The stock market’s fear gauge tumbles despite ongoing election uncertainty

Nov 5, 2020

Observations & Insight

$14,341/$300,000 (4.8%)
Rich Mackey

Lead Stories

The stock market’s fear gauge tumbles despite ongoing election uncertainty
Matthew Fox – Markets Insider
An uncertain outcome of the presidential election and a potential divided Congress result led the stock market to do the near opposite of what some Wall Street experts expected it to do: trade higher.
That surge in stocks has coincided with the stock market’s so-called fear gauge, the Cboe Volatility Index (VIX), plunging as much as 15% on Wednesday, according to data from Bloomberg.

****JB: Also see the Financial Times’ story, Stock volatility drops even as US election remains undecided and the Reuters’ story, Analysis: No White House result? Wall Street’s ‘fear gauge’ shows less panic.

Election Volatility Risk May Have Just Shifted to December
Joanna Ossinger – Bloomberg
Volatility is falling across asset classes with Joe Biden on the brink of victory over President Donald Trump. But traders aren’t out of the woods yet, as a number of catalysts could reignite price swings, according to strategists.
Even if Biden wins — and that isn’t certain yet — there’s still a lot to be resolved. Lawsuits related to the results in key states, the makeup of the Senate which remains in doubt, and the potential for public unrest if the result hinges on contested ballots all have the potential to send volatility higher.

Three tenets of conventional investing that might reverse as volatility becomes ‘the new normal’, according to Morgan Stanley
Theo Golden – Markets Insider
US market volatility has somewhat become the norm over the past few years and this trend isn’t going away any time soon. The VIX index, an instrument used to measure volatility in the US equities market, has traded above the 30% mark in more weeks this year than it had done in the prior 10 years.
These swings in volatility, or “a rise in the volatility of volatility” signal that structural change is afoot, according to Lisa Shalett, chief investment officer for wealth management at Morgan Stanley.

Exchanges and Clearing

Miami International Holdings Reports September 2020 Options Trading Results and New Daily and Monthly Records for MIAX Exchange Group
Miami International Holdings, Inc. (MIH) today reported September 2020 options trading results for its three securities exchanges – MIAX, MIAX PEARL and MIAX Emerald (together, the MIAX Exchange Group). The MIAX Exchange Group collectively executed over 86.7 million equity option contracts in September for a combined average daily volume (ADV) of 4,129,567 contracts, representing a total U.S. equity options market share of 13.71%.

HKEX to launch futures and options on Hang Seng TECH index; The HKEX futures and options contracts will launch on 23 November 2020 and 18 January 2021 respectively as the first ETDs to track the Hang Seng TECH index.
Annabel Smith – The Trade
Hong Kong Exchanges and Clearing Limited (HKEX) is preparing to roll out futures and options contracts on the Hang Seng TECH Index as the first exchange-traded derivatives to track the benchmark. The Hang Seng TECH index futures will launch later this month on 23 November, with plans to go live with options on 18 January next year, subject to market readiness and regulatory approval.

CME Group Declares Quarterly Dividend
CME Group
CME Group Inc., the world’s leading and most diverse derivatives marketplace, today declared a fourth-quarter dividend of $0.85 per share, payable December 29, 2020, to shareholders of record as of December 10, 2020.

Position Limits and Large Trader Reporting Requirements in Connection with the Initial Listing of the Pork Cutout Futures and Options on Pork Cutout Futures Contracts
CME Group
In connection with the listing of the Chicago Mercantile Exchange Inc. (“CME”) Pork Cutout Futures and Options on Pork Cutout Futures contracts (the “contracts”) on trade date Monday, November 9, 2020 (see SER-8651 published September 29, 2020), please note below and in Exhibit C of CME Submission No. 20-339 the corresponding spot-month position limits (Rule 559), single month position limits (Rule 559), aggregation allocations (Rule 559.D) and reportable levels (Rule 561) for the contracts.

REVISED: New Product Summary: Initial Listing of the Pork Cutout Futures and Options on Pork Cutout Futures Contracts
CME Group
Initial Listing of the Pork Cutout Futures and Options on Pork Cutout Futures Contracts


Alibaba Stock Is Falling. It’s Time to Pounce on It.
Steven M. Sears – Barron’s
If stock-market forecasting exists to make necromancy seem like a respectable profession, political pollsters might just definitively prove the old maxim that figures lie and liars figure.
Despite their widespread conviction that former Vice President Joe Biden would trounce President Donald Trump in a landslide, the election results are still far from clear, leaving the world in a state of suspended animation over the outcome.


Iron Condor Strategies: A Way to Spread Your Options Trading Wings
Kevin Hincks – TDAmeritrade
Many advanced option traders seek defined-risk, high-probability options trades. Active traders understand it’s impractical to expect every options trade to be profitable. But seeking favorable probabilities and exercising prudent risk management can help create a winning strategy.


Futures & Options Expo
Since March the futures community has shown its resiliency and ability to adapt to the challenges of today. Expo-V focuses on shaping what’s next in the cleared derivatives industry as we continue to move forward and change. Whether leading voices analyzing the most pressing issues or ground-breaking fintech startups, the virtual 36th Annual Futures & Options Expo is your destination to build partnerships, spot trends and define what’s next for our industry.


Sliding Yields Recharge Stock Rally That Was Betting on Stimulus
Justina Lee – Bloomberg
Stock traders who once counted on a fiscal splurge under a Blue Wave Congress have kept their mojo thanks to a time-tested driver of the bull market: Cheap money.
As Treasuries surged, investing strategies riding near-zero interest rates got another shot in the arm — helping money managers look past their dashed hopes for a massive stimulus under a unified Democratic government.

Why Is the Stock Market Up as Election Results Come In?
Amrith Ramkumar and Caitlin McCabe – WSJ
Wall Street is reacting to election results as they come in, driving a big rally in stocks Wednesday.
The S&P 500 jumped 2.2% for the day, extending gains that began overnight. But across sectors, the rally was uneven. Heading into Election Day, traders had expected Democrats to win control of the White House and Senate, fueling wagers on a larger coronavirus stimulus plan that some anticipated would lift bond yields and support cyclical stocks tied to the economy—smaller companies, banks and manufacturers.

Why day trading is such an incredibly bad idea right now, and what you should be doing instead
Liz Weston – MarketWatch
The current day trading boom will end as these frenzies always do: in tears. While we wait for the inevitable crash, let’s review not only why day traders are doomed but also why most people shouldn’t trade, or even invest in, individual stocks.

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