Whale’s Resurfacing Shows Danger Persists in the Options Market; How Investors Are Trading November’s Election

Oct 12, 2020

Observations & Insight

The Spread: Is 2020 Over Yet?
JohnLothianNews.com

This week on The Spread: the CME launches futures trading on the VOLQ, Eurex launches futures and options trading on two ESG indices, and more.

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Lead Stories

Whale’s Resurfacing Shows Danger Persists in the Options Market
Katherine Greifeld – Bloomberg
Stock traders assessing the looming presidential election and a stalling economic recovery also need to keep an eye on the options market.
While the frenetic pace of speculation in derivatives has eased a bit recently, it hasn’t stopped, and a chorus of analysts warns the trading remains capable of exacerbating swings in equities. One proxy for the froth still latent in options, the percentage of overall volume represented by single-stock contracts, remains up 19% from a year ago, according to JPMorgan Chase & Co. Most of it is concentrated in megacap technology and momentum-driven shares.
/bloom.bg/2GIk9KB

How Investors Are Trading November’s Election; Traders are buying shares of green-energy companies and gauging the impact of possible corporate-tax increases as they brace for a Biden win
Amrith Ramkumar – WSJ
With market volatility rising ahead of November’s U.S. presidential and Congressional elections, investors are parsing what polls and policy proposals mean for everything from energy stocks to shares of private-prison operators.
/on.wsj.com/2Ifeyvq

Mohamed El-Erian says whipsawing markets are moving first and finding justification later
Ben Winck – Markets Insider
Markets are making knee-jerk reactions to skewed narratives without considering larger economic threats, Mohamed El-Erian, chief economic advisor at Allianz, said Monday.
After a brief bout of calmed market volatility, choppy trading resumed earlier this month after President Donald Trump abruptly canceled, and just as surprisingly revived, plans for another stimulus package. While Democrats and the White House have inched closer to reaching a compromise, Senate Republicans have balked at all recent proposals.
/bit.ly/37aLqjF

Exchanges and Clearing

Amendments to the Termination of Trading and the Exercise and Assignment Rules of the Monthly and Weekly Options on the Mexican Peso/U.S. Dollar (MXN/USD) Futures Contract and Currency Fixing Time of the Related Futures Contract
CME Group
Effective Sunday, November 15, 2020 for trade date Monday, November 16, 2020, and pending all relevant Commodity Futures Trading Commission (“CFTC”) regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will amend the termination of trading time of the Monthly and Weekly Options on Mexican Peso/U.S. Dollar (MXN/USD) Futures contract (the “Contracts”) from 9:00 a.m. Central Time (CT) to 11:30 a.m. CT as in the table below as well as amend the CME Currency Fixing Price time for MXN/USD Futures from 9:00 a.m. CT to 11:30 a.m. CT and commencing with the December 2020 contract month and the November Week 3 contracts and beyond.
/bit.ly/36URHQ3

New Complex Attributable Order Type
MIAX Options
MIAX Options will implement a new Complex Attributable order type that allows a Member to enter a market or limit order that displays the user firm ID for purposes of trading on the Exchange.
The Complex Attributable Order type will be available on January 11, 2021.
/bit.ly/30ZxyEH

Exclusion of cPRIME orders from the Complex MIAX Options Price Collar Protection
MIAX Options
MIAX Options will exclude cPRIME orders from the Complex MIAX Options Price Collar (“MPC”) Protection beginning January 11, 2021.
/bit.ly/3jT6AGr

Last Priority in Allocation available to Initiating Members that submit cPRIME Agency Orders
MIAX Options
MIAX Options Members will allow Initiating Members that submit cPRIME Agency Orders to select last priority in allocation beginning January 11, 2021.
/bit.ly/34NHlyV

New Complex Auction-On-Arrival-Only Order
MIAX Options
MIAX Options will implement a new Complex Auction-on-Arrival-Only (“cAOAO”) order type on January 11, 2021.
A cAOAO order is a complex order that can be placed into an auction if eligible, and cancelled if not eligible. Any unexecuted balance of a cAOAO order remaining upon the completion of the auction process is also cancelled.
/bit.ly/3lET4qs

MIAX Exchange Group – Options Markets – Delisting of Eaton Vance Corp. (EV)
MIAX Options
aton Vance Corp. (EV) will be de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Monday, October 12, 2020.
All GTC orders resting on the MIAX order books in EV will be canceled at the close of business on Friday, October 9, 2020.
/bit.ly/30VWYmU

MIAX Exchange Group – Options Markets – Delisting of Oasis Petroleum Inc. (OAS)
MIAX Options
Oasis Petroleum Inc. (OAS) will be de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Monday, October 12, 2020.
All GTC orders resting on the MIAX order books in OAS will be canceled at the close of business on Friday, October 9, 2020.
/bit.ly/36WE5nu

Effective October 12, 2020 through October 16, 2020, MIAX Options and MIAX Emerald 2X Opening and Intraday Valid and Priority Quote Spread Relief in All Symbols
MIAX Options
Issue Symbol: All Symbols
Multiplier: 2X
Reason: In maintenance of a fair and orderly market.
Time: Opening and Intraday
Subject Summary: Please be advised, effective October 12, 2020 through October 16, 2020, the MIAX Regulation Department has granted 2 times opening and intraday quote parameter relief for all symbols on MIAX Options and MIAX Emerald.
/bit.ly/3105uBg

MIAX Exchange Group – Options Markets – Delisting of Mallinckrodt plc (MNK)
MIAX Options
Mallinckrodt plc (MNK) will be de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Tuesday, October 13, 2020.
All GTC orders resting on the MIAX order books in MNK will be canceled at the close of business on Monday, October 12, 2020.
/bit.ly/34SxMyu

September monthly figures at Eurex and EEX
Eurex
OTC Clearing had another positive month in September with notional outstanding volumes up 45% – from 12,253 billion EUR to 17,771 billion EUR – and total average daily cleared volumes up 93% to 145 billion EUR. Average daily cleared volumes in Interest Rate Swaps grew by 25%, up from 334 billion EUR in September 2019 to 418 billion EUR this year.
At Eurex Repo, the leading electronic marketplace for secured funding and financing, the picture was also a positive one. Overall average term-adjusted YTD volume grew by over 15% since last year. On a monthly basis, term-adjusted volume in the GC Pooling market fell by 40%, while it was up 71% – from 51.6 billion EUR in September 2019 to 88.3 billion EUR this year – in the Repo Market.

Traded financial derivatives contracts at Eurex fell overall by 12%, from 185.4 million contracts in September 2019 to 162.7 million contracts in September this year.
/bit.ly/36UeOKI

SGX reports market statistics for September 2020
SGX
Singapore Exchange (SGX) today released its market statistics for September 2020. Optimism of improving market conditions spurred capital market fundraising, while uncertainties ahead of November’s U.S. elections boosted portfolio risk-management activity across asset classes.
Total funds raised from equity and bond listings on SGX rose 63% year-on-year (y-o-y) in September to S$40.8 billion – the highest amount since February. SGX-listed companies continued to tap the equity capital markets with secondary fundraising of S$2.11 billion, doubling y-o-y. Total secondary fundraising for July to September reached S$2.72 billion, up 36% from the same quarter last year.
/bit.ly/36YjFdF

Amendments to the Termination of Trading and the Exercise and Assignment Rules of the Monthly and Weekly Options on the Mexican Peso/U.S. Dollar (MXN/USD) Futures Contract and Currency Fixing Time of the Related Futures Contract
CME Group
Effective Sunday, November 15, 2020 for trade date Monday, November 16, 2020, and pending all relevant Commodity Futures Trading Commission (“CFTC”) regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will amend the termination of trading time of the Monthly and Weekly Options on Mexican Peso/U.S. Dollar (MXN/USD) Futures contract (the “Contracts”) from 9:00 a.m. Central Time (CT) to 11:30 a.m. CT as in the table below as well as amend the CME Currency Fixing Price time for MXN/USD Futures from 9:00 a.m. CT to 11:30 a.m. CT and commencing with the December 2020 contract month and the November Week 3 contracts and beyond..
/bit.ly/36URHQ3

Strategy

All the Ways Wall Street’s Telling Clients to Trade the Election
Justina Lee – Bloomberg
Every four years, Wall Street pundits butt heads on how to trade the biggest political risk on the planet.
This time around, there’s more consensus than usual over the likely winner — Joe Biden. After that, there’s plenty of disagreement on strategies to wager on an election that’s been flashing warnings of chaos ahead in volatility markets.
/bloom.bg/3lEJMuk

Events

Shielding Against Drawdowns Using VIX Tradeable Products
Cboe
Air Date: Wednesday, October 14, 2020
Start Time:12:00 PM ET
Duration:60 Minutes
Description: You’re invited to join a live 60-minute webinar hosted by Cboe Global Markets as we examine – Shielding Against Large Drawdowns and Left Tail Risk with VIX Futures and Index Options. In 2020 investor interest in portfolio protection has increased, with a new pandemic, trade wars and uncertainty about the November elections. This year several stock indices experienced their first corrections in more than a decade, and on March 16 the Cboe Volatility Index (VIX) closed at 82.69, its all-time daily closing high. The webinar is designed to provide actionable information in how to use investable securities to protect investment portfolios.
/bit.ly/3iOJ385

Miscellaneous

UK active managers fail to prove their mettle in a bear market; Only half of stock pickers outperformed in 2020’s volatile markets
Madison Darbyshire – FT
Nearly half of active funds in the UK failed to outperform their benchmark in the first six months of 2020, undermining longstanding claims that stock pickers shine in times of high market volatility.
/on.ft.com/30ZXwbn

Volatility Views 418: The “Meafiest” Volatility Yet
Volatility Views – Options Insider Podcast
/bit.ly/3jSY1LI

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