YOLO Stock-Market Options Are All the Rage This Thanksgiving

Nov 23, 2022

Lead Stories

YOLO Stock-Market Options Are All the Rage This Thanksgiving
Lu Wang – Bloomberg
Bitcoin is off the table, stock markets are gutted and bond bulls are out to pasture. In these desperate times, could folks be left with nothing more exciting to talk about this Thanksgiving than the humble equity option?
Yes, says Scott Rubner, a managing director at Goldman Sachs Group Inc. In a recent note, the expert on money flows said retail investors are wading ever deeper into the short-term derivatives trade, reprising their behavior around this time last year.

SEC to Push Bond and Option Brokers for Better Prices on Trades
Katherine Doherty and Lydia Beyoud – Bloomberg
The US Securities and Exchange Commission’s draft plans to overhaul rules for the stock market would also expand its oversight of bond and options trading.
A proposal being circulated inside Wall Street’s main regulator would require that brokers in fixed-income and some derivatives — as well as those handling equities — get their clients the best deal, according to people familiar with the matter. Brokerages already face a similar “best execution” rule from the industry-backed Financial Industry Regulatory Authority, but a regulation directly from the SEC could lead to tougher enforcement.

Stocks Have Already Bottomed. How We Know.
Jacob Sonenshine – Barron’s
The ride upward won’t be easy, but there are mounting signals that the stock market has already hit its low point.
For starters, the S&P 500 SPX is down 17% from its all-time high of 4796 hit in early January. It was down as much as 25% to its lowest close of the year of 3577, hit in early October. One key driver was that the Federal Reserve has been ratcheting interest rates higher in order to combat high inflation by reducing economic demand. That’s even after the inflation had already begun denting consumer demand. Plus, faster-growing technology companies have seen their valuations, or their stocks’ multiples of expected earnings, take a hit partly because higher rates make future profits less valuable. Those companies are expecting a bulk of their profits to come many years in the future.

Credit Suisse Saw $88 Billion Outflows as Confidence Slumped (SWX:CSGN)
Marion Halftermeyer and Myriam Balezou – Bloomberg
Credit Suisse Group AG clients pulled as much as 84 billion Swiss francs ($88.3 billion) of their money from the bank during the first few weeks of the quarter, underlining ongoing concerns over the bank’s restructuring efforts after years of scandals.
The Zurich-based bank warned on Wednesday that it will face a loss of up to 1.5 billion Swiss francs ($1.6 billion) for the three final months of the year, partly as a result of the decline in wealth and asset management client funds from the start of October to Nov. 11. That’s potentially the worst exodus since the financial crisis.

Wall Street Is Saying ‘No’ to a Bitcoin Rebound. Bearish Bets Are Piling Up.
Jack Denton – Barron’s
Bitcoin has been licking its wounds from two-year lows in the wake of crypto exchange FTX’s bankruptcy this month. Sentiment may be cautiously improving in the digital-asset world, but investors on Wall Street expect more losses.
Data indicate that traditional investors are piling into bets against Bitcoin’s price, suggesting the outlook remains gloomy even though crypto markets have already suffered big declines in 2022.


Risks ahead for SGX if average trading volume continues to be subdued; The securities daily derivatives average was down 1% month-on-month.
Singapore Business Review
An analyst revealed that Singapore Exchange (SGX) will experience risks if the average trading volume is still softened. In October, the total securities market turnover value was $23.1b, declined 5% year-on-year (YoY) and down 10% month-on-month (MoM). The securities daily average was unchanged YoY and down 1% MoM.

Singapore Exchange named Regulation Asia’s Exchange of the Year for 4th time
SGX Group
Singapore Exchange (SGX Group) has been recognised as the “Exchange of the Year” and for the “ESG Initiative of the Year” in the Regulation Asia Awards for Excellence 2022. This is the fourth time SGX Group has received the Exchange of the Year accolade. The 2022 awards recognise SGX Group’s achievements in maintaining the resiliency of its operations amid heightened volatility and challenging external conditions. SGX Group was also recognized for establishing new regulatory frameworks including rules for the listing of Special Purpose Acquisition Companies (SPACs) and international linkages that expand access to an increased range of markets and products.

Regulation & Enforcement

Brussels demands share of London derivatives clearing
Sam Fleming and Philip Stafford – Financial Times
The EU will demand that derivatives traders use accounts at clearing houses in the bloc for some of their transactions, as part of plans to take a share of the EUR115tn market processed through the City of London.
Banks dealing with large quantities of contracts that are deemed “systemic” by regulators would have to clear a minimum amount of business via active accounts in EU-based clearing houses, officials briefed on the proposals said.

‘The consequences of inaction are severe.’ This crypto pioneer wants tough U.S. laws to prevent another FTX and stabilize digital markets.
Jeremy Allaire – MarketWatch
The public has experienced two damaging shocks this year from the digital asset industry that are a reminder of how a lack of regulatory clarity can harm U.S. consumers and U.S. economic competitiveness. The first shock came in the summer, when a complex financial derivative calling itself a stablecoin, TerraUSD – issued offshore – collapsed in a matter of days. This triggered a steep drop in the value of the entire digital asset market and led to the bankruptcies of multiple industry participants, with tens of billions of dollars in value lost.


These 2 ETFs show why owning small-cap stocks is key to beating the market at times like this
Mark Hulbert – MarketWatch
Small has been beautiful this year on Wall Street. That’s because the smallest-cap stocks within the S&P 500 SPX, 0.52% have far outperformed the largest-cap stocks since January. The eight stocks with the largest market caps at the beginning of the year—which at the time represented a top-heavy 27.2% of the total market cap of the entire index — have lost an average of 40.4% so far this year (through Nov. 21), according to FactSet. That’s more than three times the 9.5% average loss among the remaining 490+ stocks in the S&P 500.


FTX Is Where Gambling and Wall Street Collided
Aaron Brown – The Washington Post
One of the sidelights to the the sudden collapse of Sam Bankman-Fried’s $32 billion crypto empire is the gambling-related tweets by Sam Trabucco, the former co-head of Alameda Research, the trading arm of FTX. Trabucco claimed to have learned his craft trading cryptocurrencies at the blackjack and poker tables. This revelation has been treated as a novelty, alongside reports that FTX’s company psychologist thought the 20- and 30-something employees were undersexed nerds and complaints that locals were priced out of Bahamian real estate when FTX was riding high. But I think Trabucco’s gambling history is worth more serious consideration if we want to understand what happened at FTX.

Black Friday Seen Kicking Off a Bumpy Holiday Shopping Season for Retailers
Olivia Rockeman – Bloomberg
The recent wave of relief across the retail industry is giving way to a sense of foreboding ahead of Black Friday and the holiday shopping season.
Shoppers helped companies such as Macy’s Inc. avoid the worst-case scenario in the third quarter, loading up credit cards to absorb higher prices for food and household items while taking advantage of steep discounts for overstocked TVs and furniture. And while results from retailers including Abercrombie & Fitch Co. and Best Buy Co. exceeded forecasts, sales were still down — the contraction just wasn’t as bad as expected.

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