| July 11, 2016 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Knowledge Is Power: A MarketsWiki Education Journey
Doug Ashburn, JLN
"There is a lot of competition out there, but that is what our markets are all about. It is the essence of what we do. We innovate because of competition."
With those words, CME Group Chairman Emeritus Leo Melamed kicked off the inaugural MarketsWiki Education event in 2013. We have come a long way since then; the event has expanded its reach each year and in 2016 will visit five cities, beginning in Chicago July 12-15. For more information on the Chicago event, or to register, click HERE
The goal of the series is quite simple. We connect industry professionals with students and young professionals and give them the information that will inspire a career in this industry.
To read the rest of the story, click HERE.
***DA: Next week we move the series to Times Square. For a full lineup of the July 19th New York event, click HERE.
| | | | | | Lead Stories | | | Options market signals little fear of election-tied volatility
Saqib Iqbal Ahmed - Reuters
The November U.S. presidential election is being sold by the major parties as a defining moment for the next generation of Americans. But stock and options traders, often moved to action by political headlines, are responding with a big 'meh.' Options bets on volatility around the Nov. 8 election are running lower than could be expected given how stocks have performed in past election cycles, BNP Paribas said.
jlne.ws/29IhnnE
****JB: I think this election cycle is so unusual that everyone is acting like a deer in the headlights.
Bringing Innovative Ideas to the Market
John Fennell - OCC Blog
With our continued focus on innovation, OCC is always asking the question of how we can bring the right ideas, products and services to the market. One such answer was our creation last year of an innovative, pre-funded, committed repurchase facility with CalPERS, the largest U.S. pension fund. This facility increases OCC's overall liquidity resources from $2 to $3 billion, while diversifying its committed lenders to include pension funds in addition to its existing participant base of banks and broker-dealers.
jlne.ws/29I8V7H
Companies' FX hedging jumped in before Brexit vote
Reuters
Hedging of currency risks by small and medium-sized British companies surged before June's referendum on EU membership, but thousands were probably still exposed to the past fortnight's huge swings in the pound, a survey on Monday showed.
jlne.ws/2a2yFbf
Invesco Cushioned Against Even Harder Brexit Blow With a Hedge
Justin Baer and Sarah Krouse - WSJ
Invesco Ltd.'s large U.K. presence has bruised the company's stock in the wake of the Brexit vote. A bet by the money manager's finance chief, though, has helped Invesco dodge even more painful losses. Months before the U.K.'s historic referendum to leave the European Union, Invesco hedged against a collapse in the British pound. Invesco CFO Loren Starr bought a series of put options on the pound aimed at insulating the firm's earnings from the currency's declining value against the U.S. dollar. Those options, once a slight drag on Invesco's earnings, have surged in value since the Brexit referendum.
jlne.ws/2a2CZaa
BOE set to cut rates for the first time in 7 years on Brexit backlash
Sara Sjolin - MarketWatch
For the first time in more than seven years, analysts are finally expecting some action on U.K. interest rates from the Bank of England when it meets for its first post-Brexit policy decision on Thursday.
jlne.ws/2a2B19M
Weekly Market Outlook - Valuation Concerns as New All-Time Highs Approach
Price Headley - CBOE Options Hub
Following through on the surprising post-Brexit bounce from two weeks ago, the S&P 500 (SPX) (SPY) gained 1.3% last week, closing at 2129.90. Though that wasn't the highest close ever for the index (nor did it reach a new intraday high), that was the highest weekly close ever for the S&P 500. And, we're within easy reach of the pinnacle of 2134.72 hit in May of last year.
This is a do-or-die moment for the market. If it's to muster any more upside, it's going to have to plow into new-high territory and traders are going to have to effectively say valuations aren't that important currently (a la 1999). It could happen though. Or, this overvalued and overbought market could finally buckle under its own weight.
jlne.ws/2a2EyoR
UK's Osborne to urge U.S. investors to stick with Britain outside EU
Kylie MacLellan and David Milliken - Reuters
British finance minister George Osborne will meet some of Wall Street's biggest investors in New York on Monday to urge them to stick with Britain despite last month's vote to leave the European Union, his office said.
jlne.ws/29IbtTt
****JB: He can rest assured that everyone will do whatever is most profitable for them.
CMBO Index and Selling of SPX Calls and Puts - Blog #6 on 30-Year Price History
Matt Moran - CBOE Options Hub
A 2011 paper by the consulting firm Cambridge Associates - Highlights from the Benefits of Selling Volatility - noted that  "Over the past 20 years, a strategy of systematically selling out of the money puts and calls on the S&P 500 Index (a short strangle portfolio) would not only have soundly beaten equity returns with lower volatility, but also offered similar returns to the median hedge fund manager tracked by Cambridge Associates, albeit with slightly higher volatility ..."
In 2015 CBOE introduced the CBOE S&P 500 Covered Combo Index (CMBO), a benchmark index that sells S&P 500 (SPX) put options and call options, and that now has more than 3 decades of price history.
jlne.ws/2a2EZzq
Weakling Profit Recession Is Why Nobody Pulls Cord on Stocks
Lu Wang - Bloomberg
The U.S. earnings recession waylaying the seven-year-old bull market has been a long one by any standard. Measured by depth, however, it isn't registering -- either with history or investors.
jlne.ws/29Ic2MW
Volatility Update: We're back in the 'cautious' range
Georgio Stoev - TradingFloor.com
Major indices in the US ended last week near record levels. We should not forget that the ride was bumpy and had a fair amount of turbulence. Following a poor start to the year and then the February scare, equities have rallied and are now above their December highs. Furthermore, the S&P 500 is flirting with all-time high of 2,131 made last July.
jlne.ws/2a2vv7j
| | | | | | Exchanges | | | Watching The Old Stock Exchanges Squirm, Round Two: Market Data Feeds
Kurt Dew - Seeking Alpha
Consider the future of IEX, our newest SEC-designated stock exchange. Born in controversy, IEX faces many limitations in the short run. Just the technological barriers -- hooking up the data feeds that the SEC requires broker-dealers to acquire from each exchange -- will take several months. IEX is further hobbled, certainly in the next year, by limiting itself to trading of common stock. But in a recent interview, Brad Katsuyama, CEO of IEX, signaled the start of Round Two, here.
jlne.ws/29IdXkF
Deutsche lowers LSE merger approval hurdle
BBC
Deutsche Boerse has lowered the approval threshold for its merger with the London Stock Exchange (LSE) from 75% to 60% of its shareholders.
As a result, they now have an extra two weeks to accept, until 26 July.
The German exchange was concerned that the threshold could be hard to reach without its index fund shareholders.
jlne.ws/29Ifxmw
TAIFEX Newsletter July 2016
Press Release
jlne.ws/2a2zuRp
BSE plans trading in commodity derivative segment
The Hindu
Leading bourse BSE on Saturday has said that it plans to launch commodity derivative segment which will allow trading in metals and has approached market regulator Sebi for approval. "BSE plans to set up a commodity derivative segment as soon as approvals are in place. It would consist of non-agricultural commodities like metal, oil and gas," BSE Managing Director and CEO Ashishkumar Chauhan said.
jlne.ws/2a2ytsh
JSE Successfully Moves To A Shorter Three Day Settlement Cycle
Press Release
South Africa's financial markets took a major step forward today with the successful launch of a shorter three-day settlement cycle, known as T+3. The move follows months of intensive market-wide activity culminating in a change-over to new systems in the days leading up to today's launch.
jlne.ws/2a2zMHT
Euronext to offer MiFID II-compliant Trade Publication and Transaction Reporting Services
Press Release
Euronext announced it will enhance its Trade Publication and Transaction Reporting Services to allow investment firms to meet the new regulatory requirements specified under MiFID II.
jlne.ws/2a2vssd
NZX Celebrates Milestone In New NZ Milk Price Futures
Press Release
NZX celebrated a milestone in the development of its NZ milk price futures contract on Friday, with more than one million kilograms of milk solids (kg/ms) traded since the product launched at the end of May.
jlne.ws/2a2AO6J
****SD: Options on these milk price futures, too.
| | | | | | Regulation & Enforcement | | | Sam Wyly's battle with IRS, SEC reveal games of the superrich; Can legal system combat libertarian tribalism of the wealthy?
Elliot Blair Smith - MarketWatch Opinion
Sam Wyly, 81, brazenly committed securities fraud and cheated on his taxes for decades, according to trial verdicts in New York and Texas. Let's see how much of the $1.1 billion tax bill that a bankruptcy court judge handed him last month winds up getting paid.
jlne.ws/2a2B0TB
****SD: Lots of options shenanigans in here.
SEC tightens rules to stamp out spoofing
Hayley McDowell - The Trade
The US Securities Exchange Commission (SEC) has rubber-stamped a change to clock synchronisation standards to stamp out market abuse and spoofing.
jlne.ws/29Ib8Qt
MiFID II Client Reporting: Focus on More Than Just Regulatory Reporting
Peter Lehnen - TABB Forum
While some of the requirements under MiFID II for pre-trade cost information and post-trade client reporting remain unclear, it is clear that MiFID II client reporting will likely require firms to alter their business processes and IT systems. As with many other aspects in connection with the MiFID II delay, institutions can't afford to wait for ESMA to fully define the regulation's client reporting obligations; firms need to start by altering their business processes and systems with the facts rather than waiting for each consultation and final legislation.
jlne.ws/2a2tBTZ
CFTC Releases Results of CBOE Futures Exchange Rule Enforcement Review
The National Law Review
On June 29, the Commodity Futures Trading Commission's Division of Market Oversight (DMO) released the results of its trade practice rule enforcement review (Review) of Chicago Board Options Exchange Futures Exchange, LLC (CFE). The review covered a one-year period from March 1, 2014, to February 28, 2015.
jlne.ws/2a2E55X
FIA warns Basel Committee leverage ratio will negatively impact client clearing
FIA Member Update
On July 6, FIA submitted a response to the Basel Committee on Banking Supervision's consultative document on revisions to the Basel III leverage ratio framework.
jlne.ws/2a2tIz2
| | | | | | Strategy | | | Options Trading Game Plan for Earnings and Elections
Tom White - The Ticker Tape
Summer is in full swing, and everyone seems to be in a better mood as longer days, warmer weather, and time at the beach bring a sense of calm happiness. Baseball games, road trips, cookouts, and another round of corporate earnings signal that summer is here.
Last quarter we wrote an article ahead of Q1 earnings season and discussed how to use risk-defined option strategies during earnings. We want to expand on this discussion and extend our views on earnings, volatility, the upcoming elections, and news-driven markets.
jlne.ws/29IaK4K
Using Options to Win During Market Chaos
Steve Sosnick - Barron's
In the shadow of Brexit, it's important to remember that both danger and opportunity accompany every market crisis. Astute traders can use options to minimize the danger and increase the opportunity.
jlne.ws/29z2dP8
Volatility Spikes: A Test of Mental Fortitude
Innealta Capital - ETF Trends
In June, the British European Union membership referendum (colloquially, the "Brexit" vote), created widespread uncertainty and ultimately resulted in significant moves across global financial markets. Investor demand for insurance, via the options market, reached levels not seen since the equity market trough of February 2016. Returns of "safe haven" and "risky" asset classes followed a traditional risk off behavior. Additionally, markets priced continued monetary policy support as the probability of FED rate hike in July fell from 35% to less than 5%. Such volatility spikes test the mental fortitude and investment thesis of every investor, regardless of experience level.
jlne.ws/2a2yKLY
Citigroup Backs Commodities for '17 in 'Especially Bullish' Call
Bloomberg
Forget Brexit, go for raw materials. Citigroup Inc. says that it's bullish on commodities including oil in 2017 as the impact of the U.K.'s vote to quit the European Union fades away, global growth chugs along and with markets rebalancing investors plow more cash into funds.
jlne.ws/29IsM6S
Is VIX Hedging Done Or About To Reload?
Peter Tchir - Forbes
I have seen what could potentially be a big shift in the pattern of UVXY and likely other VIX based ETPs.
jlne.ws/2a2FKIF
Trading Options In Google, Amazon and the VIX: Volume, Leverage and Mixed Motivation
Fred Oltarsh - Forbes
If you have been trading options in Google (GOOGL Alphabet A), Amazon (AMZN) and the CBOE Volatility Index (VIX) you are in good company. There are many participants each day. The VIX, however, is the landslide leader in the category of volume. This is not surprising. The lower the price of the trading vehicle, the more likely it would be to lead in volume, if all else was equal. In this case, however, the markets are not equal.
jlne.ws/29IeLG7
The Option Queen Newsletter
J.A. Schwarz
The votes are in and it is unanimous the insane asylums have released their inhabitants and they are on the loose. Shootings, riots, and craziness abounds. Brexit, Dallas, Louisiana and even Minnesota.....and yet, the stock market rallied on the robust "Jobs Report." We believe that as the May "Jobs Report" was sked so was June report, remember the Verizon's strike?
What we are faced with is a world where interest rates are plunging and investors are seeking yields where ever they can find them. Corporations are taking advantage of low rates and issuing gobs of debt. All this leads to a strong market environment until.....it fails. We are not saying that it will fail tomorrow but the retreat is on its way.
jlne.ws/1B5Z2pS
| | | | | | Education | | | Market Talk, Part 1: Words and Phrases to Avoid
Bob Lang - CBOE Options Hub
We hear so much definitive market talk from the financial media, and most of it is careless and quite useless. The best advice is to follow the market action and not the anecdotes and phrases that will put you in the wrong frame of mind. Discipline and hard work trump complacency and laziness, so turn off the noise and be at your best.
jlne.ws/2a2EzJf
The Relationship Between Delta And The Time Value Of Our Options
Alan Ellman - Investing.com
Covered call writers and put-sellers are always looking for an edge. Some may wonder which option Delta would make the best option-selling candidate. Intuitively or from experience we know that at-the-money strikes (Deltas near 0.50) generate the highest initial returns. I've stated that over-and-over again in my books and DVDs. Can this be demonstrated mathematically (look out folks, I'm at it again!)? Today's article will be an exercise, not a scientific study, to demonstrate the relationship between Delta and our time value initial profit generated when selling options. Our goal is to calculate the time value per unit of Delta for in-the-money, at-the-money and out-of-the-money strikes.
jlne.ws/2a2yhtc
| | | | | | Miscellaneous | | | Trading Places: Citadel Gets New CEO, Institutional Space Sees Several Hires
Jeff Patterson - Finance Magnates
Find out the latest executive moves of the following week from around the financial services industry.
jlne.ws/2a2xkko
****SD: In case you missed the big moves from last week.
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