The Spread: Tiger Billionaire

Suzanne Cosgrove

Suzanne Cosgrove

Editor

 

Transcript:

Welcome to The Spread, I’m Matt Raebel.

Archegos Capital Management, founded by Bill Hwang, a former Tiger Management analyst who previously pleaded guilty to insider trading in 2012, apparently quietly built up loads of stakes on margin using derivatives like total return swaps. This week, Archegos defaulted on its resulting credit exposure, forcing it to unwind positions estimated in the billionsI think the phrase, “don’t write checks your butt can’t cash,” was invented specifically for situations like this one.

Speaking of risky bets, we’ve mentioned Deribit quite a lot on this show, the unregulated, Panama-based crypto exchange where the majority of bitcoin options are traded worldwide and whose name sounds a bit like the noise a frog makes. 

This week, Deribit announced the future launch of a bitcoin volatility index called DVOL, which will provide a gauge of the 30-day annualized implied volatility of bitcoin. The company said it won’t be a VIX-like, like T3’s BitVol, but it seems confident enough in its potential utility that Deribit is planning to launch futures based on the DVOL at an unspecified  future date. Who knows – maybe by then, the CME Group will have announced a similar product.

Speaking of the CME, the company announced this week that over a million of its micro e-mini equity options contracts have traded since their launch on August 31, 2020. It’s not that surprising; micro futures and options contracts have been hot since they were first launched. Besides requiring less capital to pay for the premiums on them, micro e-mini contracts provide more granularity than regular-sized contracts for traders because of their smaller size, so they’re pretty useful for experienced traders who want to fine-tune their options strategies.

And finally, news broke this week that the SEC approved Cboe Global Markets’ plan to introduce periodic auctions on its BYX equities exchange. Periodic auctions give market participants access to price-forming auctions throughout the course of the trading day, which helps them find liquidity in a short time-frame while prioritizing price and size. Periodic auctions were first launched in Europe, but Cboe hopes to bring them to North America in Q3 of this year.

We’ve got a couple new interviews up on John Lothian News dot com; one’s an exclusive interview with Trading Technology’s CEO Tim Geannopulos, and the other is an interview with Kevin Tyrrell, head of research for the NYSE. Thom Thompson also published a new article on the hemp industry. Check out John Lothian News dot com for all that and more, and follow us on Twitter, LinkedIn, YouTube, and Facebook for more content. That’s gonna do it for The Spread this week, so until next time, stay safe and happy trading.

++++

Get more news from JLN at http://www.johnlothiannews.com. 

Follow us on Twitter at http://www.twitter.com/JohnLothian, http://www.twitter.com/MarketsWiki or www.twitter.com/JLNOptions. 

Follow JLN on LinkedIn at https://www.linkedin.com/company/236044/admin. 

Follow JLN on Facebook at https://www.facebook.com/johnlothiannews.

 

Sources:

Archegos Implosion: Options Expert Explains How Derivatives Caused It
Vicky Ge Huang – Business Insider
https://bit.ly/3ma2gVi

The man at the heart of the Archegos fiasco is a ‘Tiger cub’ and devout Christian who pleaded guilty to insider trading. Meet Bill Hwang.
Theron Mohamed – Markets Insider
https://bit.ly/3weC2Wb

Archegos Fiasco Is Latest Reminder Super-Rich Love Leverage
Venus Feng – Bloomberg
https://bloom.bg/3czL7AZ

Archegos meltdown, GameStop drama underscore need for more hedge-fund disclosure, reformers say
Chris Matthews – MarketWatch
https://on.mktw.net/31yym3i

Crypto Options Giant Deribit Launches Bitcoin Volatility Index
Omkar Godbole – Coindesk
https://bit.ly/31DZtKc

CME Group Announces Micro E-mini Equity Options Reach More Than 1 Million Contracts Traded
CME Group
https://bit.ly/2QFWLlh

Cboe Receives Regulatory Approval to Launch Periodic Auctions for U.S. Equities Trading
Traders Magazine (press release)
https://bit.ly/39mBR1i

Exclusive: JLN Interviews New Trading Technologies CEO Tim Geannopulos About His Mandate And The Potential Sale Of TT
https://bit.ly/3m681Dl

John Lothian Newsletter

Today’s Newsletter

Libor’s Final Days Begin With Push to Shake Up Swaps Market

Libor’s Final Days Begin With Push to Shake Up Swaps Market

First Read $51,906/$300,000 (17.3%) ++++ Hits & Takes John Lothian & JLN Staff The SEC issued an "Opinion of the Commission" on Monday in a case between ABN AMRO Chicago LLC and Chicago Board Options Exchange, Inc. and C2 Options Exchange, Inc. Here is a...

We visit more than 100 websites daily for financial news (Would YOU do that?)

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.”

Pin It on Pinterest

Share This Story