The VIX’s Wild Ride; Bitcoin Options Trading Volumes Surge as Price Moves Above $9.4K

May 1, 2020

Lead Stories

The VIX’s Wild Ride
Katie Kolchin – Traders Magazine
The emergence of the global pandemic Covid-19 in the first quarter of 2020 caused severe economic and capital markets shocks. This turmoil is evidenced by sharp price declines – yet spikes in volumes – in equities markets, which closed the first quarter with their worst performance since the financial crisis. Additionally, volatility, as measured by the CBOE Volatility Index (VIX1), elevated to historic highs. While people point out that the VIX has started to come down, it remains elevated and ticked back up this week with oil markets concerns. We are not out of the woods yet.

Bitcoin Options Trading Volumes Surge as Price Moves Above $9.4K
Omkar Godbole – Coindesk
Bitcoin jumped to two-month highs early on Thursday and now looks set to register its biggest monthly gain in nearly a year. The top cryptocurrency by market value rose to $9,469 at 06:05 UTC, the highest level since Feb. 25, having rallied from $7,700 to $8,900 on Wednesday, according to CoinDesk’s Bitcoin Price Index.

Stock Market Surge Isn’t as Crazy as It Seems
James Mackintosh – WSJ
The disconnect between the stock market message of glad tidings to capitalists and the economy’s slump into the worst performance since the Great Depression is unmissable. Are investors making a horrible mistake?
In zoological terms, is the 34% rebound since the low of March 23 the start of a new bull market or merely a dead cat bounce we will all forget when the bear returns?

The world’s richest investors want stocks to drop before buying back in, UBS poll reveals
Ben Winck – Markets Insider
The world’s wealthiest investors are still optimistic about the economy’s long-term prospects but don’t plan to buy more stocks until prices stage a second plunge, according to a UBS poll published Wednesday.

Hedge funds now are delivering as promised, but the winners are tough to find
Mark Hulbert – MarketWatch
The average hedge fund outperformed the S&P 500 in March by a lot — losing 7.3% instead of 12.5%. Is that impressive? Maybe not. On the one hand, it’s no small feat to outperform the stock market by more than five percentage points in just a single month. On the other hand, the protection hedge funds provide in an equity bear market comes at a cost. And it’s not clear that, on average, that cost is appropriate.
These nuances have unfortunately been lost as commentators have focused on the headline numbers. The emerging narrative in the wake of the March results appears to be a celebration that hedge funds “finally did… what they’re supposed to do.”

ETFs have proved critics wrong during the crisis
Financial Times
In the decade since a 2008 crisis exacerbated by newfangled credit derivatives, exchange traded funds have often been flagged as the next area that would demonstrate the destructive power of financial innovation gone wrong. Many pointed to the potential for a liquidity mismatch in funds that offer equity-like ease of price discovery but may contain bundles of illiquid assets such as junk bonds. However, when placed under enormous strain over the past few months, ETFs have mostly managed to prove their critics wrong.

Oil fund’s forced sales send WTI prices plunging again
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

What to Know about the Cboe and FTSE Russell Combination
Rick Rosenthal – Cboe blog
Cboe recently strengthened its strategic relationship with FTSE Russell, a leading provider of market capitalization weighted indices, by extending its 2015 exclusive licensing agreement through 2030. As we look forward to the next decade of innovation with FTSE Russell, we’re looking back on the past five years of this great collaboration.

FTSE Russell Extends Global Index Pact with Cboe
Traders Magazine (press release)
FTSE Russell, a leading global index, data and analytics provider, today announced a ten-year extension of its licensing agreement with Cboe Global Markets (Cboe) to develop and list options based on FTSE Russell global indexes. Through this collaboration, established in 2015, Cboe has exclusive rights in the United States to list cash-settled index options on the Russell 2000 Index, Russell 1000 Index and Russell 1000 Style (Growth & Value) Indexes. There is also an opportunity to expand their options offering to nearly two dozen additional FTSE Russell indexes.

MIAX Exchange Group – Options Markets – Standard 3rd Friday Expiration Listing Changes
Effective on Thursday, May 14, 2020 the standard 3rd Friday monthly expiration replacement series will be listed on the Thursday morning prior to the standard 3rd Friday expiration for all Equity options listed on the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange.

Regulation & Enforcement

Accountability Levels and Large Trader Reporting Requirements in Connection with the Initial Listing of the Options on One-Month SOFR Futures Contract
CME Group
In connection with the listing of the Chicago Mercantile Exchange Inc. (“CME”) Options on One-Month SOFR Futures contract (the “Options”) on trade date Monday, May 4, 2020 (see SER-8581 published April 7, 2020), please note below and in Appendix C of CME Submission No. 20-144 the corresponding accountability levels (Rule 560), aggregation allocations (Rule 559.D) and reportable level (Rule 561) for the Options.

Options Trader Alert #2020 – 11 Nasdaq PHLX, ISE and GEMX Updated Pricing Effective May 1, 2020
Effective Friday, May 1, 2020, pending filing with the SEC, Nasdaq PHLX (PHLX), Nasdaq ISE (ISE) and Nasdaq GEMX (GEMX) amend their pricing as described below.


Should You Time the Market? You Must Right Now, This Investment Manager Says
Bob Kargenian – Barron’s
Market timing. Good or bad? A sober interpretation of long-term market macro data says neither. Timing is, in fact, imperative right now.
I am convinced we are in a bear market. Since mid-March, a week has not gone by when I’ve not seen an article in major national publications, authored by accredited experts, with the same message: “Don’t panic and sell, or you’ll miss out on substantial gains.”

****JB: I think this is the first time I have ever seen someone advise that people should try to time a market.


Societe Generale Posts Loss as Traders Are Wiped Out in Rout
Christian Baumgaertel, Donal Griffin and Marion Halftermeyer – Bloomberg
Societe Generale SA slumped to a surprise first-quarter loss after coronavirus-related market volatility wiped out stock trading revenue and bad loan provisions surged.
Revenue from equities trading, a traditional stronghold of the firm, slumped 99%, more than offsetting strength in the smaller fixed-income unit, the French lender said Thursday. SocGen set aside 820 million euros ($890 million) to cover bad loans and warned provisions — including for defaults and two fraud cases — could hit 5 billion euros this year in a worst case scenario.

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