Trader Reaps $1.7 Million Payday on Wednesday’s Volatility Buys; VIX spending spree

Jul 26, 2019

Observations & Insight

Understanding Government and Regulation: Lessons From The Inside
MarketsWiki Education
Andy Busch, former chief market intelligence officer at the CFTC, had some pragmatic but alarming advice for interns who attended day one of MarketsWiki Education’s World of Opportunity event: “In D.C., someone is always out to get you.”
In this video, Busch goes into the CFTC’s focus on cryptocurrency and why the agency is hated inside the Beltway.
Watch the video »

Lead Stories

Trader Reaps $1.7 Million Payday on Wednesday’s Volatility Buys
Luke Kawa – Bloomberg (SUBSCRIPTION)
Jump in Cboe Volatility Index pays off for options investor; Volatility buyers were still out in force again Thursday
The trader who loaded up Wednesday on protection against U.S. equity tumult couldn’t have timed it better.

VIX Spending Spree
Henry Schwartz via LinkedIn
$30M spending spree on CBOE VIX Calls this week. A number of large blocks of calls were bought this week in VIX, starting Tuesday morning with 90K Aug 19/Sep 23 call stupids bought for $1.08, and continuing with two 110K lot blocks of Aug 20 calls Wednesday and another 110K Sep 24 calls on Thursday. Combined, the three days saw 1.7M calls trade and open interest growth of 770K contracts, including nearly 240K Aug 20 calls, 170K Sep 23 calls, 110K Sep 24 calls and 100K Aug 19 calls with everything bought in the 30 to 60 cent range, for a total premium outlay over $30M. First hour volume on Friday is already near 400K contracts as the blocks continue to hit- including 125K Sep 25 calls bought for 45c, opening, and a sale of 60K Aug 20 calls for 32c, possibly unwinding some bought yesterday for 45c for a loss. While large call blocks and positions of this size are not abnormal in the VIX, the frequency this week is well above recent average, and the resulting open interest growth is nearly triple the usual weekly increase of prior cycles.

Fact | Exchanges Want to Give Public Investors a Fair Shot
Bryan Harkins, Executive Vice President, Co-Head Markets at Cboe Global Markets, offers a counterargument to the opinion piece, “The SEC Wants to Give Public Investors a Fair Shot.”
A recent Wall Street Journal opinion piece authored by Professor Larry Harris of the University of Southern California attempts to make the case for the U.S. Securities and Exchange Commission’s proposed Transaction Fee Pilot, a pilot program intended to study how exchanges’ price mechanisms may impact broker routing behavior.

GSR and BlockTower Capital Conduct the First Bitcoin Variance Swap
Business Wire
GSR has completed the first ever cryptocurrency variance swap transaction with BlockTower Capital. A variance swap is a type of financial derivative product, common in traditional financial markets, that enables institutions and experienced traders to directly hedge against the volatility of a market or index, in this case Bitcoin.

Exchanges and Clearing

Tick trade-offs and the optimal size
Louisa Chender – Global Investor Group
Tick sizes are a crucial element of a contract specification that exchanges must contend with.
The goal is to protect investors by imposing a minimum price change for quotes of bids and offers, ensuring that everyone is moving the price at the same increments.
Ultimately the tick size contributes to shaping overall market quality as well as the trading costs paid by end users.
Tick size reductions on exchanges across the globe have shown that smaller ticks can result in significant cost savings to the buy-side.

Regulation & Enforcement

SEC’s Clayton Seeking Permanent Fix for Wall Street’s MiFID Pain
Bloomberg Law (SUBSCRIPTION)
The Securities and Exchange Commission, seeking a long-term response to European Union rules that force brokerages to bill separately for trading and research services, hasn’t decided whether to extend a temporary fix set to expire next year, SEC Chairman Jay Clayton said July 25.

Sebi slaps Rs 27 lakh fine on 5 entities for manipulative trade
DNA India
Markets regulator Sebi Thursday imposed a total fine of Rs 27 lakh on five entities for executing manipulative and non-genuine trades in the illiquid stock options segment of the BSE.


Warning: The stock market could be about to drop through this ‘trapdoor’
Shawn Langlois – MarketWatch
Back in 2007, when Wall Street was careening toward the financial crisis, the S&P 500 split from the consumer discretionary-to-consumer staples ratio, in a sign that appetite for risk was drying up even as the broader market pushed higher.
Now, as Jesse Felder points out this week on the Felder Report blog, we’re seeing the rare divergence pop up once again, which should have investors at least rethinking their approach to this aging bull market.


EU Says No to Boris Johnson, Increasing No-Deal Brexit Risk
Robert Hutton and Joe Mayes – Bloomberg (SUBSCRIPTION)
The scale of the challenge facing Boris Johnson to break Britain’s political deadlock was laid bare in his first days as prime minister, as the European Union immediately rejected his demands for a better Brexit deal.
Johnson told European Commission President Jean-Claude Juncker that the U.K.’s Withdrawal Agreement with the EU would have to change for it to pass Parliament, according to his office’s account of the phone conversation between the two Thursday. Juncker said it was the best and only deal possible.

Two Threats Remain for This Record U.S. Economic Expansion
Blu Putnam – CME Group
On June 30, 2019, the current economic expansion tied the old record from the Clinton decade of 40 quarters, and as each month passes without a recession it will be setting new records for duration.
As we have pointed out many times, economic expansions do not end because of old age. It takes a policy mistake.

Volatility Is Back in Argentina as Election Jitters Take Toll
Carolina Millan – Bloomberg (SUBSCRIPTION)
Argentine markets had finally seemed to find their footing, stabilizing after months of turmoil had sent the peso tumbling and borrowing costs soaring. But the past few days show investor angst is coming back.
The concern that’s contributed to the world’s worst currency and undermined bond returns stems from speculation that a primary vote set for next month may show strong support for leftist candidates ahead of October’s presidential ballot.

Record Stock Prices Are Failing to Charm the Mom-and-Pop Crowd
Elena Popina – Bloomberg (SUBSCRIPTION)
U.S. equities at a record? Volatility near historic lows? Retail investors are in no rush to celebrate.
At least that’s the sentiment of mom-and pop investors who took part in the latest survey from the American Association of Individual Investors. In a week when the S&P 500 hit a fresh all-time high, more people said they are pessimistic than optimistic on shares.

John Lothian Newsletter

So you want to know what’s happening in the financial markets?

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past Newsletters

Pin It on Pinterest

Share This Story