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With Big Tech no longer leading stocks higher, traders are eyeing newly-listed contracts to trade short-term opportunities in some of the biggest names.The broadening of the equity rally has resulted in huge sector rotations that have flattened gains, keeping the S&P 500 Index almost unchanged for the year. With the earnings season coming to an end, traders have been buying more protection against a selloff, driving up the skew of puts over calls. Now the conflict sparked by US-Israeli strikes on Iran means they’ll have to factor in the consequences.“Not only is skew increasing at the SPX index level as more people reach for portfolio hedges, we’re also seeing more downside risk being priced in at the single-stock level, particularly for the mega-cap tech names,” said Mandy Xu, head of derivatives market intelligence at Cboe Global Markets Inc. “Retail traders have turned more cautious on tech, with call buying activity dropping off sharply to levels last seen during the 2022 bear market.”Last week’s focal point for the market was the results of Nvidia Corp, which remains a bellwether for the broader artificial-intelligence theme even as fixation on the stock has eased. Unsurprisingly, derivatives trading spiked on the days leading up to the event as investors placed their bets. Almost 50% of the overall Nvidia option volume both prior and post the earnings release was focused on Friday’s expiry, underscoring the demand for short-term contracts to speculate on discrete events.Few single stocks like Nvidia have such short-term options available. Cboe launched contracts expiring on Mondays and Wednesdays on some Magnificent 7 names — including Tesla Inc and Apple Inc — in late January, adding to the Friday listings on single stocks and daily expiries on indexes and key exchange-traded funds.But the growing success of short-term wagers on indexes — 66% of the S&P 500’s overall options trading is based on contracts expiring daily, according to a Barclays Plc research report earlier in February — means a cohort of traders may see the same opportunity in single stocks.However, the option selling that tends to dominate index 0DTE flows is more likely to remain concentrated there than in single stocks as the implicit diversification mitigates the threat of unexpected, outsized moves. In single names, the idiosyncratic “jump” risk introduces a non-negligible probability of a fund-threatening event to investors.“That is not without significant left tail risk,” said Garrett DeSimone, head quant at OptionMetrics, referring to the peril of extremely negative outcomes when selling zero-day single-stock options. This risk of an outsized move that could cause steep losses for option sellers — reflected in what DeSimone refers to as statistical “skewness” — is “massive” on Big Tech names versus indexes, he said.“This, of course, presents a risk management challenge for any fund trying to attempt a systematic short vol strategy on these single-name 0DTEs,” he added.Systematic option selling at the index level can dampen intraday swings in the S&P 500 when 0DTE flows leave dealers net long gamma, forcing them to sell into rallies and buy dips as they re-balance. While this dynamic is structurally supported by diversification at the index level, a similar — though likely less stable — intraday volatility suppression could emerge in highly liquid megacap stocks if short 0DTE positioning begins to dominate flows in those names.And while the variance risk premium on the Magnificent 7 is significant, it’s likely to narrow over time as volumes continue to pick up, according to DeSimone.“We would expect that premium to compress over the next six to seven months as the new Monday and Wednesday contracts get more active,” he said. 

The Gulf countries and the entire Middle East region are going through extraordinary times since the outbreak of open war between Iran and Israel in last June, noted several experts at a panel discussion.Organised by the Middle East Council on Global Affairs earlier this week, the discussion ‘ Rethinking Gulf Security Following the Iran- Israel War' brought four experts on the topic who delved deep into current developments and their implications. They felt that the outbreak of an open war between Iran and Israel in June has considerably intensified challenges to Gulf security.Sanam Vakil, director, Middle East and North Africa Programme, Chatham House said that the countries in the region are going through a period very much defined by geopolitical competition. She noted that there are a lot of questions about consistency in these countries' relationship with the United States and the reliability of US as a security partner.“Conflicts have doubled across the world, and we are, of course, seeing that in the region, but we don't have to look too far from the Middle East itself to see the devastating impact of a conflict. And multilateralism and the investment of the international community is not just stabilising conflicts. Settling conflicts is also proving to be ineffective. We see this very visibly in Gaza,” said Vakil.The panelists also noted that the region is confronting complicated questions including charting the future of Iran’s nuclear programme and Israel’s increasing incursions on Gaza, the West Bank, and the wider region.Hasan Alhasan, senior fellow for Middle East Policy, International Institute for Strategic Studies noted that Israel represents and presents an objective threat to the security of the Arab countries.“There are multiple reasons why that is the case. Most certainly, Israel started a war that I would be fairly confident in saying that probably most or at least perhaps all of the Gulf States did not want to be at war. I think Israel actually presents more of a direct threat because of the fact that it seems to have embraced the view of the region as an open battleground. This has direct security destabilising spillover effects for the Arab and the Gulf States,” explained Alhasan.The panel also noted that diplomatic efforts to revive a nuclear deal with Iran have been significantly undermined by the “12-day war.”According to Yasmine Farouk, director, Gulf and Arabian Peninsula Project, International Crisis Group, the picture is much more complex and difficult to manage. “It is very clear that there is a gap in how the US sees the conflicts and this conflict in this region and how the Gulf countries see them. The Gulf countries see the conflicts of the region as interconnected,” she pointed out.Shahram Akbarzadeh, nonresident senior fellow, Middle East Council said that there is a deep distrust, especially among the leadership of the international system, and how the United States manages to utilise the system to its full advantage. The session was moderated by Adel Abdel Ghafar, senior fellow, Foreign Policy Programme director, Middle East Council.