Options Traders Start to Sweat Over Potentially Wild Yen Rally

Jun 21, 2022

Lead Stories

Options Traders Start to Sweat Over Potentially Wild Yen Rally
Masaki Kondo – Bloomberg
The fundamentals may be stacked against the under-pressure yen but traders are still willing to bet on a sharp move higher amid the risk of a global recession or an unlikely Bank of Japan policy change.
Highly speculative one-month dollar-yen put options cost over two percentage points more than equivalent calls — a sign of increased demand for bullish yen bets, according to data compiled by Bloomberg. The so-called delta 5 out-of-the-money options are seen by traders as having only about a 5% chance of being exercised before expiring.

Inflation Is Fueling ‘Most Uncertain Time’ in Investors’ Careers
Alex Harris – Bloomberg
The current denizens of Wall Street have never seen a market quite like this.
Volatility surged across assets last week as a worsening outlook for inflation and growth smashed US stocks and bonds. Inflation that’s surging at a rate unseen in decades — and proving unexpectedly sticky — has sent central banks scrambling to reshape policy on the fly. And that has even hardened market veterans reeling in shock, with unprecedented amounts of money flooding into cash-like instruments and facilities.

Hedge Funds Are the Rage as ‘Nothing Seems to Be Working’: Q&A; Fed is maybe regaining some control, iCapital’s Amoroso says; Crypto will remain under pressure until the Fed pauses
Vildana Hajric and Michael P. Regan – Bloomberg
Anastasia Amoroso, chief investment strategist at iCapital, joined the latest episode of the “What Goes Up” podcast to discuss the market volatility that followed the Federal Reserve’s rate hike and how hedge funds are attracting client interest again after years of languishing in a raging bull market. She joined this week’s “What Goes Up” podcast to talk about that as well as the biggest Fed hike in almost three decades. Below are lightly edited and condensed highlights of the conversation. Click here to listen to the whole podcast, and subscribe on Apple Podcasts or wherever you listen. Q: Hedge funds, we see a lot of headlines about some that are struggling, but in aggregate, they’re outperforming. Has the decline revived the demand for hedge funds?

How to Stand Up to a Bear Market; Younger investors can treat this year’s steep decline in stocks as a buying opportunity. Older investors may not be able to wait around for a recovery.
Jason Zweig – WSJ
This isn’t a bear market; it’s two bear markets. One is menacing younger investors who are still in their saving years. The other is mauling those who are in or near retirement. For people still in their prime earning years, this bear market is likely to be as bullish in the long run as it is painful in the short run. For older investors, the decline is potentially devastating. With the Federal Reserve raising interest rates by 0.75 percentage point this week and inflation raging at nearly 9%, U.S. stocks have fallen 22% this year; bonds are down 11%. Recovery could take more time than some older investors have.

ECB Will Act With ‘Cool Head’ on Market Volatility, Kazaks Says; Officials will act before July 21 if they have to, he says; Latvian central bank chief says some turbulence is natural
Martins Kazaks – Bloomberg
The European Central Bank is ready to combat unwarranted financial-market moves but must also be prepared to look through turbulence as it exits negative interest rates, Governing Council member Martins Kazaks said.

Conoco Sees Gas Volatility Lasting Years as it Invests in Qatar; Houston firm to get a 3.1% stake in Qatar’s North Field East; Exxon, Shell also made bids to be part of $29 billion project
Verity Ratcliffe, Simone Foxman, and Paul Wallace – Bloomberg
ConocoPhillips said volatility in global gas markets may last years, as it joined other Western energy firms by investing in a $29 billion project to boost Qatar’s exports of the fuel. The Houston-based company will buy a 3.1% holding in the North Field East project. Chief Executive Officer Ryan Lance announced the deal alongside Qatar’s energy minister, Saad Al-Kaabi, in Doha on Monday.

Retail Traders Who Drove Meme Frenzy Bail Out in Bear Market; Those investors this time aren’t buying the dip
Vildana Hajric and Peyton Forte – Bloomberg
Stock traders who whipped up the meme craze that took Wall Street by storm last year are furiously rushing to the exits. Roughly 50% of single-stock retail positions in the Nasdaq 100 and a quarter of those in the S&P 500 that had been accumulated since January 2019 have been sold, according to data from Goldman Sachs Group Inc. In another sign their exuberance has faded, call-option volumes have reversed about 70% of their increases from the start of 2019 to November 2021, when tech stocks and Bitcoin peaked. “While historically retail investors have bought the dip, this time they haven’t,” wrote John Marshall, head of derivatives research at Goldman Sachs.


Cboe Global Markets To Launch FLEX Micro Options on June 27
Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, plans to launch its new FLEX Micro options contracts on Monday, June 27. Like the standard, customizable FLEX options, FLEX Micro options will enable users to specify key contract terms, including exercise prices, exercise style, and expiration date. With a contract multiplier of one, rather than the standard 100, these options provide investors greater precision to hedge a portfolio based on notional value, which may equal a fraction of a standard contract.

The Unraveling of Robinhood’s Fairy Tale; An online brokerage that helped usher in an investing revolution faces a number of new threats. Where does it go from here?
Caitlin McCabe, Gunjan Banerji and Alexander Osipovich – WSJ
Few companies embodied the market mania of the past two years quite like Robinhood Markets Inc. The flashy online brokerage ushered in an investing revolution at the start of the Covid-19 pandemic that, for the first time in decades, made trading cool. Robinhood’s easy-to-use interface hooked millions of Americans on buying and selling stocks, options and cryptocurrencies. A raging bull market helped turn many newbie investors’ trades into wins. Good times for customers meant good times for Robinhood. The more customers traded, the more revenue Robinhood raked in. By last summer, it boasted more than 22 million funded customer accounts, had opened offices around the country and was preparing for an initial public offering of its stock. Then the party ended.

Moscow Exchange launches options trading on real estate index and Chinese yuan
On June 20, 2022, trading on the derivatives market of the Moscow Exchange will begin trading in two new derivative instruments: options on the real estate index and on the Chinese yuan-Russian ruble exchange rate.

Nodal Exchange Successfully Lists New Environmental Futures and Options
Business Wire – Financial Post
Nodal Exchange announced today the successful listing of new environmental products including several first-of-their-kind futures contracts in voluntary carbon offsets, renewable natural gas certificates and renewable energy credits. The new Nodal Exchange products further expand the world’s largest exchange listed suite of environmental products…This new environmental product launch is part of EEX Group’s continued commitment to a sustainable future. Nodal Exchange and the European Energy Exchange (EEX) are collaborating with highly experienced industry partners to build their environmental and voluntary carbon offset offering. This includes expanding cooperation with IncubEx, a long-standing partner for developing exchange-traded products and services and client relationships in global environmental markets. In addition, Net Zero Markets, a spin-off from award winning carbon risk management firm Redshaw Advisers is collaborating with EEX Group to develop the GER product which Nodal listed today.

Regulation & Enforcement

CFTC advocates for expansion of cryptocurrency market jurisdiction
Daniel L. Stein, Matthew F. Kluchenek and Anna R. Easter – Reuters
More than a decade has passed since Bitcoin was created, yet lawmakers and regulators continue to wade through important questions, such as which regulator should be permitted to regulate digital assets. Despite a lack of digital asset legislation, federal regulators, including the Commodity Futures Trading Commission (CFTC), are adding resources to help police fraud in the digital asset markets in light of the rapidly increasing number of enforcement actions related to digital assets.


Betting against bitcoin? You can now do it via an ETF in the U.S.
Frances Yue – MarketWatch
U.S. investors now have a new way to bet against bitcoin in the wake of this year’s crypto market volatility.
ProShares on Tuesday launched its Short Bitcoin Strategy ETF, or BITI, the first inverse exchange-traded fund connected with bitcoin in the U.S. Its shares are trading at around $38.74 on Tuesday, up about 0.6%, according to FactSet data.


The FIA’s webinar “China’s FDL – Overview and Insights” takes place tomorrow, Wednesday June 22, from 3:00 p.m. – 4:30 p.m. SGT/HKT and covers China’s Futures and Derivatives Law (FDL), “a historic development, being the first law in China regulating futures and derivatives trading at a national legislative level. It establishes a legal framework for the development of the futures and derivative markets and introduces a unified set of rules that are expected to pave the way for significant changes in the market.” The webinar will be moderated by Tze Min Yeo, head of Legal and Policy, Asia-Pacific, FIA, and the speakers will be: Chin-Chong Liew, Partner, Linklaters; Ying Zhou, Counsel, Zhao Sheng Law Firm; and Simon Zhang, Counsel, Linklaters. You can go here to register and for more information. ~SR

Crypto Lender BlockFi, in Talks With FTX, Also Gets Ledn Offer

Crypto Lender BlockFi, in Talks With FTX, Also Gets Ledn Offer

First Read Hits & Takes John Lothian & JLN Staff Monday is the 4th of July holiday in the U.S. and you can expect to see JLN's annual sharing of the Declaration of Independence edition of the John Lothian Newsletter. We will resume our normal publication...

We visit more than 100 financial news websites daily (Would YOU do that?)

The Spread

Bears Picked Right Stocks to Short With Declines Twice the S&P’s

Observations & Insight Editor's Note: The JLN Options Newsletter will not be published on Monday, July 4 in observation of the Independence Day holiday. Have a great weekend! Lead Stories Bears Picked Right Stocks to Short With Declines Twice the S&P's Lu Wang...

Past Options Newsletters

Pin It on Pinterest

Share This Story