Call option volumes declining

Bad news for meme stocks

There may not be a newsletter on Thursday, we should return on Friday but that will mark the start of a two-week break as MacroMarketsDaily will soon be taking a much-needed vacation.

Chart of the Day

The volume of call options outstanding has been falling in recent weeks, and is now close to the pre-Covid level. Many traders have been using call options to bet on more speculative “meme” stocks like AMC and Virgin Galactic, so it’s little surprise that the reduction in call option volume has coincided with weakness in those share prices. Will there be another round of call option buying soon? Well, probably, that’s the way the world seems to work now…

Macro

US durable goods orders rose by 2.3% MoM in May. Excluding transport, orders increased by 0.3% MoM.

The US Conference Board measure of consumer confidence rose in July. Consumers' assessment of the present situation improved but their expectations deteriorated.

In Brazil, growth in foreign direct investment rose to -34.9% YoY in May.

Broad money supply - the US still leading the way with growth of 13.8% YoY.

Inflation in Australia surged to 3.8% in Q2, though trimmed mean core inflation is just 1.6% . Those moves were in line with economist forecasts.

The AUD didn’t move much in response. It is up by between 0.9% and 1.6% against the USD, CHF and JPY in the past week.

Markets

Somewhat unusually, the AUD has appreciated despite the sharp drops in Chinese equities. That may be because the weakness in China is because of a state crackdown on certain companies, rather than due to growth concerns (though growth is slowing).

Continued weakness in China has pushed the MSCI EM index down even further.

The US VIX has been inching up, but volatility remains very low and there hasn’t been much of a spike in VVIX.

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