Triple Witching Roils Market Where Traders Pay Up for Hedges

Sep 17, 2021

Observations & Insight

Options Veterans Forge New Path With Tried-And-True Strategy
JohnLothianNews.com

As its name suggests, Options Solutions is an options-centric asset-management firm, launched amid the heart of the COVID-19 pandemic, that aims to increase the returns of investors’ portfolios with customized options strategies.

JLN’s John Lothian and Suzanne Cosgrove recently interviewed the founders of the new enterprise, described by CEO Michael Brodsky as an early-stage, high-growth company. Team members are led by former CBOE Chairman and CEO Bill Brodsky, as well as Michael, his son, and options industry strategist Steve Sears.

Watch the video »

Lead Stories

Triple Witching Roils Market Where Traders Pay Up for Hedges
Lu Wang – Bloomberg
Like clockwork, the S&P 500 just endured another mid-month swoon before Friday’s options expiration. What’s less certain is whether the market can resume its record-setting rally at a time when traders are busy loading up on hedges.
As expected, stock transactions spiked as the expiry of stock and index options collided this time with that of index futures in a quarterly event known as “triple witching.” During the first 10 minutes of trading, volume on S&P 500 Index stocks more than tripled the average for that time of day over the past 30 sessions as the benchmark slipped 0.3%.
/bloom.bg/3hHJSSx

Dow slumps and S&P 500, Nasdaq erase week-to-date gains amid ‘quad witching’ and weak consumer sentiment reading
Mark DeCambre and Barbara Kollmeyer – MarketWatch
U.S. stock benchmarks were under selling pressure Friday, with bearish momentum gathering steam, as a reading on consumer sentiment held close to a roughly 10-year low last seen in August.
Investors also were braced for potential volatility from simultaneous options expiries due later in the session, known colloquially on Wall Street as quadruple witching.
/on.mktw.net/3nHJaIJ

Global Economy May be Headed for Shorter, Sharper Cycles: SocGen
William Horobin – Bloomberg
Frictions in the world economy, Covid-19 and a shift in thinking about monetary and fiscal policy augur a new era of greater volatility, according to economists at Societe Generale.
/bloom.bg/3zkIf3h

‘The witches’ come to the most ‘crazy’ stock Friday that keeps investors from all over the world in suspense
Market Research Telecast
Financial markets around the world are experiencing their ‘witch’s day’ this Friday, a phenomenon that is repeated four times a year and that can generate volatility due to the large volume of operations and the tension with which it is accompanied.
Every third Friday in March, June, September and December contracts expire simultaneously quarterly on four major instruments: Index Futures, Index Options, Stock Options and Stock Futures. On this day also takes place the ‘quadruple hour witch’, as the last hour of negotiations on the Stock Exchange with the four instruments mentioned is called.
/bit.ly/3hIHlYf

Bitcoin sees ‘quite healthy’ consolidation on $200M BTC options expiry day
Everything is bullish except the price on Friday as $200 million in options expire and attention focuses on corporate quarterly disclosures.
Bitcoin (BTC) ranged around $48,000 on Friday as hopes of a bull run endured thanks to low supply and upcoming corporate disclosures.
Anticipation builds for cross-crypto breakout
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD continuing to consolidate into Friday, with the latest options expiry now due.
/bit.ly/3CepBfc

Exchanges

CME Group SOFR Futures Open Interest Sets New Record, Surpasses One Million Contracts
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that its SOFR futures contracts reached a new record, surpassing one million contracts of open interest on September 15.
SOFR futures open interest reached 1,004,882 contracts yesterday, marking its seventh-consecutive record open interest day:
/bit.ly/3kjHfrI

CME to launch E-mini Russell 2000 Monday and Wednesday options; New weekly options contracts will increase precision, adding more granularity to trading strategies, allowing Russell 2000 Index exposure to be more fine-tuned, said the exchange.
Wesley Bray – The Trade
Chicago-based derivatives marketplace CME Group will be launching E-mini Russell 2000 Monday and Wednesday options on 4 October, subject to regulatory approval. The new options contracts will accompany existing options on Russell 2000 futures including Friday Weekly, End-of-Month and Quarterly options.
/bit.ly/2VPFdGv

Regulation & Enforcement

The Fed Needs to Change Its Trading Rules After Two Officials’ Moves Raise Eyebrows
Randall W. Forsyth – Barron’s
“Ethical behavior is doing the right thing when no one else is watching—even when doing the wrong thing is legal.” That quote, attributed to philosopher and early ecologist Aldo Leopold, is brought to mind by the recent revelation that two Federal Reserve Bank district presidents traded stocks last year while their monetary policy deliberations were having profound impacts on financial markets.
/bit.ly/3hKe9A1

Strategy

Fade Or Trade Unusual Activity?
Nasdaq
Contributor: Daniel Laboe – Zacks
A popular options strategy is to scan the markets for unusual activity and then formulate a trading idea based on what that activity implies. This novel market environment is full of unexpected action with a the tidal wave of freshman traders moving markets (aka r/wallstreetbets), unorthodox public offerings (aka SPACs), boundless monetary stimulus, and an unforeseen penchant for ultra-high growth oriented stocks.
/bit.ly/3tQZtnq

Miscellaneous

Did Occupy Wall Street mean anything at all? A look at the legacy of the movement that swept the world, ten years on
Darren Loucaides – FT
Around noon on September 24, 2011, a young black man named Robert Stephens fell to his knees in the middle of the road outside Chase Bank headquarters on Liberty Street, New York City. Wearing a white fleece and black-rimmed glasses, Stephens pointed at the Chase building and wailed: “That’s the bank that took my parents’ home.”
/on.ft.com/3CigGcH

*****Yes, it did. ~JJL

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