The VIX Just Revealed an Optimistic Signal for U.S. Stocks; How Options Helped Cboe Vest Buffer Investor Returns During The 2020 Market Crash

Apr 28, 2020

Observations & Insight

Cboe to donate medical units to U.S., UK facilities
SC: In a new blog post Monday, Cboe CEO Ed Tilly reflected on the 47th anniversary of the company’s founding and some lessons learned as Cboe continues to operate its markets through the coronavirus pandemic. Sunday, April 26, marked the 47th anniversary of Cboe Global Markets’ founding.

Tilly also announced that Cboe Global Markets plans to donate 70 “patient isolation units,” to U.S. and UK medical facilities in Kansas City, Chicago, New York and London as part of Cboe’s efforts to serve its communities and help stem the spread of the coronavirus.

The units are designed to protect healthcare workers by containing and isolating infected individuals. A Cboe spokeswoman said the exchange plans to deliver the first shipment to New York – where there continues to be the most immediate need – by the end of this week. The New York donations will be used by the NYC Fire Department Hazmat unit and NYC Police Department Emergency Services unit. Cboe did not disclose the costs of the units.

In the blog, Tilly also said the temporary transition of Cboe’s trading floor to all-electronic trading during Illinois’ stay-at-home orders was “seamless,” but added he looked forward to the reopening of the floor “and its eventual move to its new home in the 141 W. Jackson building in 2021.”

Lead Stories

The VIX Just Revealed an Optimistic Signal for U.S. Stocks
Joanna Ossinger – Bloomberg
Market turbulence has calmed down since the mid-March extremes, but a couple of recent moves may bode particularly well for stocks.
The Cboe Volatility Index, or VIX, closed below its second-month future on Monday for the first time since Feb. 21, going back to a more typical structure. Since contracts dated further out would tend to carry more uncertainty than those closer in, they would normally trade higher — though that hadn’t been the case in recent weeks because of the massive concern caused by the spread of COVID-19 and ramifications for public health, economies and financial markets.

How Options Helped Cboe Vest Buffer Investor Returns During The 2020 Market Crash
Renato Capelj – MarketWatch
Global markets are historically volatile amid the COVID-19 coronavirus. Typically, cash or diversification across multiple asset classes is the go-to strategy during uncertain market environments. However, with advancements in financial products, investors now have access to solutions that help them better mitigate risk and target returns.
In light of recent cross-asset volatility, Karan Sood, CEO and Managing Director, Head of Product Development at Cboe Vest Financial LLC, spoke with Benzinga regarding his firm’s unique risk-management strategies which received the 2020 Refinitiv Lipper Fund Award for protecting investor portfolios.

GOLDMAN SACHS: Global oil storage could be maxed out in just 3 weeks, driving ‘substantial volatility’
Ben Winck – Markets Insider
The world’s oil storage could reach capacity as soon as mid-May and wreak additional havoc on the critical commodity market, Goldman Sachs analysts said Friday.
Oil prices have sat close to historic lows as the coronavirus pandemic sinks demand and leaves producers struggling to stem a massive supply glut. The downward pressure recently pushed West Texas Intermediate crude contracts into negative territory for the first time ever and has kept the commodity from staging a return to past highs.

‘The virus is popping the bubble’: ‘Black swan’ funds scored a record 57% gain after profiting from the market meltdown
Theron Mohamed – Markets Insider
While many investors suffered heavy losses during the coronavirus sell-off, “black swan” funds have gained a record 57% this year, according to the CBOE Eurekahedge Tail Risk Hedge Fund Index.
The funds, which specialize in profiting from extreme market events, benefited from the spike in volatility and swings in equities, commodities, currencies, and other assets.

Forget 2020, stock market optimists look at 2021 for buy signals
Thyagaraju Adinarayan, Julien Ponthus, Joice Alves, Saikat Chatterjee and Tommy Wilkes – Reuters
Shrugging off reams of terrible economic data, plunging oil prices and dire corporate profits, world stocks have recouped around half of this year’s coronavirus-linked losses as investors flip over their calendars to bet on a strong recovery in 2021.
Trillions of dollars in stimulus from governments and central banks and moves to start re-opening businesses are contributing to the bounceback. While oil languishes near multi-decade lows, it might well be the cheap fuel that powers the upcoming recovery.
The most hopeful sign is the decline in volatility.

Oil fund’s forced sales send WTI prices plunging again: Kemp
John Kemp – Reuters
Front-month U.S. light crude oil futures prices slumped almost 25% yesterday, the second sharp tumble in a week, after the exchange operator ordered a major commodity fund to sell some of its near-dated futures contracts. United States Oil Fund (USO) announced to investors it would roll its current positions forward over three days between Monday and Wednesday after intervention by the Chicago Mercantile Exchange (CME).

Exchanges and Clearing

Reflecting on 47 Years of Defining Markets
Ed Tilly – Cboe blog
Sunday, April 26, marked the 47th anniversary of Cboe Global Markets’ founding. But this global pandemic has shown that even after 47 years, the core purpose of our business has not changed: we remain committed to providing a forum for investors to express their views on the market and manage their risk.

Regulation & Enforcement

Responses to FAQs Concerning Rule 301(b)(5) under Regulation ATS “Fair Access Rule”
John D’Antona Jr. – Trader’s Magazine
Responses to these frequently asked questions represent the views of staff of the Division of Trading and Markets (“Staff”). They are not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”). Furthermore, the Commission has neither approved nor disapproved their content. These responses, like all staff guidance, have no legal force or effect: they do not alter or amend applicable law, and they create no new or additional obligations for any person.

Futures Trader Alert #2020 – 27 Product Deletion Notice: NFX Options on NFX Brent Crude Financial Futures
The Exchange will delist the NFX Options on NFX Brent Crude Futures listed below on May 5, 2020.


How to Play Intercontinental Exchange’s Coming Earnings Report
Steven M. Sears – Barron’s
The owner of the New York Stock Exchange will report first-quarter earnings early Thursday in what is sure to be a closely followed call.
Covid-19 has created so much financial and economic volatility in the markets that Intercontinental Exchange’s (ticker: ICE) report will likely offer important insights into what is happening in the global markets—and what might come next.

Oil Traders Not Sure They Like Oil
Matt Levine – Bloomberg
It will be a little weird if the price of oil goes negative next month. I mean, it could happen; it happened this month. The last trade of the NYMEX June West Texas Intermediate crude oil future will be on May 19; anyone long June futures after that will have to take delivery of a bunch of oil in June in Cushing, Oklahoma, where there is not a lot of space to store oil. The last trade of the May WTI futures was on April 21, and on April 20, as financial traders with long positions scrambled to get out of the contract, the price fell to negative $37.63 per barrel. Then on April 21 it was fine again, and the contract finished at $10.01. Even on April 20, most trades in the May futures happened at positive prices. But toward the end of the day, panic—or something—set in, and for a short period people were paying to get rid of their oil futures.

This is the greatest mistake an investor can make, according to the founder of the world’s biggest hedge fund
Shawn Langlois – MarketWatch
‘The greatest mistake of all investors is to think that what has done well lately is a better investment rather than more expensive. And what has done worse lately is the worst investment — get me out of it! — rather than it’s cheap.’


Move Over, FAANGs. Goldman Unveils Europe’s ‘GRANOLAS’ Stocks
Ksenia Galouchko – Bloomberg
Goldman Sachs Group Inc. strategists say that in Europe, the companies that can outperform during the next market cycle are firms with strong balance sheets, low volatility growth and good dividend yields. They’re dubbing them GRANOLAS.
The breakfasty acronym derives from the companies on Goldman’s list: GlaxoSmithKline Plc, Roche Holding AG, ASML Holding NV, Nestle SA, Novartis AG, Novo Nordisk A/S, L’Oreal SA, LVMH, AstraZeneca Plc, SAP SE and Sano?.

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