You’d think a volatility index would be doing great now, right? Wrong

Jul 28, 2020

Lead Stories

You’d think a volatility index would be doing great now, right? Wrong; For most of the 27 years since Cboe created VIX, the volatility index has been a cash cow. Now, the exchange may need a new cow.
Lynne Marek – Crain’s Chicago Business
The stock market was in wild flux this year in the wake of the coronavirus. So the company behind the volatility index known as the VIX fear gauge must be cashing in, right? Wrong. Cboe Global Markets, which invented the Cboe Volatility Index, witnessed an extraordinary second-quarter slump in the trading of its VIX-linked derivatives. That extended a two-year trend of “lackluster” trader interest in the VIX franchise, says a June 23 Goldman Sachs report.
/bit.ly/331T25Y

Cboe Proposes Plan That Could Curb Advantages of Fast Traders
Alexander Osipovich – WSJ
Global Markets Inc. is seeking to introduce a new mechanism on one of its U.S. stock exchanges that could limit the advantages of high-frequency traders over other market participants. The exchange operator is proposing to launch periodic auctions lasting one-tenth of a second, during which buyers and sellers could come together to trade stocks. Such auctions work by aggregating orders to buy and sell stocks into batches and executing them at discrete intervals, rather than allowing orders to be executed continuously throughout the trading day, the standard practice at U.S. exchanges.
/on.wsj.com/32ZaGap

Banks Balk at Compensation for ‘Big Bang’ Rate Losses
Donal Griffin, William Shaw, and Nishant Kumar – Bloomberg
JPMorgan Chase & Co., Deutsche Bank AG and Nomura Holdings Inc. are among banks telling clients they won’t compensate them for trades that lose value during the “big bang” transition sweeping through Europe’s interest-rate derivatives market.
Banco Santander SA and BNP Paribas SA also won’t reimburse for losses on so-called swaption trades caused by a change in how the industry prices these deals, according to people familiar with the matter who asked not to be named discussing private information. Swaptions are derivatives that give the owner the right to buy an interest-rate swap in the future.
/bloom.bg/3f5bLQo

In summer of turmoil, subdued ‘fear’ gauges make markets uneasy
Olga Cotaga and April Joyner – Reuters
Financial markets’ fear gauges are not flashing red at a time of serious global turmoil, stirring investor doubts over whether the indexes are mispricing current and future turbulence. Volatility gauges embedded in option markets are used by traders and investors to predict — or guess — market direction. They can also be useful barometers of the economic and political mood, hence the VIX equity volatility index is dubbed Wall Street’s fear gauge.
/reut.rs/3jQJSyT

Russia Is Contemplating the Wrong Oil Hedge
Clara Ferreira Marques – Bloomberg
President Vladimir Putin has asked officials to dust off the idea of a hedging program to protect revenues in the event of an oil crash. Rock-bottom crude prices make insurance look appealing, but a host of practical reasons means it is unlikely to get off the ground. Moscow would instead be wise to invest in a different kind of hedge: preparing its fossil-fuel industry and wider $1.7 trillion economy for a greener future.
/bloom.bg/2D8oEf7

Chinese Hedge Funds Shine in Volatile Year
Xie Yu – WSJ
Chinese hedge-fund managers are having a banner year, outperforming rivals elsewhere.
That is partly because Chinese stocks are also among the world’s best performers in 2020, as confidence grows that the country is moving past the coronavirus pandemic. A volatile year has also benefited investors who can be fast and flexible, while some portfolio managers say their grounding in China helped them quickly grasp the risks posed by Covid-19.
/on.wsj.com/3g8bXPT

Inside Volatility Trading: July 28, 2020
Kevin Davitt – Cboe
On July 28 of 1794, Maximilien Robespierre was executed by guillotine in Paris during the Reign of Terror. Robespierre was one of the most influential leaders of the Jacobins during the French Revolution. The French were inspired by the American Revolution and other Enlightenment principles. His death arguably brought The Terror to an end and ushered in a new regime as well as a more peaceful and democratic France.
/bit.ly/39BQJaS

Bitmain Spin-Off Launches Crypto Exchange to Go After Booming Options Market
Paddy Baker – Coindesk
Crypto services provider Matrixport has launched its own derivatives exchange to go after surging activity in the options space. The Singapore-based company said the new derivatives exchange, dubbed Bit.com, would first list a BTC/USD perpetual swap on Aug. 3, before adding a series of options contracts on Aug. 17, according to a report by The Block. Monthly options volumes have increased sharply from $1 billion in January to $2.5 billion by June; it spiked to over $3 billion in May’s halving event.
/bit.ly/2Xl7baL

(Podcast) TCR 69: Breaking Down the Crypto Derivatives Explosion w/ Genesis Trading
Crypto Rundown – Options Insider
/bit.ly/3jHgk6O

Exchanges and Clearing

OKEx Launches Its 3rd Elite Team Trading Contest with a 150,000 USDT Prize Pool
Press Release – Market Insider
OKEx (www.okex.com), a world-leading cryptocurrency spot and derivatives exchange, has announced the launch of its third Elite Team Trading Contest following two previous successful events. Starting from 10:00 am UTC on Aug. 10, the contest will last for two weeks until 10:00 am UTC on Aug. 24. The competing team leaders’ recruitment will take place between 10:00 am UTC on July 27 and 10:00 am UTC on Aug. 3, and the formation of teams will be from 10:00 am UTC on Aug. 3 to 10:00 am UTC on Aug. 10.
The top 10 teams and top 50 individuals ranked by trading yield — as well as the 10 most popular captains — will each win a share of the 150,000 USDT prize pool. All OKEx users can participate in the contest by trading futures, perpetual swaps, options and spot/margin products on the platform.
/bit.ly/306aRyx

Technology

NovaSparks Gets New Backer in MBO Deal, Eyes Options Data & FPGA Trading Capabilities; With the support of new majority owner Peninsular Capital, NovaSparks plans initiatives to expand the use cases for its FPGA market data technologies into the trading and risk sectors.
Max Bowie – Waters Technology
NovaSparks has completed a management buy-out (MBO) from its former private equity owner, and found a new backer to help accelerate its expansion, while growing employees’ stake in the company.
/bit.ly/32WB8kV

TradeZero America Announces Key Milestones For The First Half Of 2020
PR Newswire (press release)
TradeZero America, a Brooklyn, New York-based online broker dealer that provides commission-free stock and options trading, announced that the company had achieved significant milestones in the first six months of 2020. “Our trading volume has skyrocketed in the months of the pandemic and we’ve seen substantial growth in new users, new accounts and value of accounts. Our platform has continued to perform seamlessly with the explosive increase in volume, providing an exceptional trading experience for all of our investors,” said Dan Pipitone, TradeZero America co-founder.
/prn.to/3fc4Q7L

Strategy

Gold stalls near record high as dollar decline pauses
Naomi Rovnick and Hudson Lockett – Financial Times
The price of gold on Tuesday came within striking distance of hitting $2,000 for the first time, but the yellow metal’s rally lost momentum as the US dollar firmed following a heavy sell-off.
The spot gold price increased as much as 2 per cent to hit an all-time high of $1,980.57 a troy ounce on Tuesday morning in Asia, before falling back in the London session to $1,929. Silver also rose as much as 6.4 per cent to $26.19 an ounce during the Asian session, before tumbling to $23.93.
/on.ft.com/2CYFhdx

****JB: This and the next two stories are an interesting snapshot of different takes on the same story.

Gold Steadies After Futures Touch $2,000 for First Time
Ranjeetha Pakiam and Elena Mazneva – Bloomberg
Gold steadied after a record-breaking rally that saw futures touch $2,000 an ounce for the first time. Silver fell as investors assess whether precious metals rose too high, too fast.
Both metals touched fresh highs earlier Tuesday, before traders looked to lock in profits. While there’s no end in sight to the economic turmoil unleashed by the coronavirus pandemic and expectations are that more stimulus will be needed to boost growth, investors may seek out more bullish signals before pushing prices higher.
/bloom.bg/2X5ANIW

The price of gold hit an all-time high this week, and Wall Street thinks it will keep climbing. Here’s what some of the world’s biggest banks forecast for the precious metal.
Saloni Sardana – Markets Insider
Gold has been the darling of financial markets in recent days, surging to record highs as investors flood into safe haven assets due to increased uncertainty around the world.
The precious metal closed at $1,942.55 per ounce on Monday – it’s highest price in history amid rising diplomatic tensions between US and China, and a surge in virus cases globally.
/bit.ly/3jPnrtW

Thinking Of Using Options In Your Portfolio? Read This First.
Rob Isbitts – Forbes
With puts and calls, forget sexy. Go for functionality. It’s not so boring, after all. Using put and call options in portfolios is one of the more popular topics with investors. Yet I find that different groups of investors approach it differently. Do-it-yourself types often get lured in by the levered effect that options have, and the salespeople, I mean, options “gurus” that promote them. Financial professionals I coach on the use of options for their clients tend to be a very attentive audience, and typically learn it the right way. It is all part of being a fiduciary to your investor clients.
/bit.ly/330xRRC

Events

2020 US election: the impact on derivatives markets
FIA.org
MEMBERS ONLY virtual forum featuring political analyst Charlie Cook 29 July 2020 • 10:00 AM – 12:00 PM ET • Virtual Forum FIA is proud to host an exclusive forum featuring Charlie Cook, editor and publisher of The Cook Political Report – an independent, non-partisan newsletter that analyzes American political trends. Cook will preview the 2020 US election season and how it may shape the political landscape in the coming years. Following his virtual presentation, FIA president and CEO Walt Lukken will host a panel of Washington insiders to discuss the practical implications of the election season on our markets. Each session will include a Q&A at the end.
/bit.ly/2CPacsh

Q2 2020 trends in futures and options trading
FIA.org
5 August 2020 • 10:00 AM – 11:00 AM ET • Webinar Global futures and options trading grew by 32% to record-setting 21.9 billion contracts in the first half of 2020 compared to 2019, according to figures released by FIA. In the second quarter, the total number of traded contracts was 10.46 billion, down 8.4% from the record-breaking 11.41 billion contracts traded in Q1 2020, but up 21.8% from the second quarter of 2019. In fact, the second quarter volume was higher than any other quarter in the history of the industry aside from the first quarter of 2020.
/bit.ly/3jM0uYA

Miscellaneous

Trader who lost $1 billion during financial crisis is up 90% during the pandemic
Mark DeCambre – MarketWatch
That is Boaz Weinstein, the former star Deutsche Bank trader who now runs his own hedge-fund firm, Saba Capital Management explaining his investment outlook during the pandemic in a recent Bloomberg interview.
Weinstein is up 90% so far this year on a series of bets that have produced hit after hit for the hedge-fund investor. According to Bloomberg News, that performance has thus far helped the 47-year-old trader outperform nearly all of his rival investment firms.
/on.mktw.net/304ROEQ

Nancy Pelosi’s Husband Made Large Transactions in Apple, Netflix Securities
Ed Lin – Barron’s
Speaker Nancy Pelosi recently disclosed June securities transactions made by her husband Paul, a businessman and private investor.
Paul Pelosi sold Apple (ticker: AAPL) stock options, used options to acquire Netflix (NFLX) and Salesforce.com (CRM) stock, bought PayPal Holdings (PYPL) stock and stock options, and bought American Express (AXP) stock options. The transactions totaled at least $5 million in total. Speaker Pelosi, a California Democrat, disclosed the trades in a form she filed last week with the Clerk of the House of Representatives.
/bit.ly/2Pg7XkV

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