The Spread: Tiger Billionaire

 

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.

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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

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Today’s Newsletter

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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

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