| November 28, 2016 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | What the options market tells you about Donald Trump
Myron Scholes and Alan Alankar - Financial Times
It's time to get back to normal. Years of ultra-low interest-rate policies by the US Federal Reserve have led to some head-scratching distortions, with US utilities commanding higher price-to-earnings ratios than high-growth Chinese tech companies and investors finding themselves in the bizarre position of paying governments to lend to them after yields on more than $11.7tn of sovereign debt dropped below zero.
bit.ly/2gCuXbC
****SD: And why would I listen to Myron Scholes? What has that guy ever done for options?
Move Over VIX, Pain Has a New King
Andy Mukherjee - Bloomberg
Rest in peace, VIX. You're no longer the fear gauge for global markets. The Bank for International Settlements has found a better barometer to capture the nervousness that starts as a slight reduction in global banks' leverage, is magnified by European lenders as a dollar squeeze in Asian supply chains, and reverberates around the world as a financial tightness felt by everyone. Everyone, except the Chicago Board Options Exchange's Volatility Index.
bloom.bg/2fthFkr
****SD: For a long time I feel like people quoted the VIX as a proxy for aggregate fear in the market without considering what comprises the calculation.
Italian referendum nerves push up euro implied volatility
Patrick Graham and Jemima Kelly - Reuters
The cost of hedging against swings in the euro's value over the coming week jumped by the most in months on Monday ahead of an Italian referendum that could prompt Prime Minister Matteo Renzi to resign. Options market pricing showed a surge in the cost of hedging against volatility in the euro's exchange rate to the safe-haven yen over the next seven days, for the first time covering the referendum on Sunday.
reut.rs/2goOJqA
How the 'Trump bump' to the U.S. economy could fall flat
David A. Levy - MarketWatch
Investors have scurried to figure out what to expect from both President-elect Donald Trump's administration and the next Congress, and they have settled, at least for now, on a mix of pro-growth, pro-profits, and pro-inflation measures. Deregulation will be pro-growth, they judge. Anticipated tax cuts will be pro-profits, as will infrastructure investment. Protectionism will be pro-inflation.
on.mktw.net/2ft9pRu
OPEC's Last Cut Shows Oil Market Could Get a Whole Lot Messier
Bloomberg
Anyone planning to trade the outcome of this week's OPEC meeting might consider the lessons of the group's last production cut. Then take a deep breath. In December 2008, as oil demand and prices slumped during the global financial crisis, the Organization of Petroleum Exporting Countries, announced a record output reduction. What was supposed to stabilize the market initially sowed more confusion as the group's statement bundled together previously announced supply curbs and omitted a breakdown of how much each member would cut -- details of which leaked out days later.
bloom.bg/2ftoDFW
Derivatives Trading Surges Post-Brexit
Infographic - TABB Forum
The result of the UK Referendum shocked the derivatives market, with volatility spiking in key FX, interest rate and equity index products. We look at the immediate impact Brexit had on derivatives volumes, looking at individual contracts and exchanges in the month of June 2016.
bit.ly/2fte8mb
VIX and the Holiday Season
Russell Rhoads - CBOE Options Hub
I'm currently spending the Thanksgiving holiday in Singapore talking VIX and other market related topics on behalf of CBOE and SGX. There is some downtime on this trip where I have time to think about important things such as what I'm thankful for and how VIX behaves during the period between Thanksgiving and New Years Day relative to the rest of the year.
bit.ly/2fthBAV
OptionsCity FIA Winner Enjoys Weekend with a McLaren
OptionsCity
Back in October, over 1000 FIA conference attendees entered the OptionsCity drawing for their chance to win a weekend with a McLaren. It was a fitting giveaway for OptionsCity, a trading software company driven by performance and innovation. The lucky winner drawn at random was Tony Feeney, an employee at Societe Generale. Well, we recently received an email back from Tony sharing his weekend experience with the McLaren. See below for his recap of the weekend. Congrats again Tony!
bit.ly/2ftsliU
****JB: When I first saw the car at FIA I thought they were giving away the car. This makes a lot more sense. Still pretty cool.
| | | | | | Exchanges | | | CME Group Announces Record Open Interest of 117 Million Contracts; Interest Rate Complex Hits 69.5 Million
Press Release - CME Group
CME Group, the world's leading and most diverse derivatives marketplace, announced it set a total open interest record of 116,999,368 on Nov. 23, 2016. The new record surpassed the previous open interest record of 116,427,935 contracts set on June 9, 2016.
Interest Rate open interest also hit a record of 69,493,548 contracts, surpassing the previous open interest record of 68,147,202 set on Nov. 22, 2016.
bit.ly/2ftmqdK
CHX Readies IEX-Style Speed Bump
John D'Antona - MarketsMedia
Imitation is said to be the most sincere form of flattery - and it holds true on Wall Street where the Chicago Stock Exchange is ready to introduce a speed bump mechanism into its marketplace - just like exchange operator IEX.
The proposal to adopt a Liquidity Taking Delay that seeks to introduce a delay of 350 microseconds for liquidity-taking orders before they are processed by the CHX order book. The LTAD is a direct response to recent declines in CHX volume and liquidity in the SPDR S&P 500 trust exchange-traded fund ("SPY").
bit.ly/2ftgiC8
EEX Registers First Trade In EUA Options
Press Release
The European Energy Exchange (EEX) has registered its first trade in EUA options. The trade was registered in the December 2016 expiry period with a volume of 250,000 EUAs. The trade was conducted by CEZ a.s. and another counterparty on 25th November and was registered through brokerage firm Evolution Markets Ltd.
Having launched in mid-October this year, the EUA options contracts are available for the current and the next eight December expiries.
bit.ly/2ftrsXK
| | | | | | Regulation & Enforcement | | | DRW set for court showdown with US derivatives regulator
Gregory Meyer - Financial Times
Don Wilson is a boldfaced name in derivatives markets, a place where many big traders prize anonymity. The head of DRW, one of the world's largest proprietary traders, speaks on expert panels and belonged to an advisory committee to the US regulator for futures, options and swaps.
on.ft.com/2fts8wc
Regulators charge culprits of 'largest market manipulation case in Singapore'
Hayley McDowell - The Trade
Regulatory and police authorities have charged a couple in what has been called the largest market manipulation case in Singapore's history.
Soh Chee Wen and Quah Su-Ling were found guilty of massive fraud to manipulate market shares between August 2012 and October 2013.
bit.ly/2ftfSf8
| | | | | | Strategy | | | Everything Goldman Sachs predicts for 2017 Â in one chart
Victor Reklaitis - MarketWatch
This year has been particularly bad for many in the predictions business, but that isn't stopping market forecasters from doing their thing. A team of Goldman Sachs analysts led by Charles Himmelberg has offered 2017 targets for a range of asset classes.
on.mktw.net/2ftfoFV
Metals and Mining: Buyers Transition to New Groups
Bob Lang - CBOE Options Hub
Over the past several years we have seen selling pressure intensify in metals and mining names as policy directives shifted away from this group. Not only was less money invested in coal, copper, materials and the like but costly regulations put some of these companies against the wall, and in many cases out of business totally. Stocks like Cliffs Natural, Freeport McMoran and US Steel are a shadow of their former selves. Once boasting robust stock prices and strong balance sheets, these and many others have been gasping for air, slicing costs and jobs in order to survive.
bit.ly/2ftntu8
BigTrends.com Weekly Market Outlook - Will The Rally Sputter Here?
Price Headley - CBOE Options Hub
The volume may not have been great behind the shortened trading week's gains, but a gain in a gain nonetheless. And, this one was particularly noteworthy in that all the major indices made their way into record high territory.... at a time when they weren't supposed to.
Can it last? That's the $64,000 question. From a momentum and technical perspective, the picture is bullish - yes, there's reason to expect more upside from here. But there is reason to believe the rally may sputter soon and possibly roll over to the downside. This week is going to be interesting.
bit.ly/2ftjspx
Why the next bull market begins ... now!
Shawn Langlois - MarketWatch
"Can the markets embrace good news?" That's the question Jeff Miller of the Dash of Insight blog expects to be rattling around the minds of Wall Street pundits as investors buckle down after the holiday break. By the looks of the packed economic calendar, there's plenty of business to get back to this week, with the November jobs report topping the list (see below). Positive data from that jobs front would certainly support our rosy call of the day.
on.mktw.net/2fteNE9
TRADING THE WEEK: Jobs Report and Fed Set Holiday Table
John D'Antona - MarkestMedia
Traders endured a holiday-shortened week which gave way to previous concerns about the state of the US economy and intentions of the Federal Reserve. Last week's data did little for traders but provide momentary bouts of volatility and sporadic trading opportunities on anything out of President-elect Trump's transition team. But traders told Markets Media that they remained focused on the upcoming and widely expected hike in short-term interest rates at its December 14th meeting.
bit.ly/2ft9x3o
A Top European Hedge Fund's Latest Bets
Eric Uhlfelder - Barron's
Michael Petry enjoyed his job in the late 1990s overseeing foreign-currency reserves at Danmarks Nationalbank, the Danish central bank in Copenhagen. "While ours is a small country of just five million people, managing currencies is the great equalizer, where Denmark can be just as important as Germany and the United Kingdom," says Petry. But the more he learned about foreign-exchange cross rates and derivatives trading, the more he realized the many things central bankers couldn't do
/goo.gl/WmRP7w
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
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| | | Jeff Bergstrom
Editor
| | | Lysiane Baudu
Editor
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Editor
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