Tencent Stock Options Cost a Fortune and Traders Love Them; Election Volatility Is Short Trade of a Lifetime for the Brave

Oct 6, 2020

Lead Stories

Tencent Stock Options Cost a Fortune and Traders Love Them
Sofia Horta e Costa – Bloomberg
Caught off guard by Tencent Holdings Ltd.’s record-breaking rally earlier this year, Hong Kong’s stock investors are getting well prepared for the next one.
For about two months, options traders have consistently shelled out more for bullish three-month contracts on the stock than they’re willing to pay for those protecting against losses, according to data compiled by Bloomberg. That’s kept Tencent’s so-called volatility skew below zero, an unusual quirk for a market that typically sees traders pay more for downside protection than upside speculation.

Election Volatility Is Short Trade of a Lifetime for the Brave
Yakob Peterseil – Bloomberg
For volatility professionals who get it right, the American presidential election could go down in history as the short trade of a lifetime.
Yet betting that calm — not chaos — will take hold on Wall Street is proving easier said than done.

Bitcoin’s Options Market Retains Long-Term Bull Bias Despite Sluggish Price
Omkar Godbole – Coindesk
Longer-term sentiment in bitcoin’s (BTC) options market remains bullish even as the cryptocurrency struggles to claw its way back to $11,000. Bitcoin’s six-month put-call skew, which measures the cost of put options (bearish bets) expiring in six months relative to calls (bullish bets), is currently seen at close to -11%, according to data source Skew. In other words, demand for call options expiring in six months is outstripping demand for puts. The three-month skew is also leaning bullish at -5%.

The stock market will soar regardless of who wins the US election – and one trade in particular will thrive, says Fundstrat’s Tom Lee
Matthew Fox – Markets Insider
Investment implications for either a Joe Biden presidency or the re-election of President Donald Trump are nearly identical, according to Fundstrat’s Tom Lee.
In a note on Tuesday, Lee spelled out the economic and stock market impact a Trump or Biden presidency would have, and how investors should be positioned post-election.

Dollar’s strength to be short-lived; volatility and weakness ahead – Reuters poll
Hari Kishan and Rahul Karunakar – Reuters
The recent surge in the U.S. dollar will last less than three months, according to a majority of foreign exchange strategists polled by Reuters who said the greenback would have a roller coaster ride in the run-up to the U.S. presidential election.

Inside Volatility Trading: October 6, 2020
Kevin Davitt – Cboe
If 2020 was a marathon, U.S. readers are approaching mile 20. For our global audience, we just passed the 31.6-kilometer mark and have 10 and ½ km to go. Relative to a more “normal” year, 2020 has a bit of an ultramarathon feel.
There’s an innate human tendency to segment periods for the sake of comparison. Mother Nature cycles through the seasons. Humans do likewise: infancy, childhood, adolescence, early adulthood, middle aged, etc. In a similar vein, market participants often slice time as a means of measurement and benchmarking.

Options signal relief for pound as Brexit deal heaves into view
Saikat Chatterjee, Elizabeth Howcroft – Reuters
Currency traders are seeing increased demand for derivatives that enable holders to position for a stronger pound, as improved chances of a Brexit trade deal start to push the risk of negative interest rates off the table.

Exchanges and Clearing

Cboe Global Markets Reports September 2020 Trading Volume
Options ADV up 6 percent, Futures up 11 percent, U.S. Equities up 12 percent, European Equities up 19 percent and Global FX up 11 percent from previous month; Total options volume up 34 percent year over year; ADV in SPX options, VIX futures and VIX options up 20 percent, 22 percent and 5 percent, respectively; Total U.S. equities volume up 34 percent year-over-year
Cboe Global Markets, Inc., a market operator and global trading solutions provider, today reported September monthly trading volume.

MIAX PEARL Equities Expands Traded Symbols
Shanny Basar – Traders Magazine
MIAX PEARL Equities became the sixteenth US equity exchange last month and aims to add functionality and adjust its pricing model over the next 12 months.
Joseph Bracco, senior vice president, head of sales at the MIAX Exchange Group, told Markets Media that a couple of thousand shares were traded when the US equities exchange launched on 29 September with a low volume symbol, NTGR (Netgear Inc.).

LSE’s Paris unit hooks up with Cboe for clearing share trades
The London Stock Exchange LSE.L said its LCH unit in Paris will provide stock trade clearing services for Cboe Europe, Europe’s largest pan-European share trading platform. “This is the latest milestone in our strategy to expand the number of equities trading venues available to our clearing members,” said Christophe Hemon, CEO of LCH in Paris.

VOLQ Launches on CME
Traders Magazine
As financial markets gear up for what is expected to be a highly volatile period around the Nov. 3 U.S. Presidential Election, there is a new way for traders and investors to hedge against market fluctuations: Nasdaq-100 Volatility Index (VOLQ) futures contracts. CME Group today launched futures based on Nasdaq’s VOLQ, which measures 30-day implied volatility of the Nasdaq-100 Index (NDX). The tech-heavy NDX is led by many of the bellwether high-beta names that have driven the market higher in recent years, such as Apple, Amazon, Microsoft, Facebook, Alphabet, and Tesla.

Cboe Global Markets Reports September 2020 Trading Volume
Cboe Global Markets, Inc., a market operator and global trading solutions provider, today reported September monthly trading volume. The data sheet “Cboe Global Markets Monthly Volume & RPC/Net Revenue Capture Report” contains an overview of September and year-to-date trading statistics and market share by business segment, volume in select index products, and RPC, which is reported on a one-month lag, across business lines. In addition, a supplemental data sheet that provides electronic trading statistics for Cboe Options Exchange is available on the website.

CME Group Announces Launch of New TreasuryWatch Tool for Comprehensive Analysis of U.S. Treasury Markets
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the launch of its new CME TreasuryWatch Tool. With U.S. debt at the highest level since World War II, and expected to exceed the size of the U.S. economy in 2021, this new tool will provide market participants with a comprehensive look at the data shaping cash and futures markets for U.S. Treasuries today.

MIAX Exchange Group – Options Markets – Delisting of TD Ameritrade Holding Corporation (AMTD)
MIAX Options
TD Ameritrade Holding Corporation (AMTD) will be de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Tuesday, October 6, 2020. All GTC orders resting on the MIAX order books in AMTD will be canceled at the close of business on Monday, October 5, 2020.

MIAX Exchange Group – Options Markets – Corporate Action Alert: Aduro Biotech, Inc. (ADRO) Name and Symbol Change to Chinook Therapeutics (KDNY)
Aduro Biotech, Inc. (ADRO) will change its name and symbol to Chinook Therapeutics (KDNY) effective on Tuesday, October 6, 2020. All GTC orders resting on the MIAX order books in ADRO will be canceled at the close of business on Monday, October 5, 2020. NOTE: KDNY options will trade on Cloud 10 on the MIAX Options Exchange and on Cloud 5 on the MIAX PEARL Options Exchange and the MIAX Emerald Options Exchange.

Regulation & Enforcement

The UK’s financial regulator bans crypto-based products for retail investors after a year-long review
Shalini Nagarajan – Markets Insider
The UK’s Financial Conduct Authority has banned the sale of certain types of crypto-based financial products for retail investors after a year-long review.
Britain’s financial authority said unregulated cryptoassets are “ill-suited” to retail consumers for multiple reasons. These include unexpected losses, no reliable basis for valuation, volatility in price movements, a lack of understanding, and the absence of legitimate reasons for investment.

FIA urges market participants to prioritize data standardization;”Tag 1031″ effort to resolve brokerage rate issues is an important example of industry-led solutions
Dear Industry Leaders:
FIA’s core mission is to support open, transparent and competitive derivatives markets, and to protect the integrity of the financial system. This is most obvious in our work with various regulators around the world; however, FIA’s mission increasingly means we are supporting industry-led solutions for our members, too.

Collaboration and Standardization Opportunities in Derivatives and SFT Markets
Financial market participants around the world share a common goal and a common challenge: to increase margins and profitability by more efficiently deploying capital and other resources while maintaining strong balance sheets.


Trump Took Regeneron’s Covid Treatment. How to Play Its Soaring Stock With Options.
Steven M. Sears – Barron’s
If Regeneron Pharmaceutical’s experimental antibody treatment is good enough to help an American president battling Covid-19, its stock deserves consideration by investors.
Even though Regeneron’s (ticker: REGN) treatment hasn’t been approved to treat Covid, the experimental drug was given to President Donald Trump.


(Podcast) Option Block 940: A New Player Enters the Volatility Game
Option Block – Options Insider Network

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