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☆ Stock-hungry volatility funds, ‘gamma-heavy' options dealers could buoy US equities
▼ + stars: | 2023-12-05 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +4 min

Options strategists believe market gyrations may stay subdued for some time - potentially smoothing the way for further gains in equities. The S&P 500 is up 19% year-to-date, following a 9% gain in November - its best monthly performance since July 2022. Since the VIX tends to move inversely to stocks, market participants watch it closely as an indicator of investor sentiment and positioning. Among the factors closely watched by market participants are the funds that take their signals from market volatility, selling when volatility picks up and buying when it subsides. History also shows that once volatility expectations become subdued, they can linger at low levels for a while.

Persons: Lucas Jackson, Ilya Feygin, Nomura, Charlie McElligott, Brent Kochuba, Cantor Fitzgerald, Eric Johnston, Cantor Fitzgerald’s, Johnston, Saqib Iqbal Ahmed, Ira Iosebashvili, Grant McCool Organizations: New York Stock Exchange, REUTERS, Federal, Monday, WallachBeth, Nomura Securities, ’, Thomson

☆ Wall St Week Ahead Investors seek shelter as U.S. stocks grow more turbulent
▼ + stars: | 2023-10-20 | by ( Lewis Krauskopf | ) www.reuters.com time to read: +5 min

A Wall Street sign is pictured outside the New York Stock Exchange in New York, October 28, 2013. Wall Street’s most closely-watched measure of investor nervousness, the Cboe Volatility Index (.VIX), on Friday hit its highest in nearly seven months, as the S&P 500 slid for the week. That has left investors piling into other traditional safe-haven assets such as the dollar and gold, as well as short-term debt. Rising bond yields have dampened risk appetite, raising the cost of capital for companies and offering investment competition to stocks. Geopolitical uncertainties, climbing bond yields and the risk of more losses in stocks means "investors face fresh uncertainties," they wrote.

Persons: Carlo Allegri, Angelo Kourkafas, Edward Jones, “, Jerome Powell, Brent Kochuba, ”, Rick Meckler, Lewis Krauskopf, Saqib Iqbal Ahmed, Ira Iosebashvili, David Gregorio Our Organizations: New York Stock Exchange, REUTERS, Equity, Treasury, Reuters Graphics, Federal, Microsoft, UBS Global Wealth Management, Swiss, Cherry Lane Investments, UBS, Brent, Thomson Locations: New York, Israel, Cherry Lane Investments .

☆ Traders wary of volatility as JP Morgan fund's big options trade looms
▼ + stars: | 2023-09-28 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +3 min

The fund's sheer size means its options reset can rack up a massive surge in trading volume in S&P 500 options and set off related hedging activity that can aggravate market moves. How the fund's rebalancing could end up affecting the whole market has to do with market makers - typically big financial institutions that facilitate trading but seek to remain market-neutral. As things stand, with the S&P 500 trading around the 4,290 level, market makers are short about 40,000 September 29 S&P 500 options at the 4,210 strike. Market makers who have sold these put options must sell stock futures to minimize their own risk, as the market drifts closer to the strike price of the sold options. "As we move lower, market makers need to sell and as we move higher market makers need to buy it back," Murphy said.

Persons: Brendan McDermid, Morgan, Chris Murphy, Murphy, Brent Kochuba, Saqib Iqbal Ahmed, Megan Davies, Nick Zieminski Organizations: New York Stock Exchange, REUTERS, JPMorgan Hedged Equity, Apple Inc, Microsoft Corp, Amazon.com Inc, Treasury, Susquehanna Financial Group, Traders, Thomson Locations: New York City, U.S

☆ Bearish traders swarm AMC options as stock conversion plan faces doubts
▼ + stars: | 2023-07-28 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +3 min

NEW YORK, July 28 (Reuters) - Shares of AMC Entertainment Holdings Inc (AMC.N) have been hit by a wave of bearish options bets amid uncertainty over the company's stock conversion plan. While the common shares finished Thursday at $4.52, the APE preferred shares ended the session at $1.86. The move sent AMC’s shares higher, disappointing bearish traders who expected news of a conversion to tank the price. Still, options traders appear to be powering on with their bearish wagers, in effect betting the conversion will eventually go through. On Thursday, AMC shares finished down 10%, while APE shares rose 6%.

Persons: Steve Sosnick, Brent Kochuba, Garrett DeSimone, Saqib Iqbal Ahmed, Ira Iosebashvili, Diane Craft Organizations: YORK, AMC Entertainment Holdings Inc, AMC, Trade, Reuters, New York Stock Exchange, Interactive Brokers, Thomson Locations: Ortex, OptionMetrics

☆ Investors watch for quarter-end rebalancing in US stocks, bonds and options
▼ + stars: | 2023-06-26 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +2 min

NEW YORK, June 26 (Reuters) - Investors are watching a large hedged-equity fund's quarterly refresh of its options positions and quarter-end rebalancing by portfolio managers to potentially influence U.S. stock moves as the first half of the year winds down this week. The nearly $16 billion JPMorgan Hedged Equity Fund , which holds a basket of S&P 500 (.SPX) stocks along with options on the benchmark index, is expected to roll its options positions on Friday. While the trade is anticipated by many market participants, it can exacerbate or suppress daily stock market moves, especially during times of poor market liquidity, analysts said. For now, the trade may be helping suppress volatility in stocks. That may help curb market volatility, analysts said.

Persons: Brent Kochuba, Michael Purves, Saqib Iqbal Ahmed, Ira Iosebashvili, Matthew Lewis Organizations: YORK, JPMorgan Hedged Equity Fund, Bloomberg, JPMorgan, Tallbacken Capital Advisors, Thomson Locations: U.S, New York

☆ Fear of missing out on stocks' rally drives bullish options trading
▼ + stars: | 2023-06-16 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +2 min

NEW YORK, June 16 (Reuters) - Fear of missing out on the recent stock market rally is driving traders in the U.S. equity options market to lap up bullish derivative contracts at a hectic pace, further fueling gains for stocks, analysts said on Friday. On Thursday, a record 1.8 million S&P 500 calls traded. The rush into call options lifted the S&P 500 Index's 1-month moving average of calls-to-puts to the highest in at least 4 years, according to Trade Alert data. Some of the rush into call options has also helped fuel the rally, said Brent Kochuba, founder of options analytic service SpotGamma. "The trend is probably higher... but in the very short term we have gotten over our skies," Kochuba said.

Persons: Russell, Christopher Jacobson, Brent Kochuba, Kochuba, Saqib Iqbal Ahmed, Ira Iosebashvili, Nick Zieminski Organizations: YORK, Thomson Locations: U.S, Susquehanna

The 15% year-to-date rally in the S&P 500 (.SPX) is pulling once doubtful investors back into the market. Meanwhile, options investors are buying calls - bets on upside in stocks - at levels not seen in years. A record 1.8 million S&P 500 calls traded on Thursday, helping lift the one-month moving average of calls-to-puts to the highest in at least four years, Trade Alert data showed. The S&P 500 has posted a median gain of 18% in the 12 months after clearing the 20% threshold, LPL Financial data showed. One encouraging signal is that a greater number of S&P 500 stocks are heading higher, in addition to the handful of megacap growth names such as Microsoft (MSFT.O) and Nvidia (NVDA.O) that led gains this year.

Persons: you've, Emily Roland, Goldman Sachs, Willie Delwiche, we're, Delwiche, Brent Kochuba, Matt Stucky, Ken Mahoney, Lewis Krauskopf, Saqib Iqbal Ahmed, David Randall, Ira Iosebashvili, Richard Chang Organizations: YORK, National Association of Active Investment, Bank of America, Deutsche Bank, Trade, John Hancock Asset Management, Mount Research, American Association of, Investors, Northwestern Mutual Wealth Management Company, Fed, Microsoft, Nvidia, Asset Management, Thomson Locations: U.S

NEW YORK, April 28 (Reuters) - Bearish options traders are ramping up bets on further declines in the beaten-down shares of First Republic Bank (FRC.N), though strategists say they could run into trouble cashing in their wagers if the bank goes into receivership. Profitable put options are typically automatically exercised by selling underlying shares - either already owned by the investors or newly purchased - at a profit. But brokers might restrict share sales when a stock is halted, keeping investors from reaping gains. Some traders found this out the hard way when they ran into trouble cashing in bearish options bets on failed lenders SVB Financial Group and Signature Bank. The Options Clearing Corp and brokerages Charles Schwab, Robinhood, Interactive Brokers and Fidelity did not immediately respond to a request for comment.

☆ Explainer: How a massive options trade by a JP Morgan fund can move markets
▼ + stars: | 2023-03-30 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +3 min

read moreWHAT IS THE JP MORGAN HEDGED EQUITY FUND? The JPMorgan Hedged Equity Fund holds a basket of S&P 500 (.SPX) stocks along with options on the benchmark index and resets hedges once a quarter. For the year, the fund was down 10.66% through September 28, compared with a 21% decline for the S&P 500 Total return Index (.SPXTR). On June 30, the refresh of the fund's options positions involved about 140,000 S&P 500 options contracts in all, including S&P 500 puts at strikes 3580 and 3020 and calls at 4005, all for the September 30 expiry. Options dealers - typically big financial institutions that facilitate trading but seek to remain market-neutral - take the other side of the fund's options trades.

Reuters Graphics Reuters GraphicsAmong factors fueling the swings is a flood of options trades, many of them short-term in nature. A surge in options trading tends to boost hedging by market makers – typically large banks or financial institutions that facilitate the trades and need to position in equity futures to reduce their risk from unexpected market moves. Their furious buying and selling can heighten short-term swings in stocks, adding to broader volatility, market participants said. LOW POSITIONINGMeanwhile, many so-called "real money" investors such as pension funds and mutual funds have cut their stock allocations to the bone after months of equity volatility, another factor fueling stock swings. At the same time, under-positioned investors have recently tended to jump aboard stock rallies, further extending the moves, market participants said.

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