VIX Bets Shows Volatility Concerns Ebbing But Not Forgotten

Feb 16, 2021

Observations & Insight

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This week on The Spread, the CME announces the launch of new volatility benchmark indexes, Amsterdam’s trading volume surpasses London’s, and more.

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Lead Stories

VIX Bets Shows Volatility Concerns Ebbing But Not Forgotten
Joanna Ossinger – Bloomberg
Seeing the Cboe Volatility Index finally close below 20 may have settled the nerves of the most anxious investors Friday. But a look at futures and exchange-traded fund flows suggests the all-clear hasn’t been sounded just yet.
The spread between four-month contracts on the so-called fear gauge and front-month ones — a measure of expected price swings in the medium term — remains above its 10-year average, and demand for volatility-tracking funds is soaring. That suggests some traders are betting volatility may quickly return amid concerns about stretched valuations and signs of froth in risk assets.

Bitcoin (BTC USD) Cryptocurrency Price Extends Rally to High Close to $50,000
Joanna Ossinger and Eric Lam – Bloomberg
Bitcoin reached another record, coming ever closer to $50,000, as the world’s largest cryptocurrency extends its breathtaking rally.
The token climbed as much as 3.6% to $49,913 in Asian trading Tuesday, according to a composite of prices compiled by Bloomberg. Prices fell back later in the session and were last trading around $49,000.
Bitcoin’s volatile, fivefold advance over the past year towers above the returns from more traditional investments like stocks, gold and commodities.

****JB: Also see the Business Insider story, Bitcoin breaks $50,000 for the first time as record-shattering 2021 rally extends to 74% amid Wall Street adoption and The Wall Street Journal story, Bitcoin Trades Above $50,000 for First Time.

Bitcoin’s Volatility Should Burn Investors. It Hasn’t; Wild price swings normally have a way of reversing fortunes. So how do you explain when they don’t?
Nir Kaissar – Bloomberg
Just over 10 years old, Bitcoin might already be the best-performing investment of all time. It might also be the most volatile, and volatility has a way of luring people into ill-timed and costly investing choices. So with all the headlines about Bitcoin’s meteoric rise, it seems reasonable to ask how its investors are doing.

Going all-in? Investors’ cash levels dip to 2013 pre-taper-tantrum levels
Thyagaraju Adinarayan – Reuters
Cash levels in investment portfolios have hit the lowest since just before the so-called taper tantrum of 2013, according to Bank of America’s February fund manager survey, which also showed investors to be overwhelmingly bullish on the economic outlook.
World stocks have been notching successive record highs in 2021, with central banks remaining supportive and governments injecting money into the system to get economies up to speed after the damage caused by COVID-19.

Wall Street’s fear gauge falls below key level that may trigger buying
Yun Li – CNBC
A measure of fear in stocks just fell back to pre-pandemic levels, sending a bullish signal for the market.

Exchanges and Clearing

Survey Finds Support From Derivatives Markets For Payment For Order Flow Ban In US
Almost half of respondents to the monthly Acuiti Derivatives Insight survey have backed a ban on payment for order flow in the US markets with 29% saying it should not be banned.

*****This is an interesting result. Why would it be popular?~JJL

Russia’s main bourse to open earlier to attract traders in China
Eva Szalay – Financial Times
The Moscow Exchange is set to open currencies and derivatives trading three hours earlier from March, in the latest effort to drum up more demand from investors in China.
Trading will run from 7am to midnight Moscow time as the exchange seeks to capture more of the waking hours of countries east of Russia.

Amsterdam Could Be EU’s Next Financial Center. Can Paris or Frankfurt Stop It?
Chris Hughes – Bloomberg
Barely weeks after the U.K.’s exit from the Europe Union, Amsterdam is gaining kudos as a major European venue for stocks. It may all be a matter of perception — but perception counts in the markets.
The Dutch capital has been chosen for two high-profile listings in recent days. It was also the lead venue for European share trading in January, according to U.S. market infrastructure group Cboe Global Markets Inc.

Regulation & Enforcement

Clear crypto rules urgently needed as major companies embrace asset: SEC official
Chris Prentice and Katanga Johnson – Reuters
A clear cryptocurrency regulatory regime is urgently needed as major companies like Tesla Inc, BNY Mellon Corp and Mastercard Inc embrace the alternative asset class, a top Securities and Exchange Commission (SEC) official said.

Senate Republicans oppose Nasdaq diversity rule
Hazel Bradford – Pensions & Investments
Republican members of the Senate Banking Committee told the Securities and Exchange Commission to reject a Nasdaq proposal allowing it to require listed companies to publicly disclose the gender and racial diversity of their boards and eventually to have at least two diverse directors, citing a connection between diverse boards and corporate performance.


Best Stock Tips: Hot New Clubhouse App Is Anti Reddit Forum for Investing Buffs
Charlie Wells – Bloomberg
Still trawling through WallStreetBets on Reddit for investing tips? So passé. The hot new spot to talk stocks is an app you might not even be invited to use yet.
It’s called Clubhouse. If you haven’t heard, the audio-oriented, invite-only social network is part podcast, part chat room. And in the past few months it has become a favorite pontificating ground for tech titans and celebrities including Elon Musk, Mark Zuckerberg and Drake. Listeners tune in to live conversations and ask questions — verbally — in sessions covering everything from mixed martial arts to money management.


Outlook 2021: lessons learned from 2020, insights from Washington, and clearing strategies for 2021
The FIA Operations Americas Division invites you to an event with FIA President and CEO Walt Lukken, FIA’s Head of Global Industry Operation and Execution Don Byron, FIA Operations Americas Division President Scott Andersen and FIA Operations Americas Division First Vice President Diane Sherman. This year we will focus on the perspective coming from Washington but expand the discussion to look at lessons learned in 2020 as well as the clearing strategy for 2021. We hope you will take this opportunity to gather with your peers and talk about strategic paths forward for the derivatives industry.


Short Sellers Still Love to Hate GameStop
Michelle Celarier – Institutional Investor
Short sellers haven’t given up on video game retailer GameStop, the stock that roiled markets and almost took down hedge fund Melvin Capital last month.
Even though short sellers have covered more than $2.2 billion worth of GameStop shares over the past 30 days, the stock is still the most heavily shorted in the market, as measured by the percentage of its float that had been shorted as of Feb. 9, according to S3 Partners, which tracks short sales.

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