| July 24, 2017 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Is Canada's ETF growth sustainable?
Wealth Professional - Joe Rosengarten
Canada's ETF industry continues to break records. In June, Canadian ETFs attracted more than $3 billion in new money for the second straight month, but can that growth be sustained and what are some of the key drivers behind the record-breaking adoption in exchange traded funds?
jlne.ws/2vSLuOW
****SD: On July 20, TSX announced it had hit 500 ETFs listed  58 of those have options on MX. ADV in ETF options has been in the 40k-50k range for 2016/17. From 2009 to 2014 ADV was stuck under 20k contracts.
Canada's ETF options volumes are extremely concentrated in a few names, more so than even in the U.S. The iShares S&P/TSX 60 Index ETF (XIU) is the elephant in a pretty small room  January through June, XIU traded 4,047,503 contracts. The next most-traded in that six month period? The iShares S&P/TSX Capped Energy Index ETF with 534,881 contracts. It falls off pretty quickly after that. Once you get to the seventh most-traded, you're already under 50k contracts for the first six months of the year.
For some U.S. context, the Financial Select Sector SPDR Fund (XLF) traded more than 140k contracts last Friday alone. (1.44 put-to-call ratio if you're wondering.) See page 3 of this PDF link for more on Canadian ETF options. One other thing to keep in mind about options trading in Canada  participants don't need to fret about a fractured market structure.
| | | | | | Lead Stories | | | Mystery Bond Trader Nets $10 Million on Treasury Strangle Gamble
Edward Bolingbroke and Brian Chappatta - Bloomberg
The unknown bond trader who placed a potentially record wager in the Treasury options market may have just netted a $10 million profit.
The $10 million worth of put and call options on 10-year Treasury futures that the trader purchased on July 11 expired Friday at 3 p.m. in New York. At expiry, the benchmark 10-year yield was about 2.23 percent, down about 15 basis points from when the so-called strangle trade was initiated. This kind of position gains value if there's a major swing in prices in either direction. Futures prices rose to 126-10, representing profit of about $10 million for whomever made the bet, assuming they didn't pare the position as it turned profitable.
jlne.ws/2tubiQJ
Mystery trader's massive bet on stock market going crazy by October
Joe Ciolli - Business Insider
50 Cent has some competition.
That's right, there's another volatility vigilante making bets on increased stock-market price swings, and he's going bigger than the recently unmasked 50 Cent ever has.
The mystery trader is making a massive bet that the CBOE Volatility Index  or VIX  will surge from its near-record lows. If successful, it would yield a $262 million payout, according to a person familiar with the trade.
jlne.ws/2tDHlS9
****SD: Nothing 'crazy' about getting past 15 for the VIX.
2017 is a Record-Breaking Year for Both SKEW-Over-145 and VIX-Under-10 Values
Matt Moran - VIX Views
In recent weeks several news articles have noted that the CBOE Volatility Index (VIX) dipped below 10, and have asked if there is an unusual amount of complacency in the markets. The VIX Index closed below 10 on seven straight trading days (an all-time record) from July 13 to July 21. Recent headlines stated (1) "Too calm? Wall Street volatility collapses to lowest since 1993" (by CNBC), and (2) "Dip in volatility stirs warnings about too much complacency" (by Pensions & Investments).
jlne.ws/2vTigj8
Why VIX 'Acceleration Events' And Extreme Short Interest Signal "Clear Path To Uglier Scenarios"
Peter Tchir, Brean Capital via Zero Hedge
We take a deeper dive into the strange world of VIX ETFs and ETNs. We take a quick look at the incredible short interest in both the long VIX products and the short VIX products. This massive short interest in both long and short products seems unique to the VIX world (it reflects a re-balancing trading strategy that works in the VIX space because of the high volatility of the VIX products) (VIX ETFs seem to run 5 to 10 times the realized volatility of the S&P 500).
jlne.ws/2vSY5So
Market Performance Post QE
Bob Lang - CBOE Options Hub
Many market cynics of the quantitative easing (QE) program could not wait to pounce on the negatives of such a system. When the Fed implemented a few of these programs following the worst financial crisis since the Great Depression, many were dumbfounded and ridiculed the Fed for shoring up the banks and thus the stock market. Not only bringing rates down to zero but juicing up the bond market by adding what seemed to be unlimited bond purchases to their portfolio.
jlne.ws/2vTeDJI
How High Can VIX Go?
Peter Tchir - Forbes
As VIX closed at 9.36 on Friday, just above its all-time low closing of 9.31 back on December 22, 1993 most people are asking how low VIX can go? While that is a good question, it is ignoring the possibility of VIX spiking higher (and dragging stocks down significantly).
jlne.ws/2vTjCdE
| | | | | | Regulation & Enforcement | | | U.S. to drop criminal charges in 'London Whale' case
Jonathan Stempel - Reuters
U.S. prosecutors have decided to drop criminal charges against two former JPMorgan Chase & Co (JPM.N) derivatives traders implicated in the "London Whale" trading scandal that caused $6.2 billion of losses in 2012.
In seeking the dismissal of charges against Javier Martin-Artajo and Julien Grout, the Department of Justice said it "no longer believes that it can rely on the testimony" of Bruno Iksil, a cooperating witness who had been dubbed the London Whale, based on recent statements he made that hurt the case.
jlne.ws/2vSVWpP
Pa. slams broker with record fine for failure to track derivative sales
Joseph N. DiStefano - Philly.com
The Pennsylvania Department of Banking and Securities has fined Newbridge Securities of Boca Raton, Fla., a state-record $499,000 for failing to "maintain a reasonable system for applying and enforcing written procedures" for the sale of derivative securities by the firm's agent in Pennsylvania from 2012 to 2016. The firm has consented to the fine, without admitting wrongdoing.
jlne.ws/2vSAIbl
How not to approach FinTech regulation
Joshua Satten - The Trade
There's a distinct lack of detail or examination of the current proof-of-concepts and a real lack of nuance around what is still a fairly nascent, yet comprehensive, technology.
jlne.ws/2vTb9XH
| | | | | | Strategy | | | Strong Growth in Volume for Mini-SPX (XSP) Options
Matt Moran - CBOE Options Hub
A portfolio manager recently called me to discuss Mini-SPX (ticker XSP) options, and told me he is trading the XSP options and he liked several features about the XSP options, including the "no-early-call-away" feature, the tax treatment, the contract size, and the fact that the XSP options prices appeared to track pretty well the prices of the larger-sized options on the S&P 500 Index (ticker SPX).
jlne.ws/2vTc36w
EQDerivatives: ?VIX/V2X Trades Remain Attractive, Despite Recent Decrease
Eurex Exchange
Despite the poor performance of the CBOE Volatility Index and Euro STOXX 50 Volatility Index spread strategy over the last year, its cost remains attractive and its performance could pick up soon, according to market participants.
jlne.ws/2vSUbJ2
| | | | | | Education | | | Using ETFs for crash protection: a look at the VIX 'fear index'
Oliver Smith - IG UK
The VIX, or volatility index, gets a lot of media coverage as a barometer for investor sentiment. But what is the VIX, and can you actually trade it? Here we explain how it works and why investors wanting to protect their portfolios against falling markets should tread carefully.
jlne.ws/2vTgnCM
| | | | | | Miscellaneous | | | Pepper: NCDEX, MCX look to revive pepper futures trading
Economic Times
Despite a decline in production in the past couple of years, two major commodity exchanges are looking to revive futures trading in black pepper.
jlne.ws/2vSYELG
****SD: Different asset classes are fun. I will direct readers to a cool little story we had last Thursday from the New Zealand Herald about the evolution of dairy derivatives.
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