Rocket Stock Is Sliding After Its Incredible Surge. Here’s Why.; Stocks and Bonds: There Are Early Signs of a Value-at-Risk Shock

Mar 4, 2021

$31,026/$300,000 (10.3%)
Michael Dawley, Kevin Murphy

Lead Stories

Rocket Stock Is Sliding After Its Incredible Surge. Here’s Why.
Shaina Mishkin – Barron’s
Rocket Cos. stock headed back to Earth on Wednesday morning, after shooting up 71% the day before. Trading in the stock was halted several minutes after Wednesday’s open due to volatility.
Rocket’s 109% gain since the mortgage originator reported earnings last week means high demand for mortgages “is more than being captured in the current valuation,” wrote RBC Capital Markets analyst Daniel Perlin in a Wednesday note. Perlin downgraded Rocket (ticker: RKT) to the equivalent of Hold from the equivalent of Buy, while restating a $30 price target for the stock.
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Stocks and Bonds: There Are Early Signs of a Value-at-Risk Shock
Richard Cookson – Bloomberg
Financial assets, pretty much all of them, are in increasing danger of some nasty shocks and not only because many are horribly expensive.
The problem, as we started to see last week, is a changing relationship between government bonds and equities. Should that change become more entrenched — and this week’s movements suggest it will — many investors will be able to hold fewer of either. That’s because of the risk-management model that just about everyone uses and which is written into the way banks and big investment firms are regulated and capitalized.
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Volatility is Here to Stay, Amundi’s Sandrini Says
Bloomberg (VIDEO)
Francesco Sandrini, senior multi-asset strategist at Amundi, discusses bond market volatility and the need for central bank reassurance. He speaks with Anna Edwards on “Bloomberg Markets: European Open.”
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Reflation Vortex Threatens to Stir Currencies From Their Stupor
Vassilis Karamanis and William Shaw – Bloomberg
Global currencies are displaying a defiant calm in the face of bond-market turbulence — and that’s flashing opportunity for some analysts.
A gauge of expected swings in Treasuries hovers near its April highs after the reflation trade spurred the biggest monthly surge since the 2013 Taper Tantrum. Yet, a similar index in foreign exchange is resuming this year’s decline, resting in a historically stable trading range that kicked off mid-2017.
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Opinion: The stock market’s short-term outlook has turned bearish
Lawrence G. McMillan – MarketWatch
The stock market has struggled throughout the latter half of February, after having made a new all-time high at 3950 on Feb. 16.
Indicators have weakened, and the price of the S&P 500 index has fallen below resistance, which is a range between 3870 (the January highs) and 3950.
The bulls are still in the fight, though, and have engineered two violent counter-rallies, the latest being a 125-point gain, from the lows on Feb. 26 to the highs the next trading day (March 1). Despite that furious rally, prices have fallen again, dropping below the resistance area.
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Viewpoint – The rise of retail in derivatives markets
Walt Lukken – FIA
One of the biggest trends in financial markets in 2020 was the rise of retail participation, particularly in the US equity markets. Brokerages reported a massive increase in the number of new accounts and the amount of assets being invested through their platforms. And social media lit up with posts from active traders talking about their trading strategies. A significant portion of this activity spilled over into the US equity options market. According to UBS, retail trading now accounts for 42% of total equity options volumes, up from 30% at the beginning of 2019. The US equity options markets set an all-time record last year for number of contracts traded, making that jump in market share even more impressive. This surge of activity is creating exciting new business opportunities for exchanges, brokers, market makers and many other companies in the derivatives industry. But it also raises some serious issues.
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GameStop Saga Puts Focus on Inaccessible Liquidity
Ivy Schmerken – TABB Forum
GameStop mania has raised a number of issues that the industry and regulators will be grappling with for some time. Expect lawmakers to hold additional hearings with the SEC and FINRA in the coming months. But it remains to be seen if regulators will take any steps to address the rise of off-exchange liquidity in the near term, or whether it will end up in a study of payment for order flow, writes Ivy Schmerken, Editorial Director at FlexTrade Systems.
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Exchanges and Clearing

ICE Announces Record Activity in Gilts and Sterling Rates Complex
Gilts reach record Single Day Volume of 1.91M and record ADV of more than 459,000 contracts
ICE
Intercontinental Exchange, Inc., a leading operator of global exchanges and clearing houses and provider of mortgage technology, data and listings services, announced record activity across its benchmark Gilts and Sterling rates complex as the market manages Sterling-related risk.
ICE Gilt futures and options, the highly liquid market benchmarks for UK Government Bonds, reached a Single Day Volume record of more than 1.91 million contracts and record Average Daily Volume (ADV) of more than 459,000 contracts during February.
/bit.ly/3kKtDUV

Foreign Exchange (“FX”) Futures and Options Holiday Schedule for the 2021 Good Friday Holiday
CME Group
/bit.ly/3bYp8lP

Spectrum Markets Hits Two Million Trades
Mondovisione
Spectrum Markets, the pan-European trading venue for securitised derivatives, announced it has now executed more than two million trades, representing a total volume of 585 million securitised derivatives traded. This major milestone comes less than 18 months after it first launched, with Spectrum’s 24/5 trading hours continuing to prove particularly popular.
/bit.ly/30bAmOf

Cboe Global Markets Reports February 2021 Trading Volume
Cboe
Cboe Global Markets, Inc. , a market operator and global trading solutions provider, today reported February monthly trading volume statistics across its global business lines. The data sheet “Cboe Global Markets Monthly Volume & RPC/Net Revenue Capture Report” contains an overview of certain February trading statistics and market share by business segment, volume in select index products, and RPC/net capture, which is reported on a one-month lag, across business lines.
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CME Group Inc. Announces First-Quarter 2021 Earnings Release, Conference Call
CME Group
CME Group Inc. will announce earnings for the first quarter of 2021 before the markets open on Wednesday, April 28, 2021. Written highlights for the quarter will be posted on the company’s website at 6:00 a.m. Central Time, the same time it provides its earnings press release. The company will also hold an investor conference call that day at 7:30 a.m. Central Time, at which time company executives will take analysts’ questions. A live audio Webcast of the conference call will be available on the Investor Relations section of the company’s website, www.cmegroup.com. Following the conference call, an archived recording will be available at the same site. Those wishing to listen to the live conference via telephone should dial 1-800-367-2403 if calling from within the United States or 1-334-777-6978 if calling from outside the United States, at least 10 minutes before the call begins.
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Miami International Holdings Reports February 2021 Trading Results and Volume Records for MIAX Exchange Group
MIAX
Miami International Holdings, Inc. today reported February 2021 trading results for its three national securities exchanges – MIAX, MIAX Pearl and MIAX Emerald (together, the MIAX Exchange Group). In U.S. options, the MIAX Exchange Group collectively executed over 105 million equity option contracts for a combined average daily volume (ADV) of 5,530,731 contracts, representing a total U.S. equity options market share of 13.37%. The 13.37% market share represents an increase of over 22% from February 2020. In U.S. equities, MIAX Pearl Equities executed 477,334,450 shares.
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Regulation & Enforcement

‘Roaring Kitty’ in GameStop saga testifies before Massachusetts regulators
Nate Raymond – Reuters
The social media persona “Roaring Kitty,” whose online posts helped spark January’s trading frenzy in GameStop Corp shares, appeared before Massachusetts securities regulators on Wednesday to testify as part of an examination into his activities.
Massachusetts Secretary of the Commonwealth William Galvin, the state’s top securities regulator, last month subpoenaed Keith Gill, who touted GameStop stock in his spare time while he was a registered broker and working at the insurer MassMutual.
/jlne.ws/388mJno

Strategy

Be Like Warren Buffett. Use This Options Strategy.
Steven M. Sears – Barron’s
Warren Buffett is no stranger to risk. He famously said that investors should be fearful when others are greedy and greedy when others are fearful.
He has applied that investment discipline in many different situations, such as when he took over Salomon Brothers in 1991 after a bond-trading scandal, and during and after the 2007-09 financial crisis. In 2011, for example, he boldly invested in Bank of America (ticker: BAC) when many people thought the company was doomed.
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Education

(Podcast) OBC 125: Risk Reversals vs. Strangles, Combining The Greeks and More
Options Boot Camp – Options Insider Radio Network
On this episode, Mark and Dan answer your questions about: risk reversals vs. strangles, how to combine The Greeks, the origins of volatility skew, the “proper” day to trade risk reversals,
and much more…
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Events

Registration is open! – FIA Boca 2021
FIA.org
/bit.ly/3qADb6G

A New Virtual Experience
OIC
The Options Industry Conference is Going Virtual in 2021. Join OCC and the options exchanges for the 39th annual Options Industry Conference, April 28-29, 2021. While the conference will be held virtually for the first time in history, the focus will continue to be the key topics facing the options industry today, from the regulatory shifts in the U.S. and Europe to the technological developments that are driving monumental change in markets around the globe.
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Miscellaneous

Snapshot of the COVID-19 American Workforce: Employees like working remotely; Employers cite greater workforce productivity; How to increase diversity remains top concern
PR Newswire
Infosys, a global leader in next-generation digital services and consulting, today announced the launch of the Milken Institute and Infosys report ‘Future of Work: Insights for 2021 and Beyond’. The new report highlights insights about remote work based on original research; it examines the pandemic’s impact on the workforce and offers recommendations for employers and employees moving forward. The report, based upon surveys of employees and managers of large US-based companies, found that 80% of respondents are very or somewhat satisfied with remote work, despite higher workloads and a lack of social interactions with colleagues. Eighty-two percent of managers said their employees are working more than they were before the pandemic, with over half saying employees were working “a lot” more.
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