The World’s Biggest Volatility ETF Grows 40% in Just Four Days
Sam Potter – Bloomberg
The biggest exchange-traded fund that profits from U.S. stock volatility has added more than $600 million of new money in less than a week.
The ProShares Ultra VIX Short-Term Futures ETF (ticker UVXY) now boasts $2.2 billion in assets, up from $1.6 billion late last week, according to data compiled by Bloomberg. Activity in the fund is surging, with trading volume on Wednesday jumping to more than three times the one-year average.
Bitcoin Options Market Sees Low Odds of Sky-High Rally in 2021
Omkar Godbole – Coindesk
Bitcoin’s options market is assigning a low probability of prices rising above $100,000 this year despite widespread expectations for a meteoric rally in the wake of Tesla’s recent purchase of the top cryptocurrency. At press time, the options market is pricing 12% odds of the cryptocurrency trading in seven figures before the end of December, according to data source Skew. The probability of a break above $70,000 is around 21%.
US brokers’ race to attract investors stokes concerns over risks
Madison Darbyshire and Colby Smith – Financial Times
The era of commission-free trading has driven a relentless race among US brokers to defend their market share, fuelling a trading frenzy that has set off alarm bells among veteran investors and analysts.
The sector has transformed more rapidly over the past 18 months than at any point since the dotcom boom two decades ago, analysts say. That has empowered day traders but could also be “distorting” their sense of risk, they argue.
WallStreetBets’ Reddit Traders Make Short Selling Even More Dangerous
Mark Gilbert – Bloomberg
Investors who seek to profit from a decline in a company’s share price have always taken greater financial risks than their long-only peers. Now, they face the additional danger of running afoul of Redditors piling into the market’s most-shorted stocks. For the sake of efficient capital markets, here’s hoping the short-selling crowd can hold its nerve.
The most direct casualty of the trading frenzy that propelled shares of GameStop Corp. and other stocks with big short positions to stratospheric levels in recent weeks was Melvin Capital Management LP, which lost about 53% in January on positions including a short of the video game retailer’s shares. But other short sellers have also been chastened.
Exchanges and Clearing
Amsterdam ousts London as Europe’s top share trading hub; UK’s departure from the EU prompts shift in dealing of stocks and derivatives
Philip Stafford – FT
Amsterdam surpassed London as Europe’s largest share trading centre last month as the Netherlands scooped up business lost by the UK since Brexit. An average EUR9.2bn shares a day were traded on Euronext Amsterdam and the Dutch arms of CBOE Europe and Turquoise in January, a more than fourfold increase from December. The surge came as volumes in London fell sharply to EUR8.6bn, dislodging the UK from its historic position as the main hub for the European market, according to data from CBOE Europe.
London Confronts Exodus of Euro Swaps Trading After Brexit
Silla Brush, Nicholas Comfort and Viren Vaghela – Bloomberg
London took a major hit to its dominance of euro swap trading after Brexit, with business fleeing the U.K. capital to both the European Union and Wall Street.
That’s according to a new analysis by IHS Markit, which found London trading venues’ share of the euro interest rate swap market slipped to 10% last month from nearly 40% in July. In the same period, EU platforms’ market share increased to a quarter from less than 10%. Wall Street venues’ share doubled to 20%, while trades done off-venue remained relatively steady.
Deutsche Boerse CEO says won’t match Q1 2020 volatility-driven highs
Deutsche Boerse’s chief executive Theodor Weimer said on Thursday that the German stock exchange operator wouldn’t be able to match the volatility-driven revenue highs of the first quarter of last year, but that he was optimistic for 2021.
CME Expands Volatility Indexes
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the publication of 11 additional implied volatility benchmark indexes to its suite of CME Group Volatility Indexes (CVOL). Clients can now access two years of historical implied volatility data on CME Group’s CVOL indexes on WTI Light Sweet Crude Oil, Henry Hub Natural Gas, Gold, Silver, Corn, Soybeans and Wheat, along with the addition of both 5-Year and 30-Year Treasuries.
Regulation & Enforcement
Citadel’s Ken Griffin Expected to Testify at GameStop (GME) r/WSB Hearing
Robert Schmidt and Jeff Kearns – Bloomberg
Ken Griffin, Citadel’s billionaire founder, is expected to testify next week at a House hearing on wild market swings in shares of GameStop Corp. and other stocks, according to three people familiar with the matter.
It’s also anticipated that Robinhood Financial Chief Executive Officer Vladimir Tenev will appear to answer questions about the role that the firm’s popular online trading app played in the tumult, said the people, asking not to be named before a formal announcement. House Financial Services Committee Chair Maxine Waters, a California Democrat, has said she wants the panel to hear from hedge fund Melvin Capital Management, as well.
US brokers’ race to attract investors stokes concerns over risks
Madison Darbyshire and Colby Smith – FT
The era of commission-free trading has driven a relentless race among US brokers to defend their market share, fuelling a trading frenzy that has set off alarm bells among veteran investors and analysts. The sector has transformed more rapidly over the past 18 months than at any point since the dotcom boom two decades ago, analysts say. That has empowered day traders but could also be “distorting” their sense of risk, they argue. US retail investors have piled into equities, with rolling net inflows over the past 22 days reaching $32bn this week from less than $3bn two years ago, VandaTrack data show.
Crypto exchange Bitso opens door to futures and options products with derivatives platform acquisition
Michael McSweeney – The Block
Bitso has acquired Quedex, a Europe-based derivatives trading platform, the crypto services company announced Thursday. With the Quedex deal, one of the Latin American region’s most prominent crypto firms has moved to add significant technological heft to its toolkit as well as the ability to offer new kinds of products, according to CEO Daniel Vogel. Bitso declined to share terms but said that PwC advised Quedex on the sale.
Robinhood to open new offices in Seattle and New York City
Avery Hartmans – Business Insider
Robinhood is opening two new offices in New York and Seattle, the company said Thursday.
In a blog post announcing the news, Robinhood said the new locations will help it grow and better hire talent. A New York office would be Robinhood’s first East Coast hub, which will allow for “coast-to-coast market coverage,” Robinhood said. The Seattle location will become the company’s center for “infrastructure, security, and privacy.”
How to Play Palantir’s Extremely Volatile Options
Steven M. Sears – Barron’s
If you like volatility, you will love Palantir Technologies.
The big-data analytics company has options volatilities that often exceed 125%, making them among the most richly priced options in the entire market.
Implied volatility is a key determinant of options premiums. When it is high—as is the case with Palantir (ticker: PLTR)—it means the options market is pricing a stock as very likely to make a sharp, strong move, up or down. When implied volatility is high, especially compared with the S&P 500 index, many investors like to sell options. Why? They get paid a lot for doing so.
Opinion: Your biggest risk in this bullish stock market is ignoring sell signals
Lawrence G. McMillan – MarketWatch
The stock market continues to plow ahead, making new all-time highs with regular frequency. Moreover, most of the indicators are staying in overbought territory, but are generally not on sell signals. So the best approach is to ride the trend higher, but remain wary of the dangers that could lie ahead.
Long call options vs. long put options — what ‘going long’ in options trading means
Jim Probasco – Business Insider
A long position in investing basically means to buy or own a stock. Generally, you do so because you expect it to increase in value in the future — hence, you’re holding it for the long-term.
But a long position also has a specialized meaning, having to do with options and options trading. It refers to buying a specific kind of option, based on your belief as to where the price of a stock (or another asset) is headed.
Let’s examine how a long position in options, or “going long” as the traders say, works.
Registration is open! – FIA Boca 2021
A New Virtual Experience
The Options Industry Conference is Going Virtual in 2021. Join OCC and the options exchanges for the 39th annual Options Industry Conference, April 28-29, 2021. While the conference will be held virtually for the first time in history, the focus will continue to be the key topics facing the options industry today, from the regulatory shifts in the U.S. and Europe to the technological developments that are driving monumental change in markets around the globe.
Yellen Is Poised to Make Markets Happy Again
Matthew A. Winkler – Bloomberg
If Treasury Secretary Janet Yellen means anything to business, labor and the world right now, it is as the avatar of the moral that luck is what happens when preparation meets opportunity.
Yellen, who was the only female chair of the 108-year-old Federal Reserve, has never done anything without exceptional due diligence. Her best-in-class career delivering financial stability bodes well as she manages the deeply depressed No. 1 economy rebounding from the largest contraction in gross domestic product since World War II and restores American prosperity.
What the WallStreetBets Saga Revealed: Yes, Investing Really Is a Game
Kevin Werbach – Barron’s
It took just a week for frenzied message board-driven trading in “meme stocks” such as GameStop and AMC to ignite a massive controversy that attracted the attention of the Securities and Exchange Commission, members of Congress from both parties, and the White House. Multiple book and movie deals have already been cut to tell the tale.