US stocks near all-time highs has traders talking about a ‘gamma flip’ — and what might happen if things turn bad
Thorsten Roland Wegener – Markets Insider
There is a new buzzword in town: ‘Gamma Flip’. It is used to explain (due to a lack of any sane explanation for current market behaviour) why the S&P seems stuck at practically all-time highs and what might happen if things turn bad. In fact, it is so hot that even TV pundits are elaborating on its potential advantages and dangers. But what exactly is it?
Why stock investors aren’t rattled by Trump’s historic impeachment — and what it would take for that to change
William Watts – MarketWatch
Investors don’t care about impeachment — and that is unlikely to change unless there is a shift in widely held expectations that President Donald Trump will remain in office.
Trump late Wednesday became the third U.S. president in history to be impeached, as the Democratic-led House of Representatives approved abuse-of-power and obstruction-of-Congress charges against the Republican leader, as was widely expected.
The ‘ultimate smart money indicator’ is signalling a big move in the stock market by the end of the week
Shawn Langlois – MarketWatch
Look out, above!
S&P 500 index monthly options expire this Friday, and Erik Lytikainen, longtime trader and founder of Viking Analytics, says that, just like this time last year, investors could be in store for some real fireworks.
Just not necessarily the bearish kind we saw in 2018.
Investors are hedging against a ‘black swan-type’ event even as Street’s main fear gauge falls
Jesse Pound – CNBC
The Cboe Volatility Index is trading near its lowest level this year. However, the Cboe SKEW Index, measuring hedging activity against major market moves, hit its highest level this year on Friday. The rising SKEW could mean investors are wary of major macro events, such as negative trade developments.
Pot Stock Short Sellers Are Getting Killed. That Means the Marijuana Rally Could Continue.
Al Root – Barron’s
Short sellers are getting killed in cannabis stocks this month.
December mark-to-market losses in the 20 most heavily shorted cannabis stocks are more than $130 million, according to short selling data provider S3 Analytics. Shares of Canopy Growth (ticker: CGC), for instance, are up more than 40% over the past month. Still, betting against marijuana stocks has been a winning trade for the bears in 2019. Total profits approach $1 billion.
****JB: Party on dude!
Heard of bitcoin’s ‘halving’? It’s set to shake crypto markets in 2020
Tom Wilson – Reuters
If you’re not a bitcoin enthusiast, you probably haven’t heard what’s happening next year: It’s called the “halving”, and it will cut production of the cryptocurrency by 50%.
****JB: There is an options angle here to consider.
Russell Rhoads’ Derivatives Look Forward: 2020 Futures Market Predictions
Russell Rhoads – TABB Group
2019 was another great year for futures and options-on-futures trading in the US, and both markets are on track for record volumes this year. Among the year’s highlights, says TABB Group head of derivatives research Russell Rhoads, was the launch of Micro E-Mini futures on stock indexes by CME Group. In his weekly video, Rhoads predicts an even better year for futures markets in 2020. Expectations are for increased volatility in 2020, resulting from the US election cycle and the ongoing trade talks with China, as well as the aftermath of the Saudi Aramco IPO and the potential for inflation pressure following low unemployment levels.
Exchanges and Clearing
CME Globex Notices: December 16, 2019
Intercontinental Exchange Reaches Open Interest Records in Brent Crude Oil Futures and TTF Natural Gas
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced record open interest of 2.71 million contracts in Brent Crude Oil futures and 2.21 million contracts in TTF futures and options. As of December 17, and on a year-over-year basis, Brent Crude Oil futures open interest is up 22% versus the prior year, while open interest across TTF futures and options is up 73%.
Regulation & Enforcement
Statement of Chairman Heath Tarbert in Support of Final Amendments for Derivatives Clearinghouses
Clearinghouses—often called central counterparties or CCPs—are what make our futures, options, and much of our swaps markets work. Once a buyer and seller enter into a derivatives trade, the CCP takes on each party’s credit risk for the duration of the contract. Hundreds of thousands of trades occur in the United States because market participants never need to worry about counterparties not making good on their payment obligations. The entire risk of an exchange or even several exchanges is centralized within a given CCP. As a consequence, CCPs are the “risk controllers” that stand at the very epicenter of our markets.
Amendments to Block Trade Minimum Threshold Levels for Inter-Commodity Spread or Combination (“ICS”) Transactions in Short-Term Interest Rate (“STIR”) Futures and Options Products
Effective on Sunday, January 12, 2020, for trade date Monday, January 13, 2020, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME”) and The Board of Trade of the City of Chicago, Inc. (“CBOT”) (collectively, “the Exchanges”) will adopt a revised standard form meeting the block trade minimum threshold levels in ICS transactions in STIR futures and options products (Three – Month Eurodollar, One – Month Eurodollar, Three – Month SOFR, One – Month SOFR and 30 – Day Federal Funds).
AFME, FIA, ICMA, ISDA and ISLA Publish Master Regulatory Reporting Agreement
The Association of Financial Markets in Europe (AFME), Futures Industry Association (FIA), International Capital Market Association (ICMA), International Swaps and Derivatives Association, Inc. (ISDA) and International Securities Lending Association (ISLA) have published a new agreement intended to simplify reporting across different European Union regulatory regimes.
Market Regulation Advisory Notice
Effective on trade date Monday, January 13, 2020, and pending all relevant CFTC regulatory review periods, this Market Regulation Advisory Notice will supersede CME Group Market Regulation Advisory Notice RA1908-5R from August 29, 2019. It is being issued to revise the standards for meeting the block trade minimum threshold in inter-commodity spread or combination transactions in CME and CBOT shortterm interest rate futures and options products.
Hedge Funds, Unicorns May Open to More Investors in SEC Plan
Robert Schmidt – Bloomberg
U.S. regulators are poised to add new criteria for who’s considered a sophisticated investor in an effort to allow more people to invest in hedge funds or hot startups that have become known for raising billions of dollars outside of public markets.