VIX Curve Inverts in Time-Honored Bull Signal Tied to Peak Panic
Lu Wang – Bloomberg
Selling has gotten intense enough in stocks that volatility indexes are pricing more turbulence in the here and now than in the future. The setup, known as an inverted VIX, is sometimes viewed as a positive for those hoping markets will calm.
As the S&P 500 suffered its worst week since October 2020, traders are paying up for near-term protection. The Cboe Volatility Index, a gauge of option costs, has surged 7 points to 26 over the span, pushing its spot price above that of its three-month futures for the first time in more than a month.
Stock Jitters Grow as $3.3 Trillion of Options Expires in a Day
Sam Potter and Lu Wang – Bloomberg
Option expirations of more than $3 trillion are helping stoke market turbulence in a week already defined by the rout in stay-at-home stocks and gyrations in bonds.
The phenomenon — generally known as OpEx — has taken place like clockwork for about a year now. Around the middle of most months, American equities lurch lower, usually near the third Friday — the day that most stock derivatives expire.
Why the Options Craze May Outlast Meme Madness
Avi Salzman – Barron’s
Meme-stock madness has slowed down, and cryptocurrencies are stuck in a funk. But another record-breaking trading trend that emerged during the pandemic is unlikely to go away, according to a top executive who has been following it for decades.
Options-trading has soared to record highs this year. In 2021, 9.9 billion options contracts were traded, 32% more than the 7.5 billion that were traded in 2020, which itself was a record, according to the Options Clearing Corporation.
A Year’s Worth of Nasdaq Tumult Gets Jammed Into Three Weeks
Lu Wang and Vildana Hajric – Bloomberg
Many ways exist to chart shakiness in the stock market. There’s options-derived volatility indexes, price relative to moving averages and maximum drawdowns, to name a few.
Then there’s the type of whole-cloth vanishing act the Nasdaq 100 has been staging in recent weeks, sessions in which the index appears headed for resounding gains or declines — before the whole thing goes poof in a matter of minutes. It happened again Thursday, when the tech-heavy gauge erased a 2% rally and kept falling in its worst bearish reversal in 17 months.
Optiver and CME to offer Nasdaq mini options block trading; From 24 January, institutional investors can source direct liquidity from Optiver in Nasdaq options blocks via electronic execution during an extended 23-hour trading day at CME.
Annabel Smith – The Trade
Market maker, Optiver, and derivatives exchange CME Group have set out plans to launch block trading on Nasdaq E-mini options in a bid to help institutional investors manage risk during heightened market volatility.
NSE top derivatives trading exchange globally
Times of India
For the third consecutive year, India’s leading exchange NSE has been ranked as the world’s top derivatives trading platform, ahead of global giants like Chicago, Nasdaq and B3 of Brazil. Data from Futures Industry Association (FIA), a global derivatives trade body showed that the NSE was ranked the largest exchange in the equity as well as the currency derivatives segments by number of contracts traded in 2021.
Regulation & Enforcement
CFTC issues cease and desist order to binary options operator using smart contracts
On January 3, 2022, the Commodity Futures Trading Commission (the “CFTC”) entered an order charging Blockratize, Inc. (d/b/a Polymarket.com) (“Polymarket”) with offering off-exchange binary options contracts and failing to register with the CFTC as a designated contract market or swap execution facility as required under the Commodity Exchange Act (the “CEA”). (In re Blockratize, Inc. d/b/a Polymarket.com, CFTC Docket No. 22-09 (Order Jan. 3, 2022)). The CFTC ordered Polymarket to cease and desist all such unregistered market making activities and issued a $1.4 million fine (which the order noted was reduced in light of Polymarket’s “substantial cooperation” with the investigation).
Options trading keeps smashing through record highs, but rising volatility makes it harder to stay ahead. Here’s how Goldman Sachs and Evercore says traders can get it right — and 10 trades to make now
Marley Jay – Business Insider
Options trading was once an off-the-menu item on Wall Street, but over the last few years it’s come closer to turning into the main course.
Options trading volume hit record highs in 2021 according to Options Clearing Corp. as people looked for something to do during COVID lockdowns, apps like Robinhood made day trading easier than ever, and online traders grew more sophisticated in their approach to investing.
QB Launches Liquidity Tracking Tool For Real-time Analysis To Help Achieve Best Execution; Free, Open-Source QB Liquidity Tracker Reports Liquidity on 20-plus Futures Contracts, 4 Global Exchanges
Quantitative Brokers (QB), a leading provider of advanced execution algorithms and data-driven analytics for global futures, options and OTC Fixed Income markets, today launched a free online tool that allows institutional traders to track market liquidity and quote size at a level of transparency and ease never before available. Today’s announcement also marks a new direction for QB, who aims to offer an integrative suite of market microstructure analytics soon.
Fed opens debate over possible digital currency
James Politi and Colby Smith – Financial Times
The Federal Reserve has for the first time launched a period of debate and public comment on the introduction of a central bank digital currency, as it seeks to keep pace with global financial innovation and maintain the supremacy of the dollar.
After months of anticipation, the Fed on Thursday released a lengthy discussion paper that will serve as the basis of what is expected to be a heated and consequential debate at the heart of the central bank in the coming months — though it made clear it did not “favour any policy outcome” at this point.
How Robinhood Investors Robbed Themselves
Spencer Jakab – WSJ
Following the crowd works—until it doesn’t. A new generation of traders getting their tips from social media and using apps like Robinhood to choose stocks are learning that the hard way.
Back in 2020 when millions of mostly young people opened brokerage accounts for the first time while sheltering from the Covid-19 pandemic, it seemed like they could do no wrong, even as some legendary investors could do no right. Dave “Day Trader” Portnoy poked the most revered one of them all to his millions of Twitter followers: