Taking Stock Flash Update | The Corona Correction | Refinitiv

TL;DR

Market structure has changed significantly, with smart beta funds now in control. Next week may provide a buying opportunity as expiring options and gamma hedging could drive volatility. Watch out for potential downside risks in European industrials.

Transcript

11 a.m. UK time on Friday just a quick update really looking at some of the ideas around market structure now we're getting a little bit of a bounce and a little bit of a breather I wanted to sort of look forward at potentially what might happen next week and what to look for next week rather than what necessarily would happen then what's keen anal... Read More

Key Insights

• ☢️ Market structure has evolved from active to passive management, impacting trading dynamics.
• 💦 The recent market drop was driven by programed trades and portfolio liquidation.
• 🥺 Next week's expiring options could lead to increased volatility and potential buying opportunities.
• 🫥 The VIX and realized volatility levels are currently in line, with potential for volatility spikes.
• 🔠 Korean investors repatriating capital may affect structured products and the Kospi.
• ✋ European industrials, such as sx NP, are near all-time highs relative to the market, presenting potential downside opportunities.

Questions & Answers

Q: How has market structure changed in recent years?

Market structure has shifted from active managers to passive funds, such as smart beta funds, which now have a significant impact on the market.

Q: What caused the recent market drop?

The recent market drop was triggered by programed trades and portfolio liquidation, leading to a rapid sell-off in both European and US markets.

Q: What should investors watch for next week?

Next week, as options expire, there may be increased gamma hedging and volatility. If a high volume low is not seen, it may present an opportunity for investors.

Q: What is the potential risk in structured products?

Korean investors have been repatriating capital, which could impact structured products. If the Kospi hits the 200 level, it could trigger a significant downside move.

Summary & Key Takeaways

• The market has transitioned from active managers to rules-based smart beta funds.

• The recent market drop is faster than ever before, driven by programed trades and portfolio liquidation.

• Next week, as options expire, there may be a high volume low, presenting a potential buying opportunity.