Traders Pile Into Options Wagers Amid Rate-Hike Expectations

Oct 25, 2021

Observations & Insight

Cboe Options Institute will offer a 75-minute webinar, “Put-writing and Portfolio Risk Management,” on Wednesday, October 27, at 12 p.m. ET with Derek Devens, managing director and senior portfolio manager at Neuberger Berman, and Gaurav Sinha, managing director, head of Americas, Global Research & Design at S&P Dow Jones Indices. Registration information is here.~SC

MIAX is holding a webinar on October 28 at 1:00 p.m. ET to introduce the BRIXX CRE indexes and derivatives. This newest suite of proprietary products from MIAX includes BRIXX™ Commercial Real Estate Futures and Options. BRIXX Futures and Options are cash-settled contracts based on the family of BRIXX Commercial Real Estate (CRE) Indexes developed by Advanced Fundamentals. For more information and to register, click HERE. ~JJL


Crypto Steals Headlines With Cboe-ErisX Deal, U.S. Bitcoin ETF; John’s Take Connects With ICE Mortgage Tech; A Look at Cash-Secured Puts – The Spread – October 22, 2021

– Crypto edges into the mainstream with Cboe-ErisX acquisition announcement, first-ever bitcoin U.S. ETF debut; SEC’s GameStop study a reflection without regulation;
– John’s Take reviews the data-driven mortgage experience with ICE Mortgage Technology;
– Are you bullish on a stock? The Term of the Week looks at a cash-secured put strategy with Jermal Chandler.

Watch the video »

Lead Stories

Traders Pile Into Options Wagers Amid Rate-Hike Expectations
Hema Parmar and Liz McCormick – Bloomberg
Traders of short-term interest-rate derivatives appear to be piling back into bets about the timing of the Federal Reserve’s first monetary policy tightening ahead of the central bank’s meeting next week.
At the end of the two-day session, the Fed is widely expected to announce plans to begin tapering its massive bond-buying program. Yet when it will begin raising interest rates remains the wildcard and that’s a favored angle for speculative trading in money markets.

Stocks could see continued gains in a low-volatility environment if the market’s fear gauge breaks this key level
Matthew Fox – Markets Insider
The stock market’s record-setting year could continue into year-end if Wall Street’s fear gauge falls below a key technical support level, Fairlead Strategies founder Katie Stockton said in a Monday note.
The CBOE Volatility index, known as the VIX, helps gauge the level of fear among investors and recently traded at 15.29 Monday morning.

Fed Prepares to Taper Stimulus Amid More Doubts on Inflation
Nick Timiraos – WSJ
Federal Reserve officials are set to wind down their $120 billion-a-month bond-purchase program in November, but questions over how soon inflation pressures will fade are creating more uneasiness inside the central bank.
Fed Chairman Jerome Powell and senior officials have played down worries this year that a surge in prices during the uneven pandemic recovery would lead to permanently higher inflation. The most notable price increases have been tied to items most affected by the shutdown and reopening of the economy, but there are signs that inflation is coming from a broader set of products and services.

Oil prices soar, bullish hedge funds hold their nerve
John Kemp – Reuters
Petroleum futures and options saw another influx of hedge fund inflows last week as renewed bullishness about output restrictions overcame concerns about the already-high level of prices.Hedge funds and other money managers purchased the equivalent of 10 million barrels in the six most important futures and options contracts in the week to Oct. 19

Crypto Stock’s Options Activity Ramps Up as Bitcoin Soars
Riot Blockchain is seeing call interest ramp up
Jake Scott, Assistant Editor – Schaeffer’s Research
The recent spike in Bitcoin (BTC) has led to renewed interest in crypto-adjacent stocks like Riot Blockchain Inc (NASDAQ:RIOT). RIOT was last seen up 6.4% to trade at $30.10, and pacing for its best monthly performance since June. A recent pullback was saved by the $24 level, as well as long-term support at the 320-day moving average. Though a far cry away from its Feb. 17 decade-high of $79.50, Riot Blockchain stock boasts an incredible 675% year-over-year rise.

Tesla Is Towering Over Megacap Tech in the Options Market
Justin Zacks – Bloomberg
Some of the world’s largest tech companies, with a combined market value of over $9 trillion, are set to report earnings this week but these behemoths are being overshadowed by Tesla Inc. in the options market.
Tesla, despite reporting earnings on Oct. 20, accounted for eight of the top nine most-traded single stock options on Monday. Tesla $1,000 calls for expiration Friday topped the list with over 210,000 contracts traded as of 2:00 p.m. New York time. The bullish interest comes as the electric-vehicle maker’s market-cap eclipsed the $1 trillion mark on the heels of a 100,000 unit order from car-rental company Hertz Global Holdings Inc.


FTX Trading raises $420 million in Series B-1 funding round
Funding round will allow FTX to expand into new jurisdictions and improve upon its current offerings.
Wesley Bray – The Trade
FTX Trading, owner and operator of global cryptocurrency exchange, has seen its valuation climb to $25 billion following the successful closing of Series B-1 funding worth $420 million.

Fast Growing Crypto Exchange FTX “Finalizes” Acquisition of Futures & Options Provider LedgerX
JD Alois – CrowdFund Insider
FTX US (West Realm Shire Services Inc.), a digital asset marketplace affiliated with fast-growing crypto exchange FTX Trading, says it has finalized its acquisition of Ledger Holdings Inc., the parent company of LedgerX LLC.
The FTX said it has also rebranded LedgerX to FTX US Derivatives.
The deal was announced this past August and was described at that time as a significant milestone for their rapidly growing US business and is a key part of their strategy to bring regulated crypto derivatives to their US user base.

Market for Underlying Security Used for Openings on MIAX Options, MIAX Pearl Options and MIAX Emerald Options for Newly Listed Symbol DWAC Effective Tuesday, October 26, 2021
Digital World Acquisition Corp. (“DWAC”) will start trading on MIAX Options, MIAX Pearl Options and MIAX Emerald Options beginning Tuesday, October 26, 2021 and shall use the NASDAQ Global Select Market as the “market for the underlying security” for the purpose of Openings on the Exchange.

MIAX Exchange Group – Options Markets – New Listing Effective for October 26, 2021
The option class listed below will begin trading on the MIAX Options Exchange, the MIAX PEARL Options Exchange, and the MIAX Emerald Options Exchange on Tuesday, October 26, 2021:
Digital World Acquisition Corp. (DWAC)

Regulation & Enforcement

What The SEC May Have Missed In Its Report On ‘Meme Stock’ Volatility
Renato Capelj – Benzinga
The U.S. Securities and Commission issued a report earlier this month suggesting brokers — via gamified user interfaces and mechanisms such as payment for order flow — lured investors to increase their trading which, in turn, resulted in higher revenues.
Context: The SEC report comes after a wave of speculative commentaries on online forums like WallStreetBets earlier this year in which market participants fueled a rise in the volume and share prices of popularized meme stocks.


This Little-Known Woman Billionaire Built A Fortune Powering Fintech Firms Like SoFi And Webull
Jennifer Wang – Forbes
A former single mother and options trader, Jenny Just runs a multi-billion dollar business that provides the trading and technology behind popular mobile trading platforms, robo-advisors, and online banks.

How Bots Are Buying Up All This Year’s Hottest Christmas Gifts
Joshua Hunt – Bloomberg
Jason Kent, a self-described “hacker in residence” at Cequence Security Inc., sat down in front of a pair of computer monitors at his home in Hilliard, Ohio. On them he watched as one of his clients sold off millions of dollars in assets in thousands of transactions conducted across mere minutes. Kent was acting as a digital sentry, guarding not against theft but against arbitrage, in this case of limited-edition sneakers that a sports apparel retailer was releasing for sale on its website: Nike SB Dunks, the latest Yeezys, and some Air Jordans.

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