Volatility Traders Pounce on Stock Market Angst Before Election; Turbulent markets upend volatility hedge funds

Aug 26, 2020

Lead Stories

Volatility Traders Pounce on Stock Market Angst Before Election
Yakob Peterseil – Bloomberg
U.S. stock prices teetering at record highs in the grip of the presidential election cycle are sounding alarms across volatility markets for the months ahead.
Yet a slew of options traders are betting that tranquility will take hold as they seek to capture premiums that are among the richest in two decades. S&P 500 and Russell 2000 Index options that expire one to four weeks from now have seen robust selling, according to Credit Suisse Group AG strategist Mandy Xu.

Turbulent markets upend volatility hedge funds; Specialist hedge funds caught out after betting on calm conditions in 2020
Laurence Fletcher and Richard Henderson – FT
Hedge funds that bet on market volatility have turned out to be some of the biggest losers from the financial turmoil that struck in March. Volatility hedge funds, which buy and sell derivatives to try and profit from the volatility of stocks, bonds and currencies, lost 2.4 per cent this year to July, according to the latest data from HFR. That compares with an average 0.3 per cent loss among hedge funds more broadly, and a 2.4 per cent return from the S&P 500 index.

US stocks will extend records as COVID-19 cases decline and America becomes ‘one of the safest places in the world,’ Fundstrat’s Tom Lee says
Matthew Fox – Markets Insider
Stocks will continue their run and hit record new highs if the US becomes “one of the safest places in the world” when it comes to daily COVID-19 cases, Fundstrat’s Tom Lee told clients on Monday.
With COVID-19 cases “falling so rapidly” in the US, daily cases could breach sub 10,000 by early September if the current pace continues, Lee said.

S&P 500 Seeks to Extend Winning Streak
Anna Isaac and David Benoit – WSJ
The S&P 500 edged higher Wednesday, on course for a fourth consecutive record, buoyed by data pointing to a U.S. economic recovery. The broad stock-market index climbed 0.7%. The Dow Jones Industrial Average turned slightly higher, up 0.1%. The Nasdaq Composite was also poised to extend its recent record streak, up 1.4%, as tech stocks followed soon-to-be Dow component Salesforce higher. Volatility in U.S. stocks has been muted through much of August, with many investors and traders taking summer vacations in the U.S. and Europe. The Cboe Volatility Index, a closely watched gauge of turbulence in U.S. stocks, has in recent days been at its lowest since before the coronavirus pandemic capsized markets.

Exchanges and Clearing

Cryptocurrency exchange FTX acquires portfolio tracker Blockfolio
Romain Dillet – TechCrunch
FTX, a cryptocurrency exchange that offers derivatives, options and other sophisticated products, is acquiring a popular portfolio tracking app, Blockfolio. FTX is spending $150 million for the acquisition. But take that price with a grain of salt as it’s a combination of cash, cryptocurrency and stock. Cryptocurrency (and stock) in particular might not be perfectly liquid. While an exchange buying a portfolio tracking app seems to be a right fit, they don’t necessarily have the same audience right now. FTX is better positioned for professional traders as it lets you trade on futures markets and it even offers ERC-20 tokens that track the volatility of bitcoin.

MIAX Exchange Group – Options Markets – Corporate Action Alert: SunPower Corporation (SPWR)
MIAX Options
SunPower Corporation (SPWR) has announced a distribution effective for Thursday, August 27, 2020. On that date, the current SPWR option class will change to SPWR1. The MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange will not list SPWR1 options. Therefore, no options on SPWR will be available for trading on Thursday, August 27, 2020.


SGX partners with Cassini systems in preparation for 2021 UMR regulation; The partnership between Singapore Exchange (SGX) and Cassini Systems will allow market participants free analyses of their average aggregated notional amount (AANA).
Annabel Smith – The Trade
The Singapore Exchange (SGX) has partnered with derivatives margin analytics provider Cassini Systems to prepare market participants for incoming uncleared margin rules (UMRs). SGX will use Cassini’s domain expertise to provide participants with free analyses of their average aggregated notional amount (AANA), representing the gross value of open, non-centrally cleared derivatives positions.


The financial therapists helping wealthy people cope with change
Madison Darbyshire – Financial Times
When the dotcom bubble burst two decades ago, psychologist William Martin started getting calls for the first time from an unexpected source. People were anxious, depressed and even suicidal, and they had one question: “Can you help me talk about money?”
He turned them down. “I said, ‘if you get hypertension or diabetes, I can help you’,” he remembers. Finance wasn’t then a part of his mental health practice, which focused on chronic illnesses. But the calls kept coming from rich investors and financial planning firms worried about staff experiencing extreme stress as they dealt with clients who had lost money.

*****MR: I know a lot of people who still won’t go to a therapist because of the stigma about “needing” a therapist. The truth is, therapists are just there to help you deal with stress and figure out life. I think that everyone needs a therapist at some point in their life, even people who aren’t mentally ill.

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