launched new ones. Here’s a look at how they work, why they’re catching on and what advisers have to say about them.


Sympathy for the Dimon
Steven Kelly – Financial Times
It’s always fun when Jamie Dimon is trending. He’s one of few people in business who effectively have tenure. Remember when he said JPMorgan would outlive the Chinese Communist party? It was top-notch entertainment from the person who — love or hate him — is the quintessential banker of our time.
Last week, he made waves with comments to Congress that “the continued upward trajectory” of large banks’ capital requirements pose a “significant economic risk.”

An Employee Left Citadel Securities for a Startup. Now, He’s Facing a Lawsuit.
Alicia McElhaney – Institutional Investor
Less than two weeks after digital asset trading platform Portofino Technologies announced its launch, Citadel Securities has filed a lawsuit against one of the firm’s newest employees.
Vincent Prieur, who worked for Citadel Securities for three years before joining the cryptocurrency firm, is facing a lawsuit alleging that he broke his Citadel Securities noncompete agreement.

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