Exploring the data that is lying around “hidden in plain sight” in the options market on this episode of Options Insider Radio with Paul Rowady from Alphacution Research Conservatory. Hosted by Mark Longo
"You can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something - your gut, destiny, life, karma, whatever." Steve Jobs I was going to start out by saying that it's been a pivotal year for Alphacution. Problem is, I said the same things at this time last year. So, I supposed that means it's been a good coupla years. The pandemic, volatility, subsequent lockdown - and some luck in timing - drove a lot of attention towards Alphacution's content in 2020. Clearly, Robinhood and payments for order flow (PFOF) were top themes for the year. Our Feed post on Robinhood and trailing stop orders led the year in page views, and represented like no other before it what it looks like when a story goes viral. Not to be outdone, the timely post on the downfall of Ronin Capital also attracted a ton of attention. In fact, if [...]
“The future is a choice between utopia and oblivion. Whether it is to be utopia or oblivion will be a touch and go relay race right up to the final moment…” – Buckminster Fuller On September 23rd, the Financial Times reported, “Citigroup halts market making in retail options” in an apparent response to the challenges brought about by the era of zero-commission retail trading; an era that is swiftly nearing its one year anniversary. Among the more notable impacts of this Citi news, the fact that Morgan Stanley now remains as the sole major Wall Street bank still standing as an intermediary for retail option flows ranks high. Truth be told, it ranks second only to a backdrop of creeping concentration as bulge players like Citi and Barclays before them and Goldman before them and others before them – including those that have been winding down their cash equities businesses – have punted on their options businesses because it has become so mind-numbingly complicated and expensive to make money in [...]
"Knowing is not enough; we must apply. Willing is not enough; we must do." - Johann Wolfgang von Goethe With a name like Parplus, it's difficult not to take the bait. Not quite as fruitful as Lev Parnas' company, Fraud Guarantee, but ripe nonetheless, given the circumstances... For instance, we may never know if the advice - as recounted by Carl Spackler - of the Dalai Lama ever entered Jim Carney's mind: Gunga galunga. And, we may never know for sure whether the Parplus crew received total consciousness as the reality of the situation became clear. In fact, we may never know - as the Arnold Palmer story goes - what par actually was for this hole... But, one thing's for sure: It all happened fast... Here's the setup: Seeking to satisfy some of the hunger for yield enhancement solutions (and, ideally, some downside protection) - typically offered of late in the form of structured notes, "smart beta" products, and other clever overlay strategies - Parplus Partners was established [...]
“You can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever." - Steve Jobs In an article published today (March 26) by Risk.net based on a statement also released today from ABN AMRO (below), new details about the demise of Ronin Capital emerge - along with that of a "mysterious second default." According to Risk.net, a spokesperson for ABN AMRO has repeatedly suggested Ronin was not the source - a US client - of the $200 million (net) loss. It's just a matter of time now before we learn of another potential victim of this latest volatility spike... ++++++ Update 9:59PM NYC: Well, that was fast! The source of $200 million loss revealed by Risk.net as New York-based Parplus Partners, an equity volatility hedge fund with close ties to Ronin... Until next time, stay safe out there...
“If it be now, tis not to come, if it be not to come, it will be now; if it be not now, yet it will come. The readiness is all." - Shakespeare: Hamlet Act 5, Scene 2 UPDATE HERE (3/26/2020) Last Friday, March 20, CNBC was first to report that "one of the CME’s direct clearing firms was unable to meet its capital requirements. The move forced the exchange to step in and invoke its emergency protocols to auction off the portfolios. Ronin Capital, based in Chicago, was confirmed to be the firm in question, according to sources. Additional sources said Ronin’s problems stemmed from positions in futures tied to the CBOE Volatility Index (VIX)." In concert with Alphacution's recent feed post, "Marketquake: The Volatility of Volatility," on unprecedented volatility levels that surpass that of the 2008-2009 Global Financial Crisis (GFC) period, I wanted to assemble whatever we could on Ronin. A story not well known outside of Chicago prop trading circles, John S. Stafford, Jr. - the founder of [...]