Some on Wall Street see risks akin to the ‘Volmageddon’ panic, while others say investors have learned their lesson

Feb 20, 2024

Observations & Insight

Options Discovery Episode 30: Risk Management For Options Portfolios; Hilary Till, Principal At Premia Capital Management, Discusses This And More With JLN’s Asma Awass.

In this episode of Options Discovery, Asma Awass discusses the benefits and risks of options portfolios. This episode includes a breakdown of why a trader might want to create an options portfolio as well as how beta affects the risk of a portfolio. Asma then sits down with Hilary Till, principal of Chicago-based Premia Capital Management, LLC and a consultant with Premia Research LLC, who shares more insight on risk management for portfolios. You can check out Premia Research LLC here:

Watch the video »


Risk Management For Options Portfolios: Hilary Till, Principal At Premia Capital Management, Discusses Risk Management Strategies In This Options Discovery Full Interview.

In this Options Discovery full interview, Asma Awass speaks with Hilary Till, principal of Chicago-based Premia Capital Management, LLC and a consultant with Premia Research LLC. Hilary addresses a variety of topics from her career, including her background in statistics & computer science and how she got into the options industry. Hilary gives more insight into the different kinds of research and publications she has done. She also shares her experience managing risks on portfolios for large companies. You can check out Premia Research LLC here:

Watch the video »

Lead Stories

Some on Wall Street see risks akin to the ‘Volmageddon’ panic, while others say investors have learned their lesson
Joseph Adinolfi – MarketWatch
A popular trade that triggered a historic market meltdown back in 2018 made a comeback last year, as one barometer of its performance logged its best year in six.
But as with any successful trade on Wall Street, some derivatives-market experts now fear that shorting volatility, or being “short vol,” has become overcrowded, increasing the risk that a sudden spike in the Cboe Volatility Index, or the VIX, could spark a selloff that might send the S&P 500 tumbling.

Bitcoin Options Trader Takes $20M Bet to Hedge Against Prices Dropping to $47K
CoinDesk via Business Insider
The long-put “butterfly” strategy guards against a potential bitcoin price drop to $47,000 by the end of March.
The strategy, involving multiple trades, cost over $20 million.
A large bitcoin {{BTC}} options bet crossed the tape on Tuesday, aiming to profit from a potential short-term price drop in bitcoin with the floor at $47,000.
The trader bought 100 lots of March 29 expiry on crypto block trading service provider Greeks.Live, and put options at strikes $50,000 and $43,000, partly financed by selling 200 lots of similar expiry puts at $47,000.

The Fear Gauge Flashes. And the Slide Goes On.
Connor Smith – Barron’s
The market’s fear gauge was flashing on Tuesday as technology stocks led the big three indexes lower.
The CBOE Volatility Index, or Vix, was up 9.6% to 15.61. That would mark the Vix’s second close above 15 since November. It’s up 29% from a 52-week low of 12.07 from Dec. 12 but off 41% from a one-year high of 26.52 from March 13 of last year.

US hard landing bets rise in rate options market after Fed hikes
Gertrude Chavez-Dreyfuss – Reuters
Investors in interest rate options are paying for trades that benefit from a sharp slowdown in the U.S. economy, contrary to the upbeat outlook held by many bond market participants.
Analysts said they have seen increased demand from hedge funds in the U.S. options market for so-called “receiver swaptions,” a type of trade that pays off when interest rates fall. In general, receiver swaptions give buyers the right to enter into an interest rate swap where they receive the fixed rate and pay the floating one.

Bitcoin Liquidity Shifts to the US as Spot ETFs Reshape Crypto Markets
Sidhartha Shukla – Bloomberg
Bitcoin has become easier to trade on US crypto exchanges compared with platforms overseas, a shift in liquidity attributed to the impact of the nation’s new exchange-traded funds for the largest digital asset.
US trading venues on average accounted for almost half of bids and asks within 2% of Bitcoin’s mid-price so far this year, a period that straddles the launch of the US spot ETFs, data from research company Kaiko show.

Bill Ackman Rockets Up Best-Paid Hedge Fund List by Doing Very Little; Pershing Square founder Bill Ackman collected $610 million last year, while Izzy Englander and Ken Griffin topped Bloomberg’s annual ranking.
Tom Maloney and Hema Parmar – Bloomberg
Perhaps no other hedge fund manager has perfected the art of having their money work for them while they sleep — or tweet — like Bill Ackman.
The Pershing Square Capital Management founder made $610 million last year, after barely touching his portfolio of just 10 stocks. The total landed Ackman at No. 7 on Bloomberg’s annual list of the best-paid hedge fund founders, his highest-ever position. He failed to crack the top 15 in 2022.

China Freezes Accounts of Quant Fund After It Dumped Stocks
China’s two main stock exchanges froze the accounts of a major quantitative hedge fund for three days after the money manager dumped 2.57 billion yuan ($360 million) in shares within a minute Monday. Ningbo Lingjun Investment Management Partnership executed the sell orders through multiple accounts starting from 9:30 a.m. as shares declined, “disrupting normal trading order,” the Shenzhen exchange said in a statement Tuesday. The Shanghai bourse imposed a similar freeze on Lingjun, which will be barred from trading stocks until Feb. 22.


ICE Reports Record Open Interest of Over 90 Million Contracts Across Total Futures and Options Markets
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of technology and data, today announced that its global futures and options markets reached record open interest of 90.2 million contracts on February 15, 2024, with ICE’s commodities futures and options markets hitting record open interest of 61.8 million contracts on February 16, 2024. ICE’s energy futures and options portfolio hit record open interest of 57 million contracts on February 16, 2024, with global natural gas futures and options recording record open interest of 38.5 million contracts.

CME Group to Launch Micro Euro-denominated Bitcoin and Ether Futures on March 18
CME Group
CME Group, the world’s leading derivatives marketplace, today announced it plans to further expand its cryptocurrency derivatives offering with the addition of Micro Bitcoin Euro and Micro Ether Euro futures on March 18, pending regulatory review.

CME Group Launches Clearing Service for Mexican F-TIIE Overnight Index Swaps
CME Group
CME Group, the world’s leading derivatives marketplace, today announced that nine market participants have cleared over-the-counter (OTC) Mexican Overnight Funding Rate (F-TIIE) index swaps since the company launched its clearing service on February 5. The cleared F-TIIE overnight index swaps (OIS) represent more than 4.3 billion pesos (the equivalent of $250 million) in notional value and support Banco de México’s transition from its benchmark Interbank Equilibrium Interest Rate (TIIE) to the F-TIIE rate.
Market participants who have already cleared these swaps through CME Group include Banorte, BBVA, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, and Santander.

Regulation & Enforcement

An Executive Bought a Rival’s Stock. The SEC Says That’s Insider Trading; Defense lawyers say the case is the first to involve ‘shadow insider trading’
Dave Michaels – The Wall Street Journal
Biotech executive Matthew Panuwat bought options on another drug company’s stock-and earned a windfall of $120,000. The Securities and Exchange Commission now says he committed insider trading, even though he didn’t buy his employer’s stock and didn’t have inside information about the company he bet on.

The FCA gives up on Globo prosecutions; Greek travesty
Dan McCrum – Financial Times
Congratulations to Konstantinos Papadimitrakopoulos and Dimitris Gryparis, the former Globo executives whom Britain’s Financial Conduct Authority will no longer attempt to prosecute for fraud. Globo was an Aim-quoted provider of mobile phone software that collapsed in 2015 after short seller Gabriel Grego and FT Alphaville revealed that claimed business partners and resellers had never heard of the company. One turned out to be a laptop repair shop in Mumbai.

Crypto hedge fund accused of ‘criminal’ mismanagement in dispute over FTX; Swiss prosecutor raided Geneva-based Tyr last August following complaint by investor TGT
Laurence Fletcher and Scott Chipolina – Financial Times
One of the cryptocurrency industry’s highest-profile hedge fund firms has been accused of “criminal” mismanagement and raided by a Swiss prosecutor, in a dispute with an investor over losses suffered following the collapse of crypto exchange FTX. Geneva-based Tyr Capital Partners is alleged to have ignored an internal risk limit and investor warnings over its exposure to FTX, according to legal documents filed in the Cayman Islands by an investor and seen by the Financial Times.


Nvidia Options Signal Nearly $200 Billion Swing After Earnings
Carly Wanna – Bloomberg
Nvidia Corp. investors may have almost $200 billion in market value riding on this week’s earnings report, according to options positioning.
Prices for short-term calls and puts imply a 10.6% move in the chipmaker’s shares on Thursday, the session after its earnings report, according to data compiled by Bloomberg. That would sway Nvidia’s market capitalization by some $180 billion, one of the largest single-session moves on record, still trailing records set by Meta Platforms Inc. — holder of both the biggest one-day drop and largest single-session gain.

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