The Spread: A “Good” Bubble?

Suzanne Cosgrove

Suzanne Cosgrove

Editor

Welcome to The Spread, I’m Matt Raebel.

Boy there’s a lot of talk of bubbles these days. With bitcoin ballooning up past 50 K – and then back down again – it’s no surprise that there’s the usual talk about how it’s “a bubble” or “rat poison squared.” 

But then there are JPMorgan strategists Marko Kolanovic and Bram Kaplan, who proposed there might be a “good” bubble for a change – depending on who you ask. The two strategists wrote this week that the spread between the VIX and two-week realized volatility on the S&P 500 has widened to a point where it looks like the stock market might rally. Kolanovic and Kaplan said in a note on Wednesday that historically when this happens, the VIX falls and the stock market rallies within three months approximately 87 percent of the time. They didn’t say what happens the other 13 percent of the time, but I imagine it involves a lot of crying and flipping of tables.

Speaking of rallies, stock for GameStop – which people seem to insist on calling a “meme” stock now – saw a volatile rally Thursday morning that was so turbulent that trading for the stock had to be halted three times in the first half hour of trading. 

No one is exactly sure why this happened, but some suspect that the departure of a GameStop executive from the company triggered another round of retail shenanigans from Reddit. Jim Bell, the chief financial officer of GameStop, is resigning from his position over a disagreement on strategy, according to a Bloomberg report. Apparently Ryan Cohen – a GameStop board member – has been pushing for change in the company, and it seems Bell wasn’t having it. Probably for the best on Bell’s part – I wouldn’t want to have his job right now. Plus he walked away with a cool $30 million in severance, so that probably didn’t hurt. 

Anyway, enough about GameStop. The OIC has announced its keynote speakers for the Options Industry Conference in April, which will be – you guessed it – virtual this year. Allison Herren Lee, acting chair of the SEC, and Randal Quarles, Federal Reserve vice chairman for supervision, will be speaking at the event. Registration is open now, so head to the link below this video to get yourself on track to attend.

We’ve got two new videos up on the site now; one is our latest edition of “Path to Electronic Trading” starring Peter Fredriksson, and the other is our newest entry in the Open Outcry Traders History project with Mike Cavanaugh. JLN also published a new podcast on the hemp business in which Thom Thompson interviewed the CEO of PanXchange, Julie Lerner. As for me, that’s gonna do it for The Spread this week, so until next time, stay safe and happy trading.

Sources:

(Registration) A New Virtual Experience  April 28 – 29, 2021

OIC

http://bit.ly/3dKtGP5

 

Bitcoin falls below $54,000 as derivatives positions worth over $1 billion are liquidated

Yogita Khatri – The Block

https://bit.ly/3aFfqoS

 

Market Wrap: Bitcoin’s Below $50K as Investors ‘Wait and See’ Amid Market Reset

Muyao Shen – Coindesk

http://bit.ly/2NySCyC

 

JPMorgan’s Kolanovic Says ‘VIX Bubble’ May Spark Stock Rally

Joanna Ossinger – Bloomberg

http://bloom.bg/3swpBSG

 

GameStop shares extend surge in early trading

Eric Platt and Aziza Kasumov – FT

http://on.ft.com/37MJm0z

 

GameStop Jumps After Finance Chief Pushed Out Over Strategy

Olga Kharif – Bloomberg

https://bloom.bg/2ZO1gfa

 

Hemp In ‘Year of Transition,’ PanXchange CEO Says

Suzanne Cosgrove – JLN

http://bit.ly/3pT7XXT

 

Peter Fredriksson – The Path to Electronic Trading

John Lothian – JLN

http://bit.ly/3uxYTuR

 

Mike Cavanaugh – Open Outcry Traders History Project

John Lothian – JLN

http://bit.ly/2Nxl2Jk

 

John Lothian Newsletter

Today’s Newsletter

Crypto Nomads: Surfing the World for Risk and Profit

Crypto Nomads: Surfing the World for Risk and Profit

First Read $51,906/$300,000 (17.3%) ++++ Hits & Takes John Lothian & JLN Staff The STA is holding the 88th Annual Market Structure Conference in person on October 6-8 at the JW Marriott in Washington, DC with the title "The Great Return." That is a very good...

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Past The Spread Episodes

The Spread – July 23, 2021

The Spread – July 23, 2021

Volatility makes a return appearance as the Delta variant jangles nerves; Treasury bond yields perk up; July options expire; John Lothian chats with Cboe’s Ed Tilly about a World of Opportunity; UBS and SEC reach a settlement; FIA Tech expands; and the Options Institute’s Kevin Davitt explains why contract size matters in the “Term of the Week.”

The Spread – July 16, 2021

The Spread – July 16, 2021

Options traders torn between higher Inflation and steady Fed policy; June market share up at MIAX; John Lothian talks about a World of Opportunity; SEC charges binary options shop with fraud; Moscow Exchange set to offer quarterly options on U.S. stock index futures; and the Options Institute’s Kevin Davitt talks about implied volatility in the “Term of the Week.”

The Spread – July 9, 2021

The Spread – July 9, 2021

Chicago, a data destination; SEC, Robinhood and payment for order flow; John Lothian weighs in with his take; Retail trading continues to percolate; and Cboe’s Kevin Davitt explains the differences between equity and index options in the “Term of the Week.”

The Spread – July 2, 2021

The Spread – July 2, 2021

Finra socks Robinhood with its biggest-ever fine; Cboe acquires Chi-X Asia Pacific; OCC reports another volume gain; NIO takes its cue from options; John Lothian weighs in with his take; Looking for volatility; and Jermal Chandler explains hedging in the options “Term of the Week.”

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