Record Short VIX Positioning Reflects a Ton of Fear Elsewhere
Luke Kawa – Bloomberg
Bearish bets on stock volatility are close to a record high, raising investor concern that the market is ripe for turmoil. There’s a more benign explanation.
Futures linked to the measure of S&P 500’s implied volatility, known as the “fear gauge”, tend to move inversely to equities. The net non-commercial position — long contracts outstanding less short positions — sank to minus 187,948 last week, its lowest level ever.
Impeachment In Times Of Irrational Exuberance
Michael A. Gayed, CFA – Seeking Alpha
The stock market in the late 1990s was floating in the dotcom bubble. Irrational exuberance kept the market charged up despite overvalued assets and an impeachment. Economic signals were ignored; if only market players had paid attention, they would have exited before the crash. 2019 has many parallels. In this article, I discuss whether an impeachment matters in times of irrational exuberance.
LCH won’t back single fix for swaptions switch
Robert Mackenzie Smith – Risk.net
Clearing house LCH will not develop an industry-wide method for compensating swaptions holders when the benchmark for interest rate swaps shifts to new risk-free reference rates next year. A senior figure at the clearer told a conference on October 31 that he viewed the change as a “bilateral issue” to be thrashed out by swaptions counterparties on a case-by-case basis. The firm’s position will affect the majority of swaptions holders whose contracts reference swaps cleared at LCH.
China markets feel the pain of stalled derivatives rollout
Samuel Shen and Alun John – Reuters
A long list of stock and currency derivatives has been lying in wait for regulatory approval at the China Financial Futures Exchange (CFFEX), some for nearly a decade. The exchange is hoping foreign asset managers will help vouch for these products and smooth the way forward for their eventual launch. “You need to tell the public that not every fund manager coming to China is George Soros, that you use derivatives to manage long positions, not to short China,” the exchange’s vice president Zhang Xiaogang told a seminar in Shanghai.
Exchanges and Clearing
CME Group Averaged 17 Million Contracts Per Day in October 2019
CME Group, the world’s leading and most diverse derivatives marketplace, reached average daily volume (ADV) of 17 million contracts during October 2019, down 17% from October 2018. Open interest (OI) at the end of October was 132 million contracts, up 3% from October 2018, and up 14% from year-end 2018. Metals volume averaged 633,000 contracts per day in October 2019, up 11% from October 2018. Highlights include: Record Gold futures OI of 659,371 contracts on October 25 Gold futures and options ADV increased 29% to 445,000 contracts Silver futures and options ADV rose 4% to 88,000 contracts Copper options ADV grew 23% to 2,500 contracts.
CME Group, Kpler to Provide LNG Cargo Traders Access to Global Natural Gas Benchmark Futures and Options
CME Group, the world’s leading and most diverse derivatives marketplace, and Kpler, the widely used provider of transparency solutions to commodity markets, today announced that Kpler users will now have access to CME Group’s LNG and natural gas futures and options products on CME Globex. Beginning November 4, 2019, the more than 1,000 LNG professionals using Kpler to track fleets of LNG cargoes, monitor trades and follow market trends will be able to directly trade the world’s leading natural gas benchmarks, including the company’s new Gulf Coast LNG Export futures contract. CME Group’s global benchmark Henry Hub Natural Gas futures and options will also be accessible to Kpler users.
Initial Listing of 22 Portland and Tokyo Weather Futures and Option Contracts
Effective Sunday, November 24, 2019 for trade date Monday, November 25, 2019, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will list the CME Degree Days Index Futures – Portland HDD/CDD contract and a Pacific Rim Index Futures – Tokyo CAT contract (the “Contracts”), and their related option contracts for trading on the CME Globex electronic platform and for submission for clearing via CME ClearPort as more specifically described below. The options contracts are only available for trading on the CME trading floor and for submission for clearing via CME ClearPort.
Regulation & Enforcement
SEC approves new Cboe in-kind transfer rule for options-based ETFs
On 17 October, 2019 the SEC approved the new Cboe rule allowing the in-kind transfer of options in ETFs. “We believe allowing investors in the Buffer ETFs to defer and compound their gains until they sell their shares is a game changer and a major development for the industry,” says Bruce Bond, CEO of Innovator Capital Management. “Having a built-in Buffer against losses and one-to-one participation on the upside, to a cap, is the Holy Grail of investing for many investors. Now, we offer that in a tax-deferred, liquid, and transparent structure, without credit risk. All that adds up to a very attractive alternative to traditional index investing, which provides no downside protection for investors.”
NY-based Vela expands market data and risk management offerings
Sheeba Bhagat Dawar – IBS Intelligence
Vela, a New York-based FinTech firm, announced on Thursday the integration of its ‘Metro’ trading platform with its ‘SuperFeed’ and ‘DMA Platform’, for expanded market data coverage and risk management capabilities. Metro is a server-based system supporting automated, algorithmic and click trading strategies that support buy- and sell-side trading requirements. As a comprehensive solution for options pricing, execution, and risk management, the platform provides traders access to all major US and European options markets, as well as newly added Indian markets, on a single platform, according to a statement.
Roll Out Those Single-Stock Picks as Upside Thins, Btig Says
Joanna Ossinger – Bloomberg
Investors may want to consider turning to individual stock names given that performance is diverging more now than at any point in 2019, according to Btig LLC strategist Julian Emanuel.
There’s skepticism about whether shares can break out of a two-year-long S&P 500 Index “ceiling” while the Cboe Volatility Index remains near its floor, Emanuel said. The VIX closed at a three-month low of 12.30 on Friday. The equity gauge charged to a new record that day and moved even higher on Monday, reaching 3,085.20 in early trading in New York. He sees a more narrow focus as a potential way to new gains.
Hedge funds buy oil in anticipation of short-covering rally: Kemp
John Kemp – Reuters
Hedge funds have started to become more optimistic about the outlook for oil prices amid hopes that the United States and China will reach a trade truce and the global economy will avert recession in 2019/20.
From a fundamental perspective, hedge funds are rebuilding long positions in crude and fuels because the news flow about the economy is no longer deteriorating, even if it is not yet improving much.