Speculative Retail Options Traders Back in Droves, Sundial Says

Nov 2, 2021

Observations & Insight

The World Federation of Exchanges’ Issue 55, the November 2021 edition of FOCUS, is out. The headline story is titled “Moscow Exchange’s ‘Journey’ teaching investment knowledge from scratch”, by Maria Kharlashkina, Deputy Head of Strategy, MOEX. The editors’ pick is “Financial education, an essential tool in the life of Brazilians.” Other stories include “The importance of central bank access to collateral deposits” and “Saudi Exchange is focusing on raising awareness on the importance of debt markets for issuers, investors and the wider economy” and “Cboe Global Markets is working with local communities to boost access to financial education and careers.”


7RIDGE Deal for Trading Technologies Completes Robust Auction Amid Industry Strategic Players
John Lothian – John Lothian News

TT CEO Tim Geannopulos and President Farley Owens to Exit Firm After Closing; Geannopulos Stays as Board Member and Strategic Advisor to New CEO Keith Todd

Tim Geannopulos was given the job of CEO of Trading Technologies by TT’s majority owner, Harris Brumfield, with one big mandate: find a buyer through a big, robust, competitive and active auction process that discovers the right party to buy the firm and is aligned with the interests of the shareholders, employees and customers. Geannopulos accomplished that goal when the deal for the private equity firm 7RIDGE was announced Sunday as the buyer of TT with the support of SGX and Cboe Global Markets as investors in the fund managed by 7RIDGE.

The auction of TT generated interest from many potential strategic partners, Geannopulos said. What he noticed was that the strategic partners were interested in involving a private equity group as the general partner. There were several private equity groups interested, but one had a “dream team” of players that impressed him the most.

To read the rest of this commentary, go HERE.

Lead Stories

Speculative Retail Options Traders Back in Droves, Sundial Says
Joanna Ossinger – Bloomberg
Stock option speculators are back trading in a big way, a sign of increased risk in the U.S. equity market, according to Sundial Capital.
Speculative call buying rose to one of the highest levels on record, as a percentage of both volume and market capitalization, President Jason Goepfert said in a note Monday. Net call buying to open — a gauge of bullish bets — was in the top 2% of all weeks since the year 2000 and not solely thanks to demand for Tesla Inc. options, he said.

Micro-Sized Stock Options Are a Clear Sign It’s Time to De-Risk
Jared Dillian – Bloomberg
The Chicago Board Options Exchange plans to launch “nano” options on the S&P 500 Index early in 2022. These contracts will be one-hundredth the size of the mini S&P 500 options and one-thousandth the size of the options commonly used by institutional investors such as hedge funds. As Bloomberg News points out, this means that if an option on the S&P 500 is priced at $1,000, the corresponding nano option would cost $1. The nano options will have a maximum maturity of one week and be settled in cash.

Why We Should All Start Talking About ‘Whackflation’
Tracy Alloway – Bloomberg
Which type of inflation would you like to worry about today? ‘Deflation’ has become rather passé. ‘Hyperinflation’ seems a little, erm, hyperbolic. ‘Stagflation’ is popular at the moment, but also open to interpretation. Meanwhile ‘transitory’ strikes one as subpar when it comes to encompassing the surprisingly persistent pricing pressures that have confronted the world’s economies this year.
So here’s an alternative. I call it ‘whackflation.’

US bond tumult risks triggering stock market volatility, analysts warn
Robin Wigglesworth – Financial Times
Volatility in US bonds is surging in stark contrast to the relatively placid run for equities, leading some analysts to warn over the danger that central banks trigger a spasm of volatility in Wall Street’s stock market.
Fixed income markets have been jolted by fears that rising inflation will force monetary policymakers into scaling back stimulus programmes, but stocks have largely shrugged off these concerns, with Wall Street’s main equities barometers rallying to a series of new record peaks last week.

Wall Street banks step up preparations for Fed tapering volatility
Matt Scuffham – Reuters
Wall Street banks are intensifying preparations for the Federal Reserve’s withdrawal of pandemic stimulus to ensure they are able to handle spikes in market volatility, help clients manage their risks — and score a profit.
With the Fed expected to formally announce on Wednesday that it will begin tapering its monthly bond purchases, sales and trading teams are hearing more from clients concerned about the ramifications for their portfolios and the longer-term implications of rising rates and higher inflation, several senior bankers said.

Washington Has Potential to Add Market Volatility in Q4
Bloomberg (Video)
Bank of America Merrill Lynch Senior Investment Strategist Marci McGregor discusses the impact of legislative uncertainty on markets and why she expects five total rate hikes by end of 2023. She speaks to Bloomberg’s Romaine Bostick, Taylor Riggs and Sonali Basak on “Bloomberg Markets: The Close.”

Here are 5 things that could derail the S&P 500 from record highs, according to LPL Financial
Carla Mozée – Markets Insider
The S&P 500 index finished October with its best monthly gain of the year but stubborn inflation and a strong attack by the Federal Reserve against elevated price pressures are among five factors that “might spook markets” in the near-term, according to advisory firm LPL Financial.
The benchmark index closed up 6.9% in October and has hovered near record highs, with the index largely bolstered by corporate financial reports that are beating analyst expectations for the third quarter. More than half of S&P 500 companies have reported and 82% of them have surpassed Wall Street’s earnings targets, according to FactSet. The S&P 500 has jumped about 22% so far this year.

Why Inflation Could Trigger a 20% Sell-Off Any Time Now
William Edwards – Business Insider
Back in March, we asked Michael Cuggino, portfolio manager of the Permanent Portfolio Permanent (PRPFX) fund, what he thought investors were under-appreciating most at the time.
His answer? Inflation.


OCC Clears New Annual Exchange-Listed Options Volume Record in October; October 2021 Total Volume Up 29.7 Percent Compared to October 2020, Highest October Ever
OCC’s October 2021 total cleared contract volume was the fifth highest month on record and the highest October ever, up 29.7 percent compared to October 2020. Year-to-date average daily cleared contract volume through October 2021 was 38,893,113 contracts, up 34.8 percent compared to October 2020.

***** We knew this was a record month, right?~JJL

CME Group Reports October 2021 Monthly Market Statistics
Average daily volume of Interest Rate contracts rose 94% year-over-year
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today reported its October 2021 market statistics, showing average daily volume (ADV) increased 32 percent to 20.4 million contracts during the month. Market statistics are available in greater detail at https://cmegroupinc.gcs-web.com/monthly-volume.
October 2021 ADV across asset classes includes:
Interest Rate – ADV of 10.2 million contracts
Equity Index – ADV of 5.4 million contracts
Options – ADV of 3.8 million contracts
Energy – ADV of 2.5 million contracts
Agricultural – ADV of 1.2 million contracts
Foreign Exchange – ADV of 720,000 contracts
Metals – ADV of 465,000 contracts


The Dow Jones has finally topped 36,000 – 2 decades after a notorious book said it would
Harry Robertson – Markets Insider
In 1999, at the height of the dot-com bubble, two authors published a book predicting the Dow Jones Industrial Average would soar to 36,000 in the next few years – from around 10,700 at the time of publication.
The Washington Post has called “Dow 36,000,” by James Glassman and Kevin Hassett, the “most spectacularly wrong investing book ever.”

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