| October 24, 2016 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | A Chicago Cubs Win for All the Ages
John Lothian
Love of the Chicago Cubs is a generational phenomenon and that was never clearer as when the Chicago Cubs claimed the National League pennant and advanced to the World Series for the first time in 71 years. The Cubs are going to the World Series! In what seems like a prayer, my father, who is in heaven, is smiling down on us about the Cubs win. He was a loyal Cubs fan until he passed away the week before the Cubs were in the playoffs back in 2003.
/goo.gl/ytQB1F
"Sure as God Made Green Apples" ~Harry Caray
JLN Staff
We report financial news but being located in Chicago and having an office filled with Cubs' baseball fans (and one Chicago White Sox fan...not sure how that happened) we would be remiss if we didn't say, "Go Cubbies!" They have not been in the World Series in 71 years and have not won one in 108 years but Harry Caray was right about the green apples that they'd get there eventually. They did it in style with a double play to start the game and a double play to end the game. Add in the Cleveland Indians who are second only to the Cubs when it comes to a World Series drought as their opponent (1945 vs 1947) and you have a World Series truly worth watching. One of our co-workers lives in Wrigleyville (where the Cubs' ballpark is) so she is not likely to get much sleep this week but at least our staff has a place to crash if we brave the crowds to watch the games near the ballpark. I am sure she would be thrilled to find her boss and/or co-workers passed out on her living room floor first thing in the morning.
***** Check out the Hamilton inspired music video about the Chicago Cubs. It is truly inspired.
CFTC's Massad Recaps 2016
JohnLothianNews.com
The futures industry's regulator had several initiatives in 2016 but the top items were tackling the issue of cybersecurity, margin and the upcoming finalization of automated trading rules.
On cybersecurity, the CFTC adopted rules for the exchanges, clearing houses, trading platforms and trade repositories that require more testing of platforms and systems to make them more secure.
"That's probably the biggest single threat to financial stability in our markets today," said Timothy Massad, chairman of the Commodity Futures Trading Commission, who spoke with John Lothian News at the FIA Expo 2016 in Chicago last week.
Watch the video »
A Tangled Web: Exploring The Explosive U.S. Growth Of Options On Futures
Spencer Doar - JLN
In 1982, the CME became the first exchange to offer options on futures products. That was nine years after the Chicago Board Options Exchange standardized the equity options market and five years after the CBOE were allowed to list puts. While options on futures, also called futures options (or, even better, OOFs), have a 34-year history, the period since the financial crisis marks a new era for the market amid continually shifting currents. In 2011, 500 million contracts were traded. In 2015, industry volumes hit 756 million contracts, a 51 percent increase. Do not be mistaken, the volumes of options on futures were already on the march upwards in the years prior to 2008. In 1999, 115 million contracts were traded compared to 584 million in 2008. But the current environment rekindled that growth.
/goo.gl/9ree8Z
****SD: In case you missed it last week.
| | | | | | Lead Stories | | | U.S. options market not very 'Trumped up' ahead of vote
Saqib Iqbal Ahmed - Reuters
Prospects that the presidential election will inject a hefty dose of volatility into U.S. stock markets are fading fast as Republican Donald Trump's victory odds lengthen. A reading of positioning data on options tied to the benchmark S&P 500 index shows little pickup in demand for contracts that would offer investors downside insurance in the event that stock prices take a major hit right after the Nov. 8 election.
reut.rs/2e45bLf
****SD: Not a point I've heard before in options-related election stories: if the Dems sweep into the House and Senate, that could be volatility inducing.
S&P 500 Skew Unwind Shows Complacency Over Clinton Win: Analysis
Tanvir Sandhu - Bloomberg
The U.S. election premium is evaporating from S&P 500 options. Even as the shock Brexit result stays fresh in investors' minds, SPX term structure is turning relatively smoother with skews declining as opinion polls show Clinton may triumph over Trump, Bloomberg strategist Tanvir Sandhu writes.
bloom.bg/2e47ON6
TD Ameritrade to buy Scottrade in two-step deal with TD Bank
Matt Scuffham - Reuters
Toronto-Dominion Bank (TD.TO) and TD Ameritrade (AMTD.O) are buying Scottrade Financial Services for $4 billion in a deal that will combine two of the biggest U.S. discount brokerages, the companies said on Monday. TD Ameritrade, the largest U.S. discount brokerage by trade executions, said it would pay $2.7 billion for Scottrade's brokerage business. Toronto-Dominion Bank, TD's largest shareholder, is acquiring Scottrade Bank for $1.3 billion in a deal that will expand its U.S. operations.
reut.rs/2e46XMx
****SD: Funny that this happens after just sitting in on an "Importance of Retail" panel at FIA Expo last week. TD was already well positioned for the next few years with 20 percent of DARTs coming from mobile devices and derivatives making up some 43 percent of total volumes.
The Time to Listen to Market Prophets? Not EVER!
Bob Lang - CBOE Options Hub
With so much uncertainty in the world most investors/traders get anxious and worried over losing money and start listening to market sages and so-called prophets. That is typical and quite natural, yet when the underwear starts getting tight and we begin to sweat because the markets are misbehaving, well we tend to reach for whatever (or, whomever) makes the most sense. To top the list of uncertainties include the upcoming election, which many are starting to believe is to be a Hillary Clinton win, and Fed policy (a December rate hike?) which is subject to change by the day.
/goo.gl/dc2LDd
Bundesbank Says High-Frequency Trading Can Enhance Volatility
Carolynn Look - Bloomberg
High-frequency trading has the potential to both increase market liquidity and remove it at times of higher volatility, a study by the Bundesbank has found.
The report, published Monday, studied granular data from Bund and DAX futures markets, the two most liquid German investment instruments in which HFT makes up a significant portion of trading activity.
bloom.bg/2e4a6f8
Markets Are Pricing in Gridlock - And That Could Be Good for Stocks
MoneyBeat - WSJ
Election Day is barely two weeks away, but investors are growing less worried that results will shake up markets
on.wsj.com/2e47NbM
Listen Up, Bond Market. Inflation Is Coming.
Marcus Ashworth - Bloomberg
>From Washington to Tokyo, the message is loud and clear. Unfortunately, a big swathe of investors aren't listening.
Central banks want steeper yield curves. They want inflation, and inflation is coming. Expect yields on long-term government bonds to rise relative to their shorter counterparts.
bloom.bg/2e48mSZ
Gold price: Hedge funds abandoning market at record pace
Frik Els - MINING.com
On Monday gold continued to trade sideways with December futures trading on the Comex market in New York exchanging hands at $1,265.90 an ounce in European trade, down $1.80 from Friday's close. Gold has been on the defensive since the start of October and is still down nearly $50 after falling to a four month low of $1,243 on October 7.
/goo.gl/6Svajj
| | | | | | Exchanges | | | Nasdaq upgrade raises market data questions
Nicole Bullock in New York and Philip Stafford - Financial Times
Nasdaq is set to roll out a major upgrade to a controversial piece of US stock market infrastructure on Monday, in a move that is again raising questions about the speed and cost of trading data in the world's largest equity market. The US exchanges operator has improved its Securities Information Processor (SIP), the system that governs the collection and distribution of market data, and used by many investors and regulators as their "view" of the market.
on.ft.com/2e47FZX
Hong Kong bourse to introduce volatility controls for derivatives market
Michelle Price - Reuters
Hong Kong Exchanges and Clearing (HKEX) said on Monday it plans to extend new volatility controls to its derivatives market on Nov. 14.
reut.rs/2e4bgHA
| | | | | | Regulation & Enforcement | | | Regulators taking another look at costs of Wall St safety rule
Patrick Rucker and Jonathan Spicer - Reuters
Oct 24 Just as memories of the financial crisis are fading and tough new banking regulations are beginning to bite, some current and former regulators wonder whether one of the rules is too much of a burden for markets and taxpayers.
At issue is the requirement that the largest U.S. banks set aside $6 of capital for every $100 of assets on their books - double what they had to hold before.
reut.rs/2e4cMt5
| | | | | | Strategy | | | Admiral SPO Puts his Mark on Microsoft
Fari Hamzei - CBOE Options Hub
Maury, Maury, Maury!
Admiral SPO Puts his Mark on Microsoft.
Knowing Maury's thirst for shekels and his motto of "the best things in life are FREE" the Admiral launched a timely pre-earnings trade, a call time back spread.
***SR: For those of you who are not acquainted with a "Maury" trade or the Admiral, here's a quick explainer.
Doubling Down On VIX
Peter Tchir - Forbes
In the past few days investors have reverted to 'doubling' down on VIX related ETFs and ETNs. UVXY, TVIX and VXX all are at or near record highs in terms of shares outstanding. Could this be in anticipation of VIX rising in October of Election Years which is typical (here).
/goo.gl/zsiV4Z
| | | | | | Education | | | One of the worst things you can do in this business
The Reformed Broker
Investing is hard. This is partly because there is no bedrock to stand upon. Historical relationships between valuation and prices are not firm. Nor are the correlations between Thing A and Thing B. The ground below our feet is constantly shifting and only the open-minded can make the mental leaps from one regime to the next. Those who choose their one or two Most Important Things to follow religiously and base their views upon (CAPE Ratio, Fed Model, Seasonality, Economic Outlook) are going to find themselves consistently run over in The Street.
/goo.gl/rNWGnj
Gold Futures, Straddles, and Strangles: Options for Consolidation Moves
The Ticker Tape - TD Ameritrade
With all the hoopla of the upcoming U.S. presidential election, worries over the economy, and the possibility of rising interest rates, it's not a surprise to see gold moving back and forth as it has been over the past several months. For investors who use options, profits may be possible without having to correctly guess the direction of the next move.
/goo.gl/14iCCJ
| | | | | | Miscellaneous | | | Climate Change May Trigger Next Financial Crisis, Fisher Says
Emily Cadman - Bloomberg
Climate change could spark the world's next financial crisis, according to Paul Fisher, who retired this year as deputy head of the Bank of England body which supervises the country's banks. "It is potentially a systemic risk," Fisher said Monday in an interview in Sydney. A sudden repricing of assets as a result of climate change "could be the trigger for the next financial crisis," he added.
bloom.bg/2e4i5J6
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