Volatility Warnings Signal Virus May Bring Another Rough August

Aug 2, 2021

Observations & Insight

The Spread – July 30, 2021
JohnLothianNews.com

Earnings season in full bloom; Options lead year-to-date derivatives volume; Robinhood’s IPO; John gets real with Get Real VR: Conflicting factors underpin volatility; Cboe cleared for fall European competition; and the Cboe Options Institute’s Kevin Davitt talks about vega in this week’s “Term of the Week.”

Watch the video »

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The law firm of Jones Day has a post on its website titled “The Long Arm of the CFTC: What Stakeholders in the MENA Region Should Know.” The post says, “A MENA-based non-U.S. person trading derivatives such as futures and options on certain exchanges in the UAE, or internationally, may be liable for breaches of the CEA and CFTC regulations, even if that non-U.S. person has no direct link to the United States. This may also be true with “over-the-counter” transactions in swaps or physical commodities that are conducted with a U.S. person or that otherwise have a connection to the United States.” — Jones Day

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On Friday we posted the video from the 2021 World of Opportunity virtual event held on July 21 and the extra videos we shared with the registrants. We also broke out each of the presentations from the event into their own videos, one of Small Exchange CEO Donnie Roberts and the other of Get Real VR partner Ed Haravon. The extra videos are an interview with Cboe Global Markets CEO Ed Tilly, a presentation by OCC’s Andre Buckles and an interview of NFA’s Robin Wood by NFA communications specialist Joseph McCarthy.

Lead Stories

Volatility Warnings Signal Virus May Bring Another Rough August
Joanna Ossinger – Bloomberg
Concerns about the delta variant of Covid-19 look to be seeping into volatility markets just as the traditionally challenging month of August kicks off.
The Cboe Volatility Index, or VIX, has made a series of higher lows in recent weeks, a pattern Tallbacken Capital Advisors LLC Chief Executive Officer Michael Purves says should concern investors. It’s one of two “yellow warning lights” he sees, with the second being the way high-yield spreads have become “stickier” at higher levels.
/jlne.ws/3C9ABLJ

Global stocks rise after calming words from Beijing
Adrienne Klasa and Hudson Lockett – Financial Times
Global stocks kicked off the week on a strong note after calls from Beijing for greater co-operation with Washington helped sooth jitters over a regulatory crackdown in the world’s biggest emerging market.
In the US, the S&P 500 index opened 0.5 per cent higher on Monday, while the tech-heavy Nasdaq Composite gained 0.6 per cent. Europe’s Stoxx 600 index rose 0.5 per cent, falling back after hitting new all-time highs in early trading, while the UK’s FTSE 100 climbed 0.7 per cent
/jlne.ws/3jdE8zU

Allianz Shares Sink on DOJ Investigation Into Structured Alpha Funds
Julie Steinberg and Mauro Orru – WSJ
Allianz SE shares sank after the German financial giant said the Justice Department is investigating its hedge funds that caused investors significant losses during the pandemic-related market downturn early last year.
Allianz on Sunday said its future earnings could be materially hit by the current investigations, which include the DOJ’s inquiry as well as a probe launched by the U.S. Securities and Exchange Commission last year. The insurer said it couldn’t estimate the size of any potential fines and therefore hasn’t set aside provisions.
/jlne.ws/3fpNYO6

Funds play ‘wait and see’ on CBOT corn, soy ahead of U.S. yield data
Karen Braun – Reuters
Grain markets have recently been quieter than they have been for much of this year, but speculators are now looking ahead to the U.S. corn and soybean yield forecasts due on Aug. 12 from the Department of Agriculture.
That report has delivered big surprises in the past, so unless there are demand developments or a major shift in the weather forecast, investors might be hesitant to make position adjustments ahead of time.
/jlne.ws/3fiS2zB

Brazil frost triggers record coffee options trade
Nigel Hunt – Reuters
The volume of arabica coffee options traded on ICE in July hit record highs as frosts in Brazil led to a surge in prices, the exchange said on Monday.
The monthly total for arabica coffee options totalled a record 664,648 contracts.
A sudden frost on the morning of July 20 delivered a blow to the heart of Brazil’s coffee belt, damaging trees and harming prospects for next year’s crop.
/bit.ly/3fmWrS5

Exchanges

Trading Overview in July 2021
JPX
Japan Exchange Group released Trading Overview in July 2021.
Cash Equity Market – In July 2021, the daily average trading value for the TSE 1st Section (domestic common stocks) was JPY 2.4422 trillion; In July 2021, the daily average trading value for the ETF market was JPY 228.9 billion.
Derivatives Market – In July 2021, total derivatives trading volume was 26,189,990 contracts; In July 2021, total derivatives trading value was JPY 198 trillion.
/jlne.ws/3ii88eL

Regulation & Enforcement

Fed Chairman Powell’s Approach to Regulation Has Drawn Criticism From Some Democrats
Andrew Ackerman – WSJ
President Biden’s looming decision about who should be the next Federal Reserve chairman is prompting reviews of the current chief’s record on bank regulation and how strict the postcrisis rulebook should be for Wall Street.
During Chairman Jerome Powell’s nearly four years as head of the Fed, the central bank has revamped big-bank stress tests, tailored its rules for U.S. lenders based on their size and simplified key postcrisis regulations such as the Volcker rule prohibition on proprietary trading.
/jlne.ws/3rPB00M

Allianz Shares Sink on DOJ Investigation Into Structured Alpha Funds
Julie Steinberg and Justin Baer – WSJ
Allianz SE shares sank after the German financial giant said the Justice Department is investigating its hedge funds that caused investors significant losses during the pandemic-related market downturn early last year.
Allianz on Sunday said its future earnings could be materially hit by the current investigations, which include the DOJ’s inquiry as well as a probe launched by the U.S. Securities and Exchange Commission last year. The insurer said it couldn’t estimate the size of any potential fines and therefore hasn’t set aside provisions.
Several large investors have also filed civil lawsuits against Allianz following the losses.
The Justice Department’s interest in the case raises the stakes for Allianz and the asset-management division whose stock-options trades racked up huge losses when the market swung violently in early 2020. Stocks soon recovered, but not before Allianz Global Investors moved to liquidate two of its funds, locking in losses for their investors.
/on.wsj.com/3jc17eM

Technology

OptionMetrics Releases IvyDB Canada 3.0 Amid Increased Interest in Canadian Options, Expands Data to Help Investors Better Analyze Market Trading Strategies
Extended volatility surface enables quants, academia to assess shorter and longer-term strategies, while forward price tables enable calculation of option values at various maturities
NEW YORK–(BUSINESS WIRE)–OptionMetrics, an options database and analytics provider for institutional investors and academic researchers worldwide, releases OptionMetrics IvyDB Canada 3.0 with comprehensive historical price, implied volatility (IV), and sensitivity data on optionable securities across Canadian indices and equity options. Major upgrades to the database include extension of the volatility surface to better assess shorter- and longer-term strategies, and the addition of a forward price table to calculate option values at different maturities.
/bwnews.pr/3xkEBFe

Strategy

Ob 1017: The Coolest Secret Club In Options
Option Block
Host: Mark Longo, The Options Insider Media Group
Co-host: Andrew Giovinazzi, The Option Pit
Co-host: Mike Tosaw, St. Charles Wealth Management
In this episode Mark, the rock lobster, and uncle Mike break down:
Most active equity options today including amd, tsla, aapl, f, fb, nvda, clf, amc, nio, baba
Earnings season volatility in qcom, f, fb, gild, pg
Unusual options activity in tap, amd, ccl
Robinhood ipo today
Best trade play on covid spike and using a ratio put spread
And much more…
/bit.ly/37hJ4hr

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