Morgan Stanley is the leading market maker at the Chicago Board Options Exchange, according to a note in 2022.Įxecutives at the New York-based firm reported in January that fourth-quarter trading profits soared 26% to $3 billion. 0DTE option trades stack the odds way in favor of bankers. Moreover, option contract trading is a zero-sum-game. Liquidity is extreme, buffered by other financial instruments and tools. The S&P 500 is an index of 500 of the largest companies in the world. Unlike the meme stock rally in 2021 that caused so much pain for professional short sellers, hedging S&P 500 contracts is riskless to bankers. The extreme volatility might seem like a big red flag for bankers. Shares opened sharply lower on the stronger-than-expected CPI data, only to reverse all of the early losses, and close higher by 2.6%. That session, like the Tuesday this week, featured a consumer price index report. Reuters reported Octothat the bulk of a 5.4% swing in the S&P 500 was the result of this short-term hedging phenomena.
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