Volatility in U.S. stocks jumps as investors brace for Senate ‘blue sweep’; Day Trader Quickly Put to Test After End-Of-Year Buy Frenzy

Jan 5, 2021

$22,751/$300,000 (7.6%)
Joseph Gawronski
James Toes

Observations & Insight

JJL: Here are some of the highlights from the CME Group’s annual volume report. The exchange logged record equity index futures and options average daily volume of 5.6 million contracts, up 63% over 2019. The CME reported record E-mini S&P 500 futures and options average daily volume of 2.7 million contracts and record E-mini Micro futures and options average daily volume of 1.8 million contracts. They also said they traded a record E-mini Nasdaq 100 futures and options with an average daily volume of 585,000 contracts. The most eye-popping number in the report was the record Micro E-mini Equity Index futures and options average daily volume of 2 million contracts, representing a 332% increase in ADV over fourth-quarter 2019.

MR: Aggregated open interest on bitcoin futures reached $10.7 billion Sunday, according to The Block. Open interest on bitcoin options also reached $7.96 billion; 82% of that volume came from Deribit. Ethereum derivatives also hit all-time highs Sunday; aggregate open interest was $2.65 billion on Ethereum futures, and $1.22 billion for Ethereum options.

Lead Stories

Volatility in U.S. stocks jumps as investors brace for Senate ‘blue sweep’
April Joyner – Reuters
Expectations for market gyrations are rising as investors face U.S. Senate runoffs in Georgia on Tuesday that will determine which party controls Congress, amid a resurgence in coronavirus cases.
The Cboe Volatility Index, known as Wall Street’s “fear gauge,” on Monday notched its highest closing level since Nov. 5, at 26.97, while posting its biggest one-day gain since late October.
/jlne.ws/35dwjUG

Day Trader Quickly Put to Test After End-Of-Year Buy Frenzy
Sarah Ponczek – Bloomberg
The stock market’s record altitude was no deterrent to individual investors last month, who in true 2020 fashion ended the year snapping up shares. Their optimism was being tested again on Monday.
Clients at both TD Ameritrade Holding Corp. and E*Trade Financial were upping their market exposure as 2020 powered to a close, buying shares of stocks that have been popular all year long. While those positions were mostly falling in line with the S&P 500 Monday, the market itself was getting clobbered, with the benchmark index down 1.9% in the worst start to a year since 2001.
/jlne.ws/2JKns5c

Crypto trading volumes hit record $68.3 billion on Monday – CryptoCompare
Reuters
Trading volumes on major cryptocurrency exchanges hit a daily record on Monday of over $68 billion, research showed, highlighting the trading frenzy that has accompanied bitcoin’s charge to an all-time high.
Bitcoin hit a record high $34,800 on Sunday, building on a 2020 rally that saw it more than quadruple as bigger U.S. investors jumped into the market. It then fell sharply on Monday amid volatility in highly leveraged futures markets, before recovering losses.
/jlne.ws/3od9UOG

Open interest on Bitcoin derivatives reached an all-time high on Sunday
MK Manoylov – The Block
Sunday saw a new record for aggregated open interest on Bitcoin futures and options reached, according to data compiled by The Block Research.
Bitcoin’s aggregated open interest futures reached $10.7 billion on January 3. OKEx reported the most in terms of aggregated open interest, encompassing 17.7%. Next were CME at 16.7% and Binance at 16.2%.
/jlne.ws/2XcpFJP

JPMorgan says bitcoin could rally as high as $100,000 – but warns that such a surge would be ‘unsustainable’
Matthew Fox – Markets Insider
Bitcoin’s 300% surge in 2020 could repeat this year, but such a move higher would be unsustainable, JPMorgan said in a note on Monday.
“While we cannot exclude the possibility that the current speculative mania will propagate further, pushing the bitcoin price up towards the consensus region of between $50k – $100k, we believe that such price levels would prove unsustainable,” the note said.
/jlne.ws/359P7Eo

Wall Street suffers worst day since October on virus advance
Eric Platt, Hudson Lockett, Daniel Shane, and Camilla Hodgson – FT
US equities had their worst day since October as faltering efforts to contain a global spike in coronavirus cases raised the prospect of more onerous lockdown measures in some of the world’s largest economies. Shares in more than 80 percent of the companies in the S&P 500 fell on the first trading day of the new year, with the Wall Street benchmark closing 1.5 percent lower. Leading the declines were industries hardest hit by the coronavirus pandemic, including airlines, hotels and cruise ship operators. The tech-heavy Nasdaq Composite also lost 1.5 percent.
jlne.ws/3hHpnnO

Exchanges and Clearing

OCC Clears Record-Setting 7.52 Billion Total Contracts in 2020; December volume highest month in OCC’s history; up 80.9% year-over-year
OCC
OCC, the world’s largest equity derivatives clearing organization, announced today that it set new annual cleared contract volume records for the U.S. exchange-listed options industry. In 2020, OCC cleared 7.52 billion total contracts and 7.47 billion options contracts. These numbers surpass the previous records, set in 2018, of 5.24 billion total contracts and 5.14 billion options contracts. Compared to 2019, OCC had a 51.2 percent increase in total contracts cleared and a 52.4 percent increase in options contracts cleared.
/jlne.ws/2Xe68ZG

*****JJL: Equity options trading is hot. Here is your proof.

CME Group Reports 2020 Annual, Q4 and Monthly Market Statistics
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today reported its full-year, Q4 and December market statistics, showing it reached average daily volume (ADV) of 19.1 million contracts during the year, 16.2 million contracts during the fourth quarter, and 14.2 million contracts during the month of December. Market statistics are available in greater detail at https://cmegroupinc.gcs-web.com/monthly-volume.
/jlne.ws/3okWlgm

Miscellaneous

Billionaire investor Bill Ackman scored a record 70% return in 2020 as his pandemic bets paid off
Theron Mohamed – Markets Insider
Bill Ackman’s Pershing Square delivered a 70% return on its investments in 2020, breezing past the benchmark S&P 500’s 16% gain for the year and surpassing its previous record of 58% in 2019.
The billionaire investor’s hedge fund reported that its net asset value per share swelled from about $27 at the start of January to north of $45 at the end of December.
/jlne.ws/3hMzjfN

(Podcast) Option Block 963: 2020 Year-in-Review Spectacular
Option Block – Options Insider Network
jlne.ws/3hRHOGn

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