Stocks’ Gains Are Scaring Options Traders. Earnings Are Critical.

Apr 10, 2024

Observations & Insight

Cboe Global Markets released an article titled “Debunking Options Myths” on April 9, 2024, aiming to dispel misconceptions surrounding options trading. The article challenges common myths, such as the belief that options trading is only for seasoned professionals, emphasizing that options are accessible and beneficial to a wide range of investors. Cboe highlights the history and evolution of options trading, particularly focusing on the rise of same-day expiring options (0DTE options) and their benefits for investors. Additionally, the article discusses the role of short-dated options in portfolio management, income generation, and speculation, while emphasizing the importance of education and informed decision-making in options trading. Cboe advocates for the recognition of options as valuable and versatile financial tools that can benefit investors of all levels of experience.

One of the examples in the Cboe piece is using options rather than single name equities, especially in volatile market opportunities. There is a story today from Bloomberg with exactly that recommendation titled “JPMorgan Says Use ‘Cheap Options’ to Bet on Chinese Stocks.” In this case, JP Morgan is recommending buying indexes rather than single name options, but the theory is the same. But it is an example of the theory being put into practice. ~JJL


Industry Analyst Larry Tabb Discusses Cryptocurrencies, AI, and Market Dynamics at FIA Futures Conference

At the FIA International Futures Industry Conference in Boca Raton, FL, John Lothian News conducted an interview with Larry Tabb of Bloomberg Intelligence as part of the JLN Industry Leader video series sponsored by Wedbush. Tabb, known for his expertise in industry and market analysis, shared his insights into cryptocurrencies, artificial intelligence, equity options growth and increased demand for U.S. equities during non-traditional market hours.

Watch the video »


Volatility Insight of the Week: CME Group’s volatility index indicates Soybean Oil Skew Ratio is reaching a 3-month high. To learn more about CME Group’s Volatility Index, please visit here


Lead Stories

Stocks’ Gains Are Scaring Options Traders. Earnings Are Critical.
Steven M. Sears – Barron’s
It’s first-quarter earnings season. Let it be said at the outset that the sum will be greater than the parts.

Funds selling options help temper US stock swings
Saqib Iqbal Ahmed and Suzanne McGee – Reuters
Popular funds that sell options for income may be moderating the recent bout of volatility in U.S. stocks, extending the calming effect they have had on the market for the last several months.
Assets under derivative income ETFs, funds that use a mix of stock and stock derivatives to generate income, have grown to about $71 billion from $33 billion at the end of 2022, according to Morningstar data.

Wall St slides as inflation stalls, rate cut hopes wane
Stephen Culp – Reuters
U.S. stocks tumbled on Wednesday after hotter-than-expected inflation data threw cold water on hopes the Federal Reserve would enter its monetary policy easing phase soon.
All three major U.S. stock indexes veered sharply lower at the opening bell following the Labor Department’s Consumer Price Index (CPI) report, which landed north of consensus and offered a reminder that inflation’s road back down to the Fed’s 2% target will continue to be a long and meandering one.


CME Group Micro U.S. Treasury Futures Surpass 100,000 Contracts Traded
CME Group
CME Group, the world’s leading derivatives marketplace, today announced that trading in its new Micro U.S. Treasury futures has surpassed 100,000 contracts since launching just two weeks ago on March 25. “As the world’s most liquid market for U.S. Treasury futures, CME Group is pleased that so many of our global clients are incorporating smaller-sized Micro U.S. Treasury futures into their trading strategies,” said Agha Mirza, CME Group Global Head of Interest Rates and OTC Products. “Amid shifting interest rate expectations, Micro U.S. Treasury futures offer easier access to key 10- and 30-year benchmarks, complementing our broad risk management suite of U.S. Treasury offerings.”

Regulation & Enforcement

SEC Punts on New York Stock Exchange Bitcoin ETF Options; In a familiar move, the federal regulator claimed more time to review applications from Grayscale and Bitwise.
Jason Nelson – Decrypt
The U.S. Securities and Exchange Commission has delayed a decision on allowing spot Bitcoin ETFs options to trade on the New York Stock Exchange, the regulatory body announced on Monday.
In its declaration, the SEC extended the initial review period for trading any Bitcoin ETF options—including digital asset manager firm Bitwise’s Bitwise Bitcoin ETF and Grayscale’s Grayscale Bitcoin Trust—another 45 days to the end of May.

DTCC Collaborates with REGnosys to Support ISDA Digital Regulatory Reporting
DTCC, the premier post-trade market infrastructure for the global financial services industry, today announced that it is working with REGnosys to support industry adoption of the ISDA Digital Regulatory Reporting (DRR) solution and aid compliance with forthcoming global derivatives trade reporting rewrites. The ISDA DRR establishes a golden-source interpretation of market practices and trade reporting logic, developed through industry consensus.


Harnessing Implied Volatility as a Leading Market Indicator
Robert J. Scrudato – Global X
Equity market performance is predicated on an array of factors. Among them are things like monetary policy, hard economic data, and geopolitical events. These are the forces that help dictate corporate earnings power and the premiums or discounts that might be necessary to apply to stock valuations and other financial instruments. They are also the indicators that play a pivotal role in the establishment of general investor sentiment, a measure characterized by market volatility. In this piece, we seek to investigate the inputs that are used in the construction of broad index implied volatility measures. In doing so, we endeavor to show how their ability to gauge investor sentiment can make them dependable leading indicators of broad market direction and worthwhile considerations in investment decisions.


How a Pioneering Blackjack Master Beats the Odds of Aging; Legendary gambler and hedge fund manager Edward Thorp, 91, shares what he’s learned about exercise, diet and managing risk in all areas of life.
Richard Dewey and Aaron Brown – Bloomberg
The mathematics professor and hedge fund manager Edward Thorp rocketed to fame in the early 1960s by showing readers how to best casinos in blackjack. His book Beat the Dealer laid out a groundbreaking system of card counting, followed by guides to roulette and other gambling games. Thorp also invented or perfected a number of the quantitative hedge fund strategies being used today, and he delivered 30 years of 20% annual returns for the hedge funds he operated, with only a handful of down months, none large.

****** His success is just like in the markets, he thinks for himself. That was the first thing I was taught about trading.~JJL

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