| October 17, 2022 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Small-Time Options Traders Bet Big on US Stocks Falling Further; Traders bought many more puts to open than calls last week; 'First time in history that puts were 3x calls': Goepfert
Isabelle Lee - Bloomberg
Look no further than retail traders for a picture of pessimistic sentiment toward US equities, with bets on declines outnumbering wagers on gains by more than three to one. Small-lot options traders -- those buying no more than 10 options contracts at a time -- snapped up $19.9 billion worth of puts to open last week while purchasing only $6.5 billion in calls to open, data compiled by Sundial Capital Research Inc. show.
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One Options Strategy Is Winning in Nasty Year for Stock Market
Justina Lee - Bloomberg
A strange thing keeps happening in this nightmare year on Wall Street: Seemingly surefire bets that outsize volatility will engulf equity indexes keep misfiring, even as those riding turmoil in single stocks pay off handsomely.
That's proving a boon for a niche strategy known as dispersion trading, with nimble money managers netting double-digit gains by taking advantage of quirks in the world of equity derivatives.
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UK gilt market volatility credit negative for domestic issuers -Moody's
Reuters
An increase in British gilt yields indicates risks to financial stability and is "credit negative" for many domestic bond issuers, Moody's Investors Service said on Monday.
"The sharp increase in government bond yields and volatility indicate the increased risks to financial stability amid tightening financial conditions, a credit negative for a broad range of UK issuers," Moody's said.
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Market turmoil a boon for trend-following hedge funds
Nell Mackenzie - Reuters
Trend-following hedge funds are capitalising on market disruption and geopolitical unrest, with funds such as Graham Capital Management, Aspect Capital, AlphaSimplex and AQR Capital Management all near or over 40% higher for the year.
Such funds profit by buying or selling when the markets make big moves and by riding that move until it fizzles out or the market changes direction.
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Don't Get Emotional About Stocks, It Clouds Your Judgement
JJ Kinahan - Forbes
That was a famous line from the movie, Wall St. While many things about that movie were fictionalized, that line was pretty spot on. It was another rough week for stocks last week. While the S&P 500 was down around 1.5% and the Nasdaq 100 was off 3%, the actual volatility was much greater than that. After a rough first three days, markets staged a massive turnaround Thursday, only to give up those gains on Friday. And that volatility may pick up in the coming weeks as companies report third quarter earnings.
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| | | | | | Exchanges | | | BOX Options: Mandatory Annual Virtual Trading Floor Test
BOX Options
This notice is being issued to announce the mandatory annual Virtual Trading Floor ("VTF") test on Saturday, November 5, 2022 from 9:00 a.m. to 11:00 a.m. CT for all.
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| | | | | | Regulation & Enforcement | | | IMF calls on policymakers to re-examine ETF risks
Emma Boyde - Financial Times
Policymakers should re-examine risks posed by exchange traded funds during periods of stress, the IMF says, even though the vehicles are less concerning than their open-ended mutual fund counterparts.
The authors of the IMF's recently published global financial stability report expressed their deepest concerns about mutual funds with exposure to illiquid bonds, calling on policymakers to ensure that the funds used adequate liquidity management tools.
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FIA submits comments to CSRC on draft Measures for the Administration of Futures Exchanges
FIA
FIA has responded to the China Securities Regulatory Commission's (CSRC) consultation on its "Administrative Measures for Futures Exchanges." The draft measures can be found here (in Chinese).
The draft Measures are significant as they establish a unified framework and lay down common requirements to be adopted by all futures exchanges established in the People's Republic of China. They set out rules to align with and implement various requirements of the Futures and Derivatives Law, including the central counterparty role played by futures clearing institutions, margin enforcement and default management measures over defaulting clearing participants and segregation of futures margins and positions.
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| | | | | | Strategy | | | European Retail Investors Using Increasingly Popular Euro Derivatives To Hedge FX Exposure
Spectrum Markets
Spectrum Markets, the pan-European trading venue for securitised derivatives, has published its SERIX sentiment data for European retail investors for September, highlighting strong bearish trading on the Euro against the British Pound and Japanese Yen, in contrast to wider market sentiment on these currencies. The SERIX value indicates retail investor sentiment, with a number above 100 marking bullish sentiment, and a number below 100 indicating bearish sentiment. (See below for more information on the methodology).
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Financial Face-off: During this volatile stock market, is it better to buy individual stocks â or invest in an ETF?
Leslie Albrecht - MarketWatch
Inflation is stuck in overdrive, a potential recession is hanging over our heads, and the Dow Jones Industrial Average DJIA, 1.80% and S&P 500 SPX, 2.56% have both taken a dive this year. Many people are feeling understandably jittery about their finances.
Some may be looking at their investments through a lens of uncertainty, wondering if they should change things up. One perennial question some have: is it better to pick and buy individual stocks or buy shares of an exchange-traded fund (ETF)?
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| | | | | | Miscellaneous | | | Goldman Sachs plans major reorganisation
Joshua Franklin - Financial Times
Goldman Sachs is planning to fold its crown jewel trading and investment banking business into one unit as it shrinks from four to three divisions. The move is part of a sweeping reorganisation by chief executive David Solomon in an attempt to buttress the bank's stock market valuation.
Solomon has struggled to close a stock market valuation gap with rival banks that has widened since he took over as chief executive in 2018.
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New E.T.F.s Turn the Funds' Virtue of Low Risk on Its Head
Brian J. O'Connor - NY Times
Consider the attributes of the exchange-traded fund: low fees, less tax liabilities than a mutual fund, the ability to hold a broadly diversified portfolio in one security, lower risk and trading flexibility. In other words, the E.T.F. is the financial embodiment of the KISS theory: "Keep It Simple, Stupid."
Until this year.
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