{"id":1665869,"date":"2022-09-30T06:55:52","date_gmt":"2022-09-30T10:55:52","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1665869"},"modified":"2022-09-30T06:56:07","modified_gmt":"2022-09-30T10:56:07","slug":"explainer-how-a-massive-options-trade-by-a-jp-morgan-fund-can-move-markets","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/explainer-how-a-massive-options-trade-by-a-jp-morgan-fund-can-move-markets\/","title":{"rendered":"Explainer-How a massive options trade by a JP Morgan fund can move markets"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">26<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fexplainer-how-a-massive-options-trade-by-a-jp-morgan-fund-can-move-markets%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1665869&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>By Saqib Iqbal Ahmed<\/p>\n<p>NEW YORK (Reuters) \u2013     A nearly $16 billion JP Morgan fund is expected to reset its options positions on Friday, potentially adding to equity volatility at the end of a gloomy quarter for stocks.<\/p>\n<div id=\"div-gpt-ad-1663871513696-art-1\">\n<\/div>\n<p>Analysts have in the past pointed to the JPMorgan Hedged Equity Fund\u2019s quarterly reset roiling markets, and see it as a source of potential volatility during Friday\u2019s session.     <\/p>\n<p>WHAT IS THE JP MORGAN HEDGED EQUITY FUND?<\/p>\n<p>The JPMorgan Hedged Equity Fund holds a basket of S&#038;P 500 stocks along with options on the benchmark index and resets hedges once a quarter. The fund, which had about $15.59 billion in assets as of September 28, aims to let investors benefit from equity market gains while limiting their exposure to declines.<\/p>\n<p>For the year, the fund was down 10.66% through September 28, compared with a 21% decline for the S&#038;P 500 Total return Index.<\/p>\n<p>The fund\u2019s assets ballooned in recent years, as investors sought protection from the sort of wild swings that rocked markets in the wake of the COVID-19 outbreak in March 2020.<\/p>\n<p>Its holdings include some of the market\u2019s biggest names, such as Apple Inc, Microsoft Corp and Amazon.com Inc. <\/p>\n<p>HOW DOES THE FUND USE OPTIONS?<\/p>\n<p>The fund uses an options strategy that seeks to protect investors if the S&#038;P 500 falls between 5% and 20%, while allowing them to take advantage of any market gains in the average range of 3.5-5.5%.   On June 30, the refresh of the fund\u2019s options positions involved about 140,000 S&#038;P 500 options contracts in all, including S&#038;P 500 puts at strikes 3580 and 3020 and calls at 4005, all for the September 30 expiry. <\/p>\n<p>HOW CAN THIS AFFECT THE BROADER MARKET?<\/p>\n<p>Options dealers \u2013 typically big financial institutions that facilitate trading but seek to remain market-neutral \u2013 take the other side of the fund\u2019s options trades.<\/p>\n<p>To minimize their own risk, they typically buy or sell stock futures, depending on the direction of the market\u2019s move. Such trading related to dealer hedging has the potential to influence the broader market, especially if done in size, as is the case for the JPM trade.<\/p>\n<p>The trade is \u201cwell understood\u201d and \u201cmostly digested by the market,\u201d said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.<\/p>\n<p>It has, however, exacerbated daily moves in the past, according to some analysts. <\/p>\n<p>The S&#038;P 500 Index fell 1.2% in the last hour of trading on March 31 amid a lack of any obvious news \u2013 a move some analysts pinned on options hedging flows.<\/p>\n<p>Analysts say the refresh could exacerbate market swings on Friday, as the fund rolls over its options positions and dealers buy and sell futures to hedge their exposure.<\/p>\n<p>\u201cThat\u2019s because there is a fair amount that has to be adjusted and hedged to roll the trade,\u201d said Brent Kochuba, founder of analytic service SpotGamma.<\/p>\n<p>\u201cI believe that the position is expanding volatility this week,\u201d Kochuba said.<\/p>\n<p>All else being equal, once the options position is rolled forward three month out, their influence on current price swings should diminish, he said.<\/p>\n<p> (Reporting by Saqib Iqbal Ahmed in New York; Editing by Ira Iosebashvili and Matthew Lewis)<\/p>\n<p><a href=\"https:\/\/www.oann.com\/business\/explainer-how-a-massive-options\/attachment\/file-photo-traders-work-on-the-floor-of-the-nyse-2\/\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/tagreuters.com2022binary_LYNXMPEI8S157-BASEIMAGE.jpg\" alt=\"tagreuters.com2022binary_LYNXMPEI8S157-BASEIMAGE\" \/><\/a><\/p>\n<p><a href=\"https:\/\/www.oann.com\/business\/explainer-how-a-massive-options\/attachment\/file-photo-a-jpmorgan-logo-is-seen-in-new-york\/\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/tagreuters.com2022binary_LYNXMPEI8S152-BASEIMAGE.jpg\" alt=\"tagreuters.com2022binary_LYNXMPEI8S152-BASEIMAGE\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Saqib Iqbal Ahmed NEW YORK (Reuters) \u2013 A nearly $16 billion JP Morgan fund is expected to reset its options positions on Friday, potentially adding to equity volatility at<\/p>\n","protected":false},"author":66,"featured_media":2315279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1665869","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1665869","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/66"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1665869"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1665869\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2315279"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1665869"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1665869"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1665869"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}