Stock Markets: Time to Bet Against VIX After Recent Rising Streak, History Says
Akshay Chinchalkar and Joanna Ossinger – Bloomberg
Seven straight jumps in the so-called “fear gauge” for the S&P 500 is a signal that it may be time to wager against volatility, if history is any guide.
Only 10 times in the past two decades has the Cboe Volatility Index — better known as the VIX — risen for that many trading sessions in a row. Investors who shorted the gauge after the previous nine streaks of that length would have earned a return of nearly 19% after 20 days, according to data compiled by Bloomberg.
IMF warns crypto rout could lead to systemic risk, backs Fed digital coin
Jennifer Schonberger – Yahoo Finance
The International Monetary Fund says cryptocurrencies and stocks are likely to see more volatility, with the Federal Reserve set to raise interest rates, and as increasing correlations between the two asset classes create risks to the financial system. Digital coins have gotten off to a rocky start in 2022, with a deep sell-off obliterating billions in market value. Since hitting a record high in November, the value of Bitcoin (BTC-USD) has been shaved nearly in half. “The Fed needs to tighten financial conditions, that means that interest rates have to come up, risky asset prices have to come down, and that could be painful to some degree,” Tobias Adrian, director of the IMF’s Monetary and Capital Markets Department, told Yahoo Finance in an interview.
Markets’ Ceaseless Repricing Vortex Serves Up More Vicious S&P 500 Swings
Lu Wang and Peyton Forte – Bloomberg
Jerome Powell says the Federal Reserve will be nimble in formulating monetary policy. The stock market is running itself ragged trying to figure out where it will land.
Twice in two days, S&P 500 has erased a gains of roughly 2% to close the session lower. Such a streak of big back-to-back downside reversals has occurred only once before in Bloomberg’s four decades’ worth of data: October 2008. Equally big swings rocked the market on Monday and Tuesday.
Will young investors hang on for the ride?
Claer Barrett – Financial Times
We’ve picked up plenty of habits during the pandemic — streaming endless box sets, working from home in leisure wear, and emailing colleagues asking if it’s OK to ring them (the shattering intrusion of a phone call being more than some people can bear).
As restrictions end, change is definitely in the air.
Younger Traders Are More Spooked by Volatility Than Vets: Charles Schwab
Isabelle Lee – Business Insider
As US equities have whipsawed in the past few days, with the Dow Jones Industrial Average swinging more than 1,000 points in one session, investors have been on the edge of their seats. However, one cohort is feeling the pressure more deeply, according to Charles Schwab managing director and chief investment strategist, Liz Ann Sonders.
Meme stock hangover: a year after GameStop, traders face gloomier markets
Saqib Iqbal Ahmed – Reuters
The mood has shifted dramatically a year since a spectacular rally in shares of GameStop (GME.N) captivated Wall Street, launching a mania for so-called meme stocks and putting the spotlight on retail investors as a force to be reckoned with in markets.
Record 1.3 Million SOFR Futures Contracts Traded on January 26 as Liquidity Continues to Shift to SOFR; SOFR futures open interest surpasses record 2.8 million contracts
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that SOFR futures volume surpassed 1 million contracts for the first time, reaching a new, single-day trading volume record of 1,308,621 contracts and setting a new open interest (OI) record of 2,804,640 contracts on January 26.”These trading milestones reflect that market participants are increasingly turning to CME Group’s deeply liquid SOFR futures and options to manage their risk,” said Agha Mirza, CME Group Global Head of Rates and OTC Products. “Since the start of 2022, liquidity has continued to shift to our SOFR-based derivatives at an accelerated pace, with SOFR futures open interest now equivalent to nearly 25% of all Eurodollar futures open interest.”
U.S. SEC approves new U.S. exchange with blockchain feed, faster settlement
John Mccrank – Reuters
The U.S. Securities and Exchange Commission (SEC) late on Thursday approved the country’s 17th stock exchange, a subsidiary of Boston-based BOX Exchange, which will incorporate blockchain technology.
Equity index derivatives: Introduction of Eurex Daily Futures on KOSPI 200 Weekly Options
Introduction of Eurex Daily Futures on KOSPI 200 Weekly Options (OKW1/3/4/5),
Introduction of a new Product Specific Supplement for Eurex Daily Futures on KOSPI 200 Weekly Options,
Further editorial changes to the Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland (Contract Specifications).
From Thursday into Monday afternoon, equities went into a sharp correction. A reason for the carnage was a “gamma squeeze.” About $3.1 trillion total of notional of option contracts expired on Friday and that became a downward force on the S&P 500. The market traded from 4650 to below 4400 without any resistance because the “gamma” of S&P puts exploded, forcing traders to sell the underlying index and close out short put positions (Figure 1 for the gamma jump in S&P puts).
Beware of VIX ETFs and ETNs
Bernice Napach – ThinkAdvisor
One of the best performing assets so far this year have been short-term exchange-traded funds (ETFs) and notes (ETN) based on the Cboe Volatility Index (VIX), which rises when volatility in the S&P 500 index increases.
The index represents the market’s real-time expectations for the relative strength of near-term price changes of the S&P 500 index. The exchange-traded products invest in futures contracts that track the VIX; investors cannot buy the VIX directly.
The curious case of rising stocks in the night-time; An ex-hedge fund analyst has a conspiratorial theory why equities do better after the market closes
Robin Wigglesworth – FT
The “witching hour” was long said to be the time of night where demons, ghosts, ghouls and witches were at their most powerful. It turns out that it is also when the US stock market is at its mightiest. American bourses officially open between 9.30am and 4pm in New York, yet weirdly most of the gains actually accrue in the sparser, more informal after-market trading that happens on various electronic exchanges, according to a study by the New York Federal Reserve. Early morning returns, on the other hand, tend to be negative. The phenomenon has long puzzled many analysts.
Volatility, leverage dominate Miami hedge fund week
Jamie McGeever – Reuters
Swanky resorts, expensive hotels, and even more expensive cars – the familiar trappings of the vast wealth controlled by the thousand-plus delegates descending on Miami this week for a trio of conferences known as ‘hedge fund week’ were on display.