The clock is ticking for ‘Roaring Kitty’ to lock in gains as GameStop’s price declines

Jun 11, 2024

Observations & Insight


Volatility Insight of the Week: 10-Yr Treasury skew ratio, as seen on CME Group’s Volatility Index (CVOL), elevates as options traders take positions ahead of FOMC and CPI this week. Learn more about CVOL here.

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The role of the FCM: Futures Discovery EP 10
JohnLothianNews.com

Today, we’re immersing ourselves in a detailed exploration of the pivotal Role of Futures Commission Merchants, commonly known as FCMs. These financial intermediaries play a crucial role in facilitating futures and options trading, serving as a linchpin in the complex web of derivative markets. Understanding the intricate responsibilities and functions of FCMs is essential for navigating the dynamic landscape of modern financial systems.

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Lead Stories

The clock is ticking for ‘Roaring Kitty’ to lock in gains as GameStop’s price declines
Saqib Iqbal Ahmed – Reuters
The clock is ticking for Keith Gill, the stock influencer known on YouTube as “Roaring Kitty,” to lock in gains on his options position in GameStop as the company’s share price wobbles and the expiration date for the contracts draws closer. Shares of GameStop tumbled 12% on Monday to $24.83. It was the second straight session of losses for the video game retailer, whose shares fell 40% on Friday after Gill’s first livestream in three years failed to boost their price following the announcement of a more than $3 billion stock offering.
/jlne.ws/3x90iyh

Roaring Kitty’s GameStop position is in the money
Suzanne O’Halloran – Fox Business
GameStop shares fell for the second straight session Monday, down over 49%, notching the worst two-day stretch since February 3, 2001, as tracked by Dow Jones Market Data Group. Still, “Roaring Kitty,” also known as Keith Gill, is in the money with his GameStop holdings. Gill, via his Reddit handle, Superstonk/Deep F-ing Value, posted his latest account performance on Monday. FOX Business, in coordination with Dow Jones Market Data Group, crunched the numbers.
/jlne.ws/45gaUYR

DTCC and Cboe Clear Europe to create new OTC cash equities clearing workflow; The pair intend to develop a proof of concept that links DTCC’s tri-party trade matching workflow with Cboe Clear Europe.
Annabel Smith – The Trade
DTCC and Cboe Clear Europe are set to team up to create a new clearing workflow for OTC cash equities clearing. The new service will bring OTC cash equities trades into Cboe Clear Europe’s cleared environment, which can then be netted against on-exchange transactions for settlement purposes. Creating a link between DTCC’s Institutional Trade Processing (ITP) central matching service, CTM, makes up the first part of the joint initiative. Subject to regulatory approvals, this is projected to go live in Q2 of next year.
/jlne.ws/4eko2Qu

GameStop Stock Gets Halted. Volatility Is Still the Name of the Game.
Rupert Steiner – Barron’s
GameStop stock was halted for volatility just after 10:20 a.m. this morning, as volatility in the stock continued after a disappointing run.
/jlne.ws/4aUzIqh

GameStop uses its Roaring Kitty spotlight to build a cash hoard; Retailer has used social media popularity to stockpile money with no obvious use while its operations decline
Gregory Meyer – Financial Times
GameStop’s ecommerce strategy has faltered, its bricks-and-mortar store count is shrinking and its sales are in a multiyear slide. But one measure of the video game retailer is a picture of health: the amount of cash in its accounts.
The company at the centre of the 2021 meme-stock frenzy has once again captivated Wall Street after its shares soared in the past month on little more than the re-emergence of the influential social media fan known as Roaring Kitty.
/jlne.ws/4ekjzxc

May Inflation Report Clashes With Fed Meeting: Traders Brace For Volatile Wednesday
Benzinga via Markets Insider
For the first time since June 2020, the Consumer Price Index (CPI) report will be released on the same day as the Federal Open Market Committee (FOMC) meeting.
This sets up a potentially volatile Wednesday for financial markets.
Following three consecutive months of higher-than-expected inflation readings in the first quarter of 2024, April’s data showed an easing in price pressures, aligning with forecasts.
/jlne.ws/45jlgqQ

Exchanges

OCC readies new intraday margin requirement; Draft measure would cover all options positions including 0DTEs
Faye Kilburn – Risk.net
The Options Clearing Corporation (OCC) is planning to implement new margin requirements in a third phase of an initiative aimed at safeguarding the options market from intraday risk. The new margin calls will apply to all options positions in clearing member portfolios but will primarily affect zero-day to expiry options (0DTEs), derivatives contracts with less than 24 hours to expiry. After a recent boom in activity, trading in zero-day options has grown to account for roughly half of all trading
/jlne.ws/4ebIJhL

Cboe Announces Expanded Collaboration with FTSE Russell to Drive Innovation in Digital Asset Derivatives
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), the world’s leading derivatives and securities exchange network, today announced it is expanding its collaboration with FTSE Russell, a leading global index provider, to drive product innovation in the digital assets space. This new initiative builds on Cboe and FTSE Russell’s longstanding relationship and will leverage their combined expertise to develop new derivatives products, potentially beginning with cash-settled index options tied to the FTSE Bitcoin Index and the FTSE Ethereum Index.
The collaboration underscores the companies’ shared commitment to growing the digital assets space and expanding investor access to the asset class. Cboe’s plans to list cash-settled index options on FTSE’s indices, subject to regulatory approvals, would help meet growing investor demand for exchange-traded derivatives to gain and manage crypto exposures in a trusted, transparent and U.S.-regulated trading environment.
/jlne.ws/3XqXRBE

DTCC and Cboe Clear Europe to Introduce New Clearing Workflow for OTC Cash Equities Trades and Deliver Enhanced Efficiencies to the Industry
DTCC
DTCC, the premier post-trade market infrastructure for the global financial services industry, today announced it is working with Cboe Clear Europe to deliver an enhanced post-trade workflow for over-the-counter (OTC) cash equities trades to help increase settlement efficiencies across UK and European markets. DTCC, the leading post-trade market infrastructure, will collaborate with Cboe Clear Europe, the largest and most-connected pan-European cash equities CCP, to increase post-trade efficiencies while providing clients with the benefits of an established risk management counterparty. The service will bring OTC cash equities trades into Cboe Clear Europe’s cleared environment, which can then be netted against on-exchange transactions for settlement purposes, delivering potentially significant efficiencies.
/jlne.ws/3yXsjt4

Miami International Holdings Reports Trading Results for May 2024; YTD Options and Equities Volumes Reach Record Levels
MIAX Exchange Group
Miami International Holdings, Inc. (MIH), a technology-driven leader in building and operating regulated financial markets across multiple asset classes and geographies, today reported May 2024 trading results for its U.S. exchange subsidiaries – MIAX, MIAX Pearl and MIAX Emerald (together, the MIAX Exchange Group), and Minneapolis Grain Exchange (MGEX).May 2024 and Year-to-Date Trading Volume and Market Share Highlights. Total multi-listed options volume for the MIAX Exchange Group reached a monthly total of 130.4 million contracts, a 7.4% decrease year-over-year (YoY). May 2024 market share reached 14.7%, a 9.9% decrease YoY. Total year-to-date (YTD) volume reached a record 696.0 million contracts, a 1.2% increase from the same period in 2023.
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Regulation & Enforcement

White House Prepares to Tap Derivatives Regulator to Oversee FDIC; Christy Goldsmith Romero would succeed Martin Gruenberg, who has agreed to resign
Andrew Ackerman and Andrew Restuccia – The Wall Street Journal
The White House is close to naming derivatives regulator Christy Goldsmith Romero to head the Federal Deposit Insurance Corp., replacing the beleaguered banking agency’s longtime chairman Martin Gruenberg. Gruenberg bowed to pressure to resign from the FDIC in May after an external investigation found widespread sexual harassment and other misconduct at the agency and lawmakers in both parties berated his leadership. He said he would step down after a successor is confirmed by the Senate.
/jlne.ws/4aXjKvL

***** Here is the Reuters version of this story.~JJL

Singapore Ramps Up Scrutiny of Family Offices, Hedge Funds
David Ramli and Chanyaporn Chanjaroen – Bloomberg
Singapore authorities are demanding more information from family offices and hedge funds while stepping up closures of dormant firms after a string of scandals highlighted cracks in the financial hub’s oversight. The government’s push to tighten various investment regimes has accelerated since March, with agencies setting out additional requirements that must be met in the coming months and ramping up the removal of inactive corporate entities, according to people familiar with the matter.
/jlne.ws/4elMXU7

FMA opens consultation on proposed standard conditions for Derivatives Issuers
FMA
The Financial Markets Authority (FMA) – Te Mana Tatai Hokohoko – is seeking feedback on potential changes to the standard conditions imposed on Derivative Issuer (DI) licences. The changes relate to leverage and the suitability of investors for derivative trading. The proposed changes have been identified in the FMA’s 2020 Derivatives Issuer Sector Risk Assessment (SRA) and subsequent monitoring of the sector.
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Strategy

How the stock market performs when a CPI report and a Fed decision happen the same day
Isabel Wang – MarketWatch
Wall Street is gearing up for a rare double feature of market-moving economic events on Wednesday, with the May consumer-price index due in the morning and the Federal Reserve’s policy announcement in the afternoon.
CPI days and Fed decision days both have a reputation for market volatility, but they rarely coincide. The CPI report and the Fed’s policy meeting have fallen on the same day only 13 times since 2008, according to Dow Jones Market Data.
/jlne.ws/3KFevpD

Wall Street Starts Calling Time on ESG Labels After Backlash

Wall Street Starts Calling Time on ESG Labels After Backlash

First Read Hits & Takes John Lothian & JLN Staff Miami International Holdings, Inc. (MIH) announced that the SEC has approved MIAX Sapphire LLC's application to become a national securities exchange. MIAX Sapphire, MIH's fourth national securities exchange for...

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The Spread

Traders Betting on China Easing Boost Bearish Options on Banks

Observations & Insight Miami International Holdings, Inc. (MIH) announced that the SEC has approved MIAX Sapphire LLC's application to become a national securities exchange. MIAX Sapphire, MIH's fourth national securities exchange for U.S. multi-listed options,...

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