The Spread: Reddit On The Internet, So It Must Be True

This week on The Spread – analysts predict more volatility than usual around the U.S. election, institutional traders watch Reddit to predict price movements, and more.

Produced by Mike Forrester.

Transcript

Welcome to The Spread, I’m Matt Raebel. It goes without saying that 2020 has been a super chaotic year. Remember in 2016 when all that terrible and – sometimes weird – stuff happened, like there was Gene Wilder’s death and then all those creepy clowns that kept showing up in parks at night, and everybody said it couldn’t get any worse? Well 2020 heard that and was like, “hold my beer.” For one thing, this year’s U.S. presidential election is causing more worry than usual, and options traders are betting on a lot of volatility around November 3rd. Of course,  current wild markets are attributable to a combination of things – obviously the election and the economic downturn caused by the coronavirus are factors, and then there are those damn youths trading on Robinhood! (shakes fist) A greater number of options trades than ever before are coming from retail traders from all over the world with no professional investing experience or education – many of whom are fairly young. Amateur traders on platforms like Robinhood make up about twenty percent of all equity trades now, according to Bloomberg Intelligence. We’ve talked about the popular Reddit page WallStreetBets on this show before – the crass online community that some analysts say is worth taking a closer look at. According to an article published this week by Bloomberg, twelve percent of options trade volume in 2020 has been retail, and a big driver of retail volume has been large, coordinated trades led by anonymous influencers on Reddit. While it would be reductive to say that WallStreetBets is the only online community driving such trading activity, its infamy has gotten to the point where hedge funds and large financial institutions have begun to track the sentiment of these communities to anticipate the price movements of certain stocks. Speaking of crass Internet communities and wild price swings – bitcoin’s price plummeting last week was followed by a ton of bearish options positions being put down by traders on Huobi, the Chinese trading platform that rolled out bitcoin options trading on September 1, and the CME, whose bitcoin options volume has increased almost 48 percent since the beginning of the month. Bitcoin options continue to be as popular as they are novel – besides the spike in trade volume, Pantera Capital led a digital token sales round for a mobile cryptocurrency options trading app called PowerTrade – not to be confused with Powerade, which won’t let you trade bitcoin, but it does have electrolytes. Some quick exchange news before we wrap up: Deutsche Börse – or (midwestern accent) Deutsche Boerse to Chicagoans – officially acquired a majority stake in Quantitative Brokers. Representatives from (midwestern accent) Deutsche Boerse say they wanted to buy the renowned quant team as part of the exchange group’s long-term growth strategy. And that’s gonna do it for this week. We have new articles and podcasts up on John Lothian News dot com, so be sure to check out our site for more news. Until next week, stay safe and happy trading.

Sources

Hedge the U.S. Election in Currency Markets
Joanna Ossinger – Bloomberg
https://bloom.bg/3ilcEq9

Election Volatility Is Here And Most Intense Than Ever
RCM Alternatives
https://bit.ly/2RwPEc3

Wells Fargo says stock market volatility will balloon after US election
Saloni Sardana – Markets Insider
https://bit.ly/3kjEHai

The Wildly Popular Trades Behind the Market’s Swoon and Surge; Record options trading and momentum bets are spurring volatility
Gregory Zuckerman and Gunjan Banerji – WSJ
https://on.wsj.com/3kixt6y

Reddit’s Stock Threads Become a Must-Read on Wall Street
Sarah Ponczek – Bloomberg
https://bloom.bg/3c1O1MZ

Huobi’s Bitcoin Options offerings leave a mark….. on the CME
Ekta Mourya – AMB Crypto
https://bit.ly/32uVmS6

New Bitcoin Options App Raises $4.7M in Round Led by Pantera Capital
Sebastian Sinclair – Coindesk
https://bit.ly/3mqXx1b

New Bitcoin Options App Raises $4.7M in Round Led by Pantera Capital
Sebastian Sinclair – Coindesk
https://bit.ly/3mqXx1b

Deutsche Börse acquires a majority in quantitative brokers, thereby strengthening its strategic focus on the buy side
Deutsche Börse
https://bit.ly/33Fu8rp

How to pronounce: Börse (German)
VisualTerra – YouTube
https://bit.ly/2RBlN2h

John Lothian Newsletter

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Past The Spread Episodes

Tesla Trade Spurs Early-Week Stock Selling; Inflation Index Jumps; Options Volume Continues to Set Records – The Spread – November 12, 2021

Tesla Trade Spurs Early-Week Stock Selling; Inflation Index Jumps; Options Volume Continues to Set Records – The Spread – November 12, 2021

– Tesla CEO Elon Musk sells shares, briefly captivates the equity market; Higher inflation news chills Treasury trading; Options volume continues to set records;
– John’s Take profiles Stable, the winning innovator of the year at FIA Expo 2021;
– EQDerivatives’ Russell Rhoads explains the Nasdaq-100 Volatility Index in the Term of the Week.

U.S. Growth Slows, But Tesla Options Rev Up; Cboe Goes Nanos For Retail; John’s Take Previews Expo; Strategizing with Butterfly Spreads – The Spread – October 29, 2021

U.S. Growth Slows, But Tesla Options Rev Up; Cboe Goes Nanos For Retail; John’s Take Previews Expo; Strategizing with Butterfly Spreads – The Spread – October 29, 2021

– The U.S. economy sputtered to a 2% growth rate in Q3, but Tesla traders are unfazed; Cboe expands S&P 500 Index options offerings for retail with smaller options; ethereum gets a boost from new ETF expectations; 
– John’s Take previews next week’s in-person return of FIA Expo;
– Catching up with long butterfly spreads in the Term of the Week with Jermal Chandler.

Crypto Steals Headlines With Cboe-ErisX Deal, U.S. Bitcoin ETF; John’s Take Connects With ICE Mortgage Tech;  A Look at Cash-Secured Puts – The Spread – October 22, 2021

Crypto Steals Headlines With Cboe-ErisX Deal, U.S. Bitcoin ETF; John’s Take Connects With ICE Mortgage Tech; A Look at Cash-Secured Puts – The Spread – October 22, 2021

– Crypto edges into the mainstream with Cboe-ErisX acquisition announcement, first-ever bitcoin U.S. ETF debut; SEC’s GameStop study a reflection without regulation;
– John’s Take reviews the data-driven mortgage experience with ICE Mortgage Technology;
– Are you bullish on a stock? The Term of the Week looks at a cash-secured put strategy with Jermal Chandler.

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