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Lead Stories

Hedge Fund Bets Jump to 15-Month High on Bull Rally: Commodities
Tony C. Dreibus, BloombergBusinessweek
Hedge funds boosted bets on rising commodities to the highest in 15 months, driving prices into a bull market as the U.S. drought worsened and the Federal Reserve signaled it may take more steps to spur economic growth.
Money managers’ net-long position across 18 U.S. raw materials rose 10 percent to 1.32 million futures and options in the week ended Aug. 21, U.S. Commodity Futures Trading Commission data show. Holdings doubled in two months to the highest since May 2011. Bets on corn are the most bullish in 15 months amid the worst U.S. drought in 56 years, while wagers on gold rebounded and platinum more than doubled.
http://jlne.ws/PndVJ8

Europe stocks rise as Evans fuels stimulus hopes
Blaise Robinson, Reuters
European stocks inched higher on Monday, reversing early losses as comments from a top Federal Reserve official gave some support to those hoping for a fresh round of U.S. stimulus to prop up the economy.
Chicago Federal Reserve Bank President Charles Evans said in remarks prepared for delivery at the Hong Kong Bankers’ Club that the Fed should launch a fresh round of monetary stimulus immediately, buying bonds for as long as it takes to produce a steady decline in the jobless rate.
http://jlne.ws/PngH1e

Speculators Start Buying Metals Futures, Options Again – CFTC
Debbie Carlson, Forbes
A price rebound for metals across the board encouraged speculators to start to rebuild bullish positions in precious metals futures and options, according to U.S. government data released Friday.
All precious metals contracts traded on the Comex division of the New York Mercantile Exchange and the Nymex saw net long positions for speculators rise in both the legacy and disaggregated weekly commitment of traders reports. These were released by the U.S. Commodity Futures Trading Commission for the week ended Aug 21. Speculators’ net short positions in copper were reduced.
http://jlne.ws/Roxu7p

Gold options show investors bracing for Fed let-down
Amanda Cooper, CNBC
A surge in bearish gold options positions this week shows that numbers of investors are braced for a blow to expectations the Federal Reserve will act to foster growth – prospects that have set gold on course for its biggest weekly rise since early June.
Until the release of U.S. Fed minutes on Wednesday, the gold price had traded in its narrowest range in August in 2-1/2 years, strait-jacketed by uncertainty among investors over what the U.S. central bank would do to aid a patchy economic recovery.
http://jlne.ws/PndMFL

Investors Prefer Options to Structured Notes Amid Low Volatility
Kevin Dugan, BloombergBusinessweek
Investors are starting to buy options and swaps tied to stocks instead of structured notes that use the derivatives as declining volatility makes the contracts a more attractive purchase.
U.S. sales of equity-linked notes and reverse convertibles, high-yielding bank bonds that convert into stock if a company’s share price plunges, have dropped 16 percent this year to $17 billion.
http://jlne.ws/RowBvQ

Taiwan Dollar Climbs on China Stimulus Speculation; Bonds Steady
Andrea Wong, BloombergBusinessweek
Taiwan’s dollar gained on speculation China will take further steps to combat an economic slowdown. Government bonds were little changed.
http://jlne.ws/RoyAjI

Watching the VIX, what is it telling us?
Live Trading News
Watching the VIX, what is it telling us?
SVXY, UVXY, VIXY
On 6 August the VIX showed that a trade that was setting up. With the VIX at 15.18 Friday, that setup has s not triggered and VIX traders wait patiently for its signal.
http://jlne.ws/RowIYe

OptionMonster Daily Volatility Report with Jamie Tyrrell of Group1 Trading:

Exchanges

Is Chicago in CME’s future?
Lynne Marek, Crain’s Chicago Business
As CME Group Inc. ramps up its international expansion, the futures exchange is economizing in Chicago.
The contrast was evident this month as CME unveiled plans for a European exchange in London, even as 30 long-term Chicago employees took a company buyout.
The shifts are driven by two factors: First, CME must cut costs to match a decline in trading volumes prompted in part by scandals such as the MF Global collapse. Second, with the firm already dominating the industry in the U.S., its best opportunities for growth are overseas.
http://jlne.ws/PUTi9K

SEBI weighs plan to start exchange for corporate bonds, fixed income derivatives (India)
The Economic Times
Capital market regulator Securities and Exchange Board of India is examining a proposal by ICAP India – the subsidiary of the world’s largest inter-dealer broker ICAP plc – to set up an exchange for corporate bonds and fixed income derivatives.
The proposed trading platform intends to purely focus on the wholesale market where institutional clients like banks, mutual funds, insurance companies and primary dealers can directly trade.
http://jlne.ws/PneN0q

NSE to hold special trading session (India)
Press Release (Full Text)
The National Stock Exchange (NSE) will conduct a special trading session on September 8 in capital market and futures and options segments.
The exchange said pre-open trade would start at 11 hours and close at 11:15 hours, while normal trading session would happen between 11:15 and 12:45 hours.
http://jlne.ws/PneYsx

Technology

Easier Options Orders
Theresa W. Carey, Barron’s
OptionsXpress has added a nifty new order type to its All-In-One trade ticket that should be useful for traders. It’s called the Walk Limit, and it’s intended to help the trader work an option spread and get a better price. Joseph Vietri, optionsXpress’ CEO, explains that the aim is to facilitate multi-leg option spread orders and possibly save online brokerage customers some money.
http://jlne.ws/NRWyoi

Strategy

A Golden Opportunity to Trade Big Events
Use options on a gold ETF to profit from possible major moves by central bankers.
Steven M. Sears, Barron’s
Gold has awakened from its metallic slumber and taken ten strong steps in anticipation that bankers who are trying to stimulate the world economy will soon abuse major currencies.
Gold futures rallied more than 3% last week, to over $1670, for the active December contract, but the metal faces several critical tests in coming weeks that should create great price volatility.
http://jlne.ws/OFe4ZG

Even Calmer Waters Ahead for the VIX?
Tyler Craig, InvestorPlace
Despite the tendency of the financial market punditry at large to use the CBOE S&P 500 Volatility Index (VIX) as the authoritative gauge for implied volatility, it fails to capture market expectations beyond a 30-day window. Fortunately, volatility junkies have a variety of VIX futures contracts available that provide a more comprehensive view of volatility expectations over multiple months to come.
http://jlne.ws/Rowwbp

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