| February 20, 2018 | | | |  | Spencer Doar
Associate Editor
John Lothian News | |
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| | | | Observations & Insight | | | 
The Spread - Week of 2/12 - 2/16
JohnLothianNews.com
Manipulating, gaming, rigging - that's the nature of VIX talk this week. But before we get to those allegations in this week's options recap, we cover a few other stories that didn't get as much press.
Watch the video here »
| | | | | | Lead Stories | | | The age of uncertainty: chaos theorist Nassim Nicholas Taleb reveals how to survive the Trump era
Josh Glancy - The Sunday Times
From reading his books, I expected Nassim Nicholas Taleb to be angry, obnoxious and vitriolic. I was anticipating a man who would preach endlessly about how stupid everyone else is and how brilliant his ideas are. Someone who would flaunt his habit of making eerily precise speculations about the world and raking in millions of dollars in the process.
That's exactly who I got. And yet I liked Taleb from the moment he turned up to tea at a New York hotel, looking like a hench Salman Rushdie, sporting a Lenin beard, Steve Jobs black poloneck and furry hat to protect him from the chill Atlantic wind gusting down the Manhattan canyons.
/goo.gl/VRaZhC
****SD: A lot to digest in here. At one point the piece gets to a quick hitter list of things Taleb dislikes - TED Talks, Goldman Sachs, FiveThirtyEight, Davos, Harvard Business School, etc. It's a fun piece if you can get past some of Glancy's biases and the fierceness of Taleb's criticisms. Here's a Taleb quote on expertise - "'It's macro versus micro,' he says. 'You can be an expert at making goulash, but if you're an expert at, say, predicting how the British economy would respond to leaving the European Union, then you're probably a BS vendor.'"
Temenos in talks to buy British trading software company Fidessa
Noor Zainab Hussain - Reuters
Swiss banking software supplier Temenos (TEMN.S) is in talks to buy Fidessa Group (FDSA.L) for about 1.4 billion pounds ($1.96 billion), it said on Tuesday, to add the British company's equities-trading technology to its portfolio.
reut.rs/2EIcpSt
It Is Too Soon To Declare Victory In The War On VIX
Peter Tchir - Forbes
Before delving into whether VIX is returning to 'normal' or not, it is important to accept that whether investors like it or not, VIX has played a crucial role in the stock market sell-off AND the rebound.
bit.ly/2EDZxww
Lessons from the crash of short volatility ETPs
Artur Sepp Research Blog
Exchange traded products with the short exposure to the implied volatility of the S&P 500 index have been proliferating prior to "Volatility Black Monday" on the 5th of February 2018. To investigate the crash of short volatility products, I will analyse the intraday risk of these products to steep intraday declines in the S&P 500 index. As a result, I will demonstrate that these products have been poorly designed from the beginning having too strong sensitivity to a margin call on a short notice. In fact, I estimate that the empirical probability of such a margin call has been high.
bit.ly/2EDiGyB
Hedge funds lighten bullish positions in oil
John Kemp - Reuters
Petroleum markets were hit by a heavy bout of profit-taking in the second week of February as hedge funds liquidated some of the record long positions they accumulated over the previous seven months.
Hedge funds and other money managers cut their combined net long position in the six most important petroleum futures and options contracts by the equivalent of 152 million barrels in the week to Feb. 13.
reut.rs/2EFCRMi
Recession or No Recession?
Matt Moran - Cboe
The Cboe S&P 500 Putwrite Index (PUT) is designed to reflect a cash-secured put-writing strategy. The PUT strategy is designed to sell a sequence of one-month, at-the-money, S&P 500 (SPX) Index puts and invest cash at one- and three-month Treasury bill rates. The number of puts sold is limited so that the amount held in Treasury Bills can finance the loss from final settlement of the SPX puts.
In recent years the PUT Index and the cash-secured put-write strategy have gained more interest from and acceptance by fund managers.
bit.ly/2EDppZC
Interactive Brokers replies to customers' claims about faulty management of portfolio margin accounts
Maria Nikolova - FinanceFeeds
According to the broker, the complaint should be dismissed as it rests on the false legal premise that ETNs the plaintiffs traded are ineligible for portfolio margin treatment.
bit.ly/2FggQVw
| | | | | | Exchanges and Clearing | | | Why MSCI's index call is bad
The Hindu Business Line
The threat to reduce India's weight after the exchanges decided to cut off market data needs to be called for the bluff that it is
The three Indian stock exchanges, the BSE, NSE and the MSEI, stirred a hornet's nest last week when they decided to stop providing market data to enable trading on foreign exchanges and platforms. While the reaction of many global institutions was conciliatory, MSCI Inc, the global index provider, made the strongest comment against the move.
bit.ly/2FgPvCP
Singapore Exchange to launch new Indian derivatives before NSE deal ends
Reuters
Singapore Exchange Ltd (SGX) said on Monday it will launch successor products to its flagship Indian equity index derivatives before the bourse's licence agreement with the National Stock Exchange of India (NSE) expires in August 2018.
reut.rs/2EDk7wZ
****SD: SGX release.
NSE gets nod for introducing cross currency derivatives
Times of India
Markets regulator SEBI (Securities and Exchange Board of India) has given the National Stock Exchange (NSE) approval for introducing cross currency derivatives. The NSE can introduce cross currency derivatives (future and options) on following Euro-US dollar, Pound Sterling-US dollar and Japanese Yen-US dollar.
bit.ly/2Fht9B8
Nasdaq Dubai launches Abu Dhabi, Dubai equity index futures
Stanley Carvalho - Reuters
In a move that could attract fresh money to the United Arab Emirates' equity markets, the Nasdaq Dubai exchange launched futures contracts on Sunday covering the main indexes of the country's two main stock markets in Abu Dhabi and Dubai.
reut.rs/2EGtn3J
****SD: Some suggested/expected options launch dates included in this story.
Euronext publishes Full Year 2017 Results
Euronext
bit.ly/2FcIIK8
| | | | | | Strategy | | | Stock Market Speed is Like Never Before
Bob Lang - Cboe Blog
A major rally this week off the lows of a 10% stock market correction were in order this past week. It certainly had many dizzy from the rollercoaster ride that we have all been on, something very different than what we saw previously. The enormous move in volatility came at such a breakneck speed that if you blinked, you may have missed it.
bit.ly/2EE3GAt
In Options Trading, Rule of 16 Helps Investors Figure What to Do
Steven Sears - Barron's (SUBSCRIPTION)
Uncertainty has returned, after many years of tame equity market behavior.
Even though stock indexes have rebounded from their recent pyrotechnics, options volatility remains elevated. It's a sign that the options market is taking a Ronald Reaganesque "trust, but verify," stance toward equities.
bit.ly/2EGQyuD
There's a surefire strategy to use after stock market volatility soars
Joe Ciolli - Business Insider (SUBSCRIPTION)
...BNP Paribas argues that there was a profitable silver lining to the implosion  one that often presents itself following periods of considerable market turbulence. And the firm is here to help you make money using it.
read.bi/2EElD1P
Buy Volatility On Volatility And Sell Volatility
Thomas Novak - Seeking Alpha
The current VIX forward curve is flat with spot VIX at 19.46:So what? Most understand the slope of VIX futures to indicate how they are likely to perform. Positive slopes are seen as "contango" and associated with negative performance and "backwardation" is the opposite situation.
bit.ly/2EE1yIZ
| | | | | | Education | | | Options Expiration: Risks, Definitions, Checklist
Peter Klink - The Ticker Tape
In the early days of options tradingÂtwo or three decades agoÂfor market makers in the option trading pits in Chicago and other financial centers, there was one day a month in which attendance was virtually mandatory: option expiration day. Volume was usually heavy, and the potential for volatility was ever-present. In short, trading options on expiration day was seen as a time of opportunity and risk.
bit.ly/2EED8zc
What Investors Should Know About VIX
Jeff Miller, Seeking Alpha
In the aftermath of the recent market correction, there is a lot of news about the VIX, popularly known as the market's "fear gauge." I update the VIX along with actual market volatility each week in my WTWA series. Let's take a deeper look at this much-misunderstood indicator.
bit.ly/2FgrlIz
| | | | | | Miscellaneous | | | Price war between banks could offset benefits of volatility
Laura Noonan - Financial Times (SUBSCRIPTION)
A looming price war between the world's biggest investment banks could erase the revenue rebound promised by a recent surge in market volatility, research group Coalition has warned.
on.ft.com/2EG4S6C
Rand's 'Ramaphosa Rally' in Doubt
Colleen Goko - Bloomberg
Is the party over for the rand? South Africa's currency reached a three-year high after Cyril Ramaphosa was sworn in as head of state on Feb. 15, fueling optimism among investors that management of South Africa's economy will improve. Benchmark bond yields fell to levels last seen in 2013, while stocks had their best week in more than eight years. With the rand paring some of its advance this week, traders are divided about whether there's scope for further gains.
/bloom.bg/2FkieXq
Global Sigma captures February's long-vol trade
Bailey McCann - Opalesque
Florida-based Global Sigma rode February's volatility to new highs. The firm's AGSF strategy is up +2.8 percent through February 16 and +4.2 percent YTD and its Vol/Arb program is up +14 percent through February 16 and 19.6 percent YTD.
bit.ly/2Fih92b
Three Leading Economists on What to Look For in 2018
Blu Putnam and KT Arasu - CME Group OpenMarkets
How will the U.S. economy fare in 2018? It's a question foremost on the minds of investors trying to chart a course through a year that has already seen stock market dramatics and oil prices surge well above $60 a barrel.
The question was posed at the Chicago Executives' Club's 38th Annual Economic Outlook forum recently to three notable economists, including Arthur Laffer, of Reaganomics and supply-side fame, who holds that lower tax rates can raise tax revenues and accelerate growth. Also on stage were Diane Swonk, chief economist at Grant Thornton LLP, and Dr. Bob Froehlich, chairman of First Capital Investment Corporation and FC Global Realty. The panel of experts was moderated by nationally syndicated columnist Terry Savage.
bit.ly/2FkqaIc
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