Options trader bets $4 million on a major volatility spike; Crisis-hardened markets have learned to look past military flare-ups

Jan 9, 2020

Lead Stories

Options trader bets $4 million on a major volatility spike
Tyler Bailey – CNBC
Stocks surged to all-time highs Thursday morning, a day after President Donald Trump said Iran appeared to be standing down after it launched missiles at U.S. targets in Iraq. The strike caused a major overnight sell-off in the S&P 500 futures market on Tuesday, but just about all of those losses had been recovered by Wednesday’s opening bell. In fact, the event barely moved the needle on the CBOE Volatility Index (VIX), which sits lower now than it did at the beginning of the week. Not all traders are certain that the worst is over, though.

Crisis-hardened markets have learned to look past military flare-ups
Iran’s missile attack on U.S. army bases in Iraq overnight sent gold blasting above $1,600 an ounce, boosted the Japanese yen by almost 1% and oil by $3 a barrel.
But it took just hours for that safe-haven dash to fade and for world equities to resume their climb.

Diversification Benefits of Bitcoin – A Look Back at 2019
Russell Rhoads – TABB Forum
The traditional stock-bond portfolio would have benefited from an allocation of bitcoin in 2019, reports TABB Group head of derivatives research Russell Rhoads, who breaks down the performance numbers. With listed bitcoin options recently introduced and exchange traded funds a real possibility in 2020, he adds, traditional money managers no longer have an excuse to ignore the cryptocurrency.

CME Group Set to Launch Bitcoin Futures Options on January 13
Wanguba Muriuki – Coinspeaker
The United States Commodity Futures Trading Commission (CFTC) has previously allowed several crypto derivatives products to enter the market. In that context, CME Group, which offers Bitcoin futures, plans to launch options on BTC futures on January 13, 2020. While responding to the growing interest in cryptos and customer demand for tools to manage Bitcoin exposure, CME Group decided to launch options on BTC futures. As we highlighted earlier, the firm officially confirmed this launch last November.

Exchanges and Clearing

EU watchdog says can meet deadline for UK clearers after Brexit
Huw Jones – Reuters
Assessing if UK-based derivatives clearing houses can access European Union investors after Brexit can be done by June, but a final decision would hinge on broader EU-UK trade negotiations, the bloc’s markets watchdog said on Thursday.
The London Stock Exchange’s LCH unit clears the bulk of euro-denominated swaps contracts that are widely used by companies and banks across the EU to hedge against adverse moves in interest rates.

CME Globex Notices: January 6, 2020
CME Group

Regulation & Enforcement

SR-NASDAQ-2019-101 Notice & Approval
A proposal to amend the Exchange’s transaction fees at Equity 7, Section 118(a) to raise the qualifying thresholds for several of the Exchange’s credits for displayed orders/quotes that provide liquidity to the Exchange and to eliminate one such credit.


OptionMetrics Adds Evolving Markets to Database
Trader’s Magazine (Press release)
OptionMetrics, an options database and analytics provider for international institutional investors and academic researchers, has made significant updates to its IvyDB US options database, offering even greater accuracy across a broader range of data points. The industry standard for comprehensive historical option pricing, IvyDB US provides clean and reliable historical data on over 10,000 underlying stocks and indices for every day since January 1996. It enables quants, hedge fund managers, and others to back-test trading strategies, evaluate risk models, and perform sophisticated research on derivatives trading.


The Stock Market Rally Won’t Die. Here’s How to Ride It — and Protect Yourself Against a Fall.
Steven M. Sears – Barron’s
Not even the threat of war in the Middle East can stop this market.
Iran launched missiles late Tuesday at U.S. bases in Iraq—a move that many people thought could trigger a bigger conflict. Not much happened. Oil traded lower, gold traded higher, and futures dropped. The declines, which were short-lived, may have been triggered by news algorithms that are widely used by institutional investors to react to headlines. President Donald Trump’s suggestion that Iran may be “standing down” gave stocks another boost.


University of Toronto professor honored with Harry M. Markowitz Award
EurekAlert (News release)
For the second time, a professor at the University of Toronto’s Rotman School of Management has won an award for the best paper in the Journal of Investment Management. John Hull, University Professor and the Maple Financial Group Chair in Derivatives and Risk Management, won the Harry M. Markowitz Award for the paper, Funding Long Shots, which was published last year.

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