| February 27, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
Term of the Week - To Be Paid By the Buyer to the Seller
JohnLothianNews.com
In addition to their potential intrinsic value, options also have another element of value: the option premium. The premium has to be paid by the buyer, which is then transferred to the option seller. To a certain extent, the purchase of an option contract can be compared to the acquisition of an insurance policy, where a premium is charged by the insurance seller. The insurance buyer pays the premium in advance of the period during which the insurance agreement is valid. The contract embeds a potential claim, which will only be lifted if certain conditions are met.
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| | | | | | Lead Stories | | | AI momentum is underpriced in the options market, says Bank of America
Jamie Chisholm - MarketWatch
Buying Nvidia call options remains a good way to profit from gains in the AI chipmaker's share price because volatility is being undervalued, according to Bank of America.
In a note published Tuesday, the BofA global equity derivatives team observed that Nvidia's NVDA continued share price rise since last week's blowout earnings report means that keeping up with the market without having enough exposure to AI stocks, in particular Nvidia, has been an uphill battle.
/jlne.ws/49KTXXe
Traders Spent Over $20 Billion on Nvidia Options Last Week
Gunjan Banerji - The Wall Street Journal
Traders are throwing gobs of money at Nvidia stock options. They spent more than $20 billion on the trades last week, according to Cboe Global Markets data, based on what is known as options premium. The artificial-intelligence mania has also a driven a frenzy in trades tied to Super Micro Computer, a much smaller company. Traders spent more money on Super Micro Computer options last week than they did Tesla bets. Tesla is worth about 13 times the other company.
/jlne.ws/3TcKnqF
Nvidia is now the king of the U.S. options market
Joseph Adinolfi - MarketWatch
Nvidia has already conquered the U.S. stock market. Now, it's taking over the options market as well.
Traders sunk more money into trading Nvidia options ahead of its earnings last week than the next four most-popular options plays combined, according to an analysis of Cboe Global Markets data by Nomura's Charlie McElligott.
/jlne.ws/3SXRe62
FX options traders rethink vol drivers amid macro uncertainty; Market-makers believe more and more events will influence options pricing as political risk bubbles up during 2024
Cole Lipsky - Risk.net
Options dealers are reviewing how macroeconomic events such as national elections or jobs data affect currency option pricing, as political risk rises and interest rates remain on a knife edge.
A senior options trader at a French-based international bank says: "I think events now have a much bigger weight. The exogenous impacts on the market are huge compared to three years ago."
/jlne.ws/3UVohKA
BlackRock Says 'New Regime' Calls for More Active Management; World's largest asset manager benefited from index boom; Firm says 'mega forces' keeping rates above pre-Covid levels
Silla Brush - Bloomberg
BlackRock Inc., which capitalized on a decade-long boom in index investing, said investors should rely more heavily on actively managed strategies. Higher interest rates, persistent inflation and more geopolitical risk offer active managers and hedge funds a bigger opportunity to beat simple buy-and-hold portfolios, BlackRock analysts wrote Tuesday in a paper that referred to the environment as a "new regime." "Static asset allocations - or set-and-forget portfolios - are a reasonable starting point, but we don't think they will deliver as in the past," BlackRock Investment Institute analysts including Vivek Paul and Andreea Mitrache said in the paper. "The era of ultra-low interest rates is in the past, and future expected returns look less attractive."
/jlne.ws/3TemRtG
What Spot Bitcoin ETFs in Canada Say About the U.S.
Reza Akhlaghi - CoinDesk
On Jan. 10, the U.S. Securities and Exchange Commission (SEC) ended the years-long wait for spot bitcoin exchange-traded funds (ETFs). The approval, an important phase in the maturation of Bitcoin, opened the door for millions of Americans to invest in the incumbent digital currency, whose value grew by more than 160% in 2023. Futures-based crypto ETFs have been available to U.S. investors since October 2021, but unlike spot ETFs, they are not tied directly to the asset and have no requirements for custody. In other words, if spot ETFs are successful, it means there will be a lot more bitcoin buying pressure.
/jlne.ws/42T3KIG
Hot New Bitcoin Funds Could Soon Have Rivals; BlackRock, Fidelity and other Wall Street firms have applied to launch ether ETFs
Vicky Ge Huang - The Wall Street Journal
With the SEC approving funds holding bitcoin, billions of dollars are expected to flow into the market. WSJ's Dion Rabouin explains why the largest asset manager on Wall Street is looking like a big winner and what it means for crypto going forward. Photo illustration: Noah Friedman/Storyblocks
Wall Street firms launched bitcoin exchange-traded funds just a few weeks ago. Now, they want to offer everyday investors funds holding a smaller and more volatile crypto asset.
/jlne.ws/3V1uK77
| | | | | | Exchanges | | | Euronext launches Daily Options on the CAC 40 index
Euronext
Euronext launches Daily Options on the CAC 40 index for short-term trading strategies and exposure to the main index of Euronext Paris; Euronext pioneered Daily Options on the AEX index in 2008 and now expands its offering to the CAC 40 index. The new Daily Options meet growing investor demand, especially from institutional and retail investors looking to respond quickly to market fluctuations. Euronext today announced the launch of Daily Options on the CAC 40 index, enabling investors to execute short-term trading strategies and gain exposure to the main index of Euronext Paris. Having been the first exchange in Europe to introduce Daily Options, with the launch of Daily Options on the AEX index in 2008, Euronext has now expanded its Daily Options offering to the CAC 40 index.
/jlne.ws/3SMhb8I
| | | | | | Regulation & Enforcement | | | US SEC expected to drag its feet on new wave of crypto ETFs
Suzanne McGee and Hannah Lang - Reuters
Buoyed by the successful launch of U.S. bitcoin exchange-traded funds (ETFs), asset managers are lining up to list a second wave of more complex crypto products, setting the stage for another tussle with the U.S. securities regulator.
The Securities and Exchange Commission (SEC) rejected spot bitcoin ETFs for more than a decade, hoping to protect investors from market manipulation. But the SEC was forced to approve them last month after Grayscale Investments won a court challenge. A federal appeals court ruled that the SEC had not sufficiently detailed its reasoning for rejecting the products.
/jlne.ws/42XXIX6
| | | | | | Moves | | | Saudi Exchange appoints new chief of derivatives; Individual has been at the Saudi Exchange for over eight years and was most recently chief of cash markets.
Claudia Preece - The Trade
Noelle Al Jaweini has been appointed acting chief of derivatives at the Saudi Exchange following more than eight years with the business. Most recently, Al Jaweini served as chief of cash markets at the exchange and before that head of markets development. During her career, Al Jaweini has contributed to various industry initiatives, including having served as the first Saudi advisory board member for Bloomberg's "A Fair Share" - an initiative which advocates for gender equality in the regional financial industry.
/jlne.ws/49LQd83
| | | | | | Strategy | | | Nasdaq 100 Inches Higher as Yields Pullback
Thomas Westwater - tastylive
U.S. equity markets continue to chop around as traders await the release of the Federal Reserve's preferred gauge of inflation on Thursday. Bonds are mostly higher, though for the second consecutive day yields bottomed overnight ahead of the European trading session. Lower yields are undercutting the U.S. dollar, which in turn is giving metals some breathing room after yesterday's disappointing price action.
/jlne.ws/3Th0TpX
IV Increase and Strategy Benefit
tastylive
In this video, traders Nick and Mikey discuss various trading strategies and high implied volatility (IV) stocks. They mention stocks like Bitcoin, Coinbase, Mara, and First Solar, discussing their recent price movements and implied volatility levels. They provide insights into how IV affects option prices and the benefit of flexibility in strike and expiration selection, particularly in undefined risk trades. The traders also answer questions from the chat, including topics like rolling options, managing nerves in an undefined risk trade, and the impact of time on option prices. They also highlight the importance of position sizing and product class in managing risk and staying comfortable with trades. Overall, the video provides valuable insights and strategies for traders navigating high IV environments and volatile markets.
/jlne.ws/3UWDU4O
Put/Call Ratio
Cbeo (Video)
In #Vol411, Tim Biggam @Delta_Desk gives us market updates, sharing that the $VIX futures term structure is back in contango and more.
/jlne.ws/42Sm44J
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