The Market’s Fear Gauge Is Signaling Trouble. What to Expect

May 22, 2024

Observations & Insight

Asma Awass has given her notice as editor of Options Discovery. We want to thank her for her great work. She is only 19 years old and was recruited by Alex Teng, who was a very hard act to follow. Alex recruited Asma from the UIC boxing team, where they were both members. Thank you, Asma, again.

We are looking for a new editor for this video series aimed at teaching younger investors about the options markets. We would prefer a student, someone who is a peer for the target audience of the group. Also, the OCC has shifted some of its sponsorship dollars from Options Discovery to the JLN Industry Leader video series we shot at the 2024 Options Industry Conference in Asheville, NC. The OCC sponsorship was not exclusive in the first place, but we are looking for additional sponsor support for the Options Discovery series. Email me at johnlothian@johnlothian.com if you are interested.

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Prometheum Co-CEO Aaron Kaplan Discusses Digital Asset Market Structure at FIA Conference
JohnLothianNews.com

BOCA RATON, FL (JLN) – Aaron Kaplan, co-CEO and co-founder of Prometheum, shared his insights on the evolving landscape of digital assets and the integration of blockchain technology into market infrastructure during an interview with John Lothian News at the FIA International Futures Industry Conference in Boca Raton, Florida. This interview is part of the JLN Industry Leader video series sponsored by Wedbush.

Watch the video »

Lead Stories

The Market’s Fear Gauge Is Signaling Trouble. What to Expect; The message of the VIX, which measures implied volatility and is often referred to as the market’s fear gauge, is that stocks might be headed for a big new tumble.
Steven M. Sears – Barron’s
Investors are likely to soon learn a harsh lesson about the Cboe Volatility Index, or VIX—especially those who get excited by milestones like the Dow Jones Industrial Average crossing 40,000 for the first time.
The message of the VIX, which measures implied volatility and is often referred to as the market’s fear gauge, is that stocks might be headed for a big new tumble.
/jlne.ws/4bw8oQo

White House adviser says stock market volatility is ‘not unusual’
Reuters
The head of the White House Council of the Economic Advisers on Thursday downplayed concerns over recent volatility in the U.S. stock market, saying it was “not unusual.”
/jlne.ws/4bJUPwm

Why the Crypto Market Is Betting on Spot-Ether ETFs
Isabelle Lee – Bloomberg
Cryptocurrency markets have grown more optimistic that US securities regulators might approve exchange-traded funds that invest directly in Ether, the second-biggest token behind Bitcoin. The signals, including a Bloomberg News report on May 21 saying that the US Securities and Exchange Commission had recently contacted the exchanges with spot Ether ETF filings, marked a reversal of expectations. A flurry of document filings followed, including for ETFs from ARK 21Shares, Fidelity Investments, Invesco Ltd., Franklin Resources Inc. and VanEck.
/jlne.ws/3wK3q3s

Jamie Dimon Is Talking Retirement. Meet the Frontrunners to Succeed Him.
Rebecca Ungarino – Barron’s
Investors, consumers, and journalists listen when JPMorgan Chase CEO Jamie Dimon speaks. During the bank’s annual investor day on Monday in New York City, he had a lot to say.
/jlne.ws/3QXodXZ

Wall Street strategists rush to revise their S&P 500 targets as stocks hit fresh records. Here’s what they see happening.
Isabel Wang – MarketWatch
The stock market’s renewed record-setting rally has blindsided Wall Street’s top strategists, prompting many to swiftly revise their year-end S&P 500 targets in an effort to keep pace with a surge that has far exceeded expectations from earlier this year.
At least 11 Wall Street firms have lifted their year-end forecasts for the S&P 500 so far in 2024. In the past week alone, BMO Capital Markets and Deutsche Bank revamped their 2024 targets for the large-cap benchmark index, raising them to 5,600 and 5,500, respectively.
/jlne.ws/4dRaqvR

The stock market has already chosen a winner in the 2024 presidential election
Mark Hulbert – MarketWatch
The U.S. stock market is one of the best predictors of whether the incumbent party will win a presidential election.
That’s important to know because of the widely mixed messages of the electronic prediction markets, to which many until now have turned to get reliable predictions. Many fans of those markets have of late become disillusioned by these mixed messages.
/jlne.ws/4dNjfH7

Exchanges

Cboe Europe Derivatives Welcomes Interactive Brokers as New Trading Participant
Cboe
Interactive Brokers joins Cboe Europe Derivatives (“CEDX”) and will provide its clients with access to the exchange’s suite of pan-European equity derivatives in the current quarter. The global electronic broker has become a direct trading participant of CEDX and clearing participant of Cboe Clear Europe N.V. CEDX recently expanded its range of equity options and now offers contracts on over 300 European companies. Cboe Europe Derivatives (CEDX), Cboe’s pan-European equity derivatives marketplace, today announces that Interactive Brokers has successfully joined the exchange as a participant and will provide its clients with access to CEDX’s range of equity index derivatives and equity options in the current quarter. Interactive Brokers has become a direct trading participant on CEDX and a direct clearing participant for equity derivatives on Cboe Clear Europe N.V., Cboe’s leading pan-European clearing house and CEDX’s clearing provider.
/jlne.ws/4bsh5LD

Santander joins Eurex for listed FX business
Eurex
Santander Asset Management has started trading FX derivatives business at Eurex. Trend towards listed FX business continues. Eurex’s listed foreign exchange derivatives encounter rising demand. With Santander Asset Management Europe’s leading derivatives exchange welcomes a further global player in its listed FX segment. The Spanish asset manager has started expanding their FX futures business to Eurex, supported by Banco Santander as Clearing Member and Deutsche Bank as liquidity provider.
/jlne.ws/4e4oF0P

Regulation & Enforcement

Citi Trader Got 711 Warning Messages Before Sparking Flash Crash; Wall Street giant fined $78 million in UK for 2022 trades; London staffer’s fat-finger blunder triggered Europe selloff
Jennifer Surane and Jonathan Browning – Bloomberg
For one Citigroup Inc. trader in London, the morning of May 2, 2022 went from bad to worse.
It was a public holiday in the UK, so it should have been a quiet day in the markets. A little before 9 a.m., the staffer on Citigroup’s Delta One trading desk — who was working from home — began putting together a trade that would hedge the bank’s exposure to the MSCI World Index.
/jlne.ws/3UTGoix

Cboe Publishes Amended Spot Ether ETF Filings as Industry Renews Approval Hopes; Cboe is the first exchange to publish its revised 19b-4 forms.
Helene Braun, Nikhilesh De – CoinTelegraph
Things appear to be moving ahead of the U.S. Securities and Exchange Commission’s (SEC) decision to potentially approve an important filing related to the launch of a spot ether (ETH) exchange-traded fund (ETF).
Cboe, an exchange associated with five of the issuers of a potential spot ether exchange-traded fund (ETF), published its amended 19b-4 filings in response to feedback from regulators. The applicants include Fidelity, VanEck, Invesco/Galaxy, Ark/21Shares and Franklin Templeton.
/jlne.ws/459InnP

SEC Chair Gensler Statement on Upcoming Implementation of T+1 Settlement Cycle
SEC
Securities and Exchange Commission Chair Gary Gensler today issued the following statement on the conversion of the U.S. securities market to a T+1 standard settlement cycle, which will take place on May 28, 2024: “For everyday investors who sell their stock on a Monday, shortening the settlement cycle will allow them to get their money on Tuesday. Shortening the settlement cycle also will help the markets because time is money and time is risk. It will make our market plumbing more resilient, timely, and orderly. Further, it addresses one of the four areas the staff recommended the Commission address in response to the GameStop stock events of 2021.”
/jlne.ws/3UQGyY2

FIA backs international effort to promote “effective practices” for variation margin
FIA
FIA has responded to a discussion paper released by international standard setters that sets out eight “effective practices” for streamlining variation margin in centrally cleared markets. The discussion paper addresses the need for greater transparency and understanding of margin practices at central counterparties, particularly in light of recent episodes of market volatility triggered by the COVID crisis and Russia’s invasion of Ukraine.
/jlne.ws/4boOjLN

Miscellaneous

Trading stocks all day and all night might be an ‘inevitability’ for investors
Josh Schafer – Yahoo Finance
The stock market’s daily open and close may one day have little meaning if an idea gaining traction on Wall Street becomes widespread. 24X National Exchange, a trading platform backed by hedge fund founder Steve Cohen, is seeking SEC approval to operate an around-the-clock exchange. There’s interest in the idea from bigger players too: The New York Stock Exchange has reportedly polled market participants about interest in 24-hour access.
/jlne.ws/3yvp249

****** Futures markets have traded around the clock for years. There is a reason I still don’t sleep well.~JJL

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Crisis memory, geopolitics and the risks of financial contagion

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The Spread

The Stock Market Has Rarely Been This Sleepy

Lead Stories The Stock Market Has Rarely Been This Sleepy Gunjan Banerji - The Wall Street Journal It's eerily calm out there in the stock market. The Cboe Volatility Index, or VIX, dropped below 12 last week, a nearly five-year low. The gauge, based on options prices...

Past Options Newsletters

The Stock Market Has Rarely Been This Sleepy

The Stock Market Has Rarely Been This Sleepy

Lead Stories The Stock Market Has Rarely Been This Sleepy Gunjan Banerji - The Wall Street Journal It's eerily calm out there in the stock market. The Cboe Volatility Index, or VIX, dropped below 12 last week, a nearly five-year low. The gauge, based on options prices...