50 Cent Isn’t the Only One Seeking Big Protection in VIX Options
Luke Kawa – Bloomberg
’50 Cent’ has company in his quest to protect from market turmoil.
Even as the CBOE Volatility Index sits at historically low levels below 10, an institutional investor on Monday bought 100,000 lots of July VIX call options with a strike price of 25. He paid 12 cents a pop. The same person simultaneously sold an equal amount of calls with a strike price of 30 for 7 cents each. The same day, the trader nicknamed 50 cent loaded up on protection if the VIX heads to 25.
****SD: July is the month for fireworks.
Markets Have Nothing Left to Fear But Fearlessness Itself
Garfield Clinton Reynolds and Adam Haigh – Bloomberg
Volatility gauges have collapsed as policy uncertainty spikes; Machines, ETFs, central banks, ‘old normal’ among theories
Greed seems to be running the show in global markets. Fear has fled, and that may be the biggest risk of all.
****SD: Would FDR have been a good trader?
DERIVATIVES-Factors make multi-asset shift
Helen Bartholomew – Reuters
Multi-asset risk factor strategies have dramatically outperformed traditional investments through the volatile macro environment of the last 12 months, accelerating expansion of the factor-based approach beyond its equity roots.
Attempts to replicate hedge fund returns by allocating to alternative sources of beta, such as momentum, value, volatility and quality, has become almost mainstream in equity investments since Danish pension fund PKA applied the approach to its entire equity portfolio in 2012.
Russia’s Russneft looking to clinch oil hedging deal with VTB
Russneft, Russia’s mid-sized oil producer, is looking to clinch an oil hedging deal with VTB, Russia’s second biggest bank, Russneft Senior Vice President Olga Prozorovskaya said on Tuesday.
****SD: Not to be confused with the state-run oil company Rosneft, which, along with many other companies across Europe, is having a bad day. For more see – New Cyberattack Spreads Across Europe, Hits Rosneft, Maersk
Iceland scales back on trading in currency derivatives
Iceland’s central bank said on Monday it would scale back some exemptions to its Foreign Exchange Act for derivatives trading, stepping up efforts to stabilize its krona currency.
Exchanges and Clearing
CBOE Holdings Announces Pricing of Senior Notes Offering
CBOE Holdings, Inc. announced today that it priced an underwritten public offering of $300 million of its 1.950% Senior Notes due 2019. The offering is expected to close on June 29, 2017, subject to the satisfaction of customary closing conditions.
Nasdaq’s Trekkie CEO Wants To Modernize Wall Street With Blockchain, VR, And Anything Else That Sticks
Ainsley Harrislong – Fast Company
It’s Friday morning at Nasdaq headquarters, and that means demo time. Adena Friedman, a Nasdaq veteran who became CEO of the exchange in January, breezes into a 30th-floor conference room overlooking the neon thrum of Times Square. “These are always the fun meetings,” she says, taking a seat at the center of the table alongside her CTO and some of his top developers.
****SD: Black belt AND a Trekkie? Every time there is a Friedman story I learn something new.
CBOE Holdings Announces Date of Second-Quarter 2017 Earnings Release and Conference Call
CBOE Holdings, Inc. will announce its financial results for the second quarter of 2017 before the market opens on Friday, August 4, 2017. A conference call with remarks by the company’s senior management will begin at 7:30 a.m. Central Time (CT), 8:30 a.m. Eastern Time (ET).
IEX: There is ‘clear and significant harm to investors’
Matt Turner – Business Insider
Some of the biggest players in trading are at the House Financial Services Committee’s US Equity Market Structure hearing on Tuesday, and things are likely to get heated.
****SD: Another BI story from the House Financial Services Committee’s meeting – Ultra-high-priced stocks are hurting investors. Also, SIFMA Testimony At House Subcommittee Market Structure Hearing
ICE files to increase oversight of electronic trading
Global Investor Group
The Intercontinental Exchange (ICE) has filed with the US Commodity Futures Trading Commission (CFTC) to require ICE participants to increase the oversight of their agents and tighten-up its rules for automated trading systems.
SGX To Report FY2017 Results On 27 July
Nasdaq Holds Second Quarter 2017 Investor Conference Call (July 26)
LSE veteran and Group strategy chief departs
Hayley McDowell – The Trade
The London Stock Exchange (LSE) has confirmed its chief strategy officer has decided to leave his position after more than 16 years with the exchange.
David Lester was named head of LSE’s corporate strategy in 2011 and was responsible for the Group’s mergers and acquisitions and development of core growth initiatives.
****SD: Yesterday, news broke that Ali Hackett, LCH’s global head of sales, resigned.
Soros Fund Management: Robert Soros To Step Down As Firm Cuts Macro
Mark Melin – ValueWalk
Just like a great athlete makes playing sport looks easy, so, too can investment managers make great fundamental predictions and resulting profits look easy. George Soros making his historic bet against the British pound, the trade that “broke the Bank of England,” was one such amazing feat. What made him stand out, however, was his ability to repeat macro prediction success throughout his career.
****SD: Dawn Fitzpatrick is the CIO of Soros Fund Management and has an options background. She gets a mention in the above piece — for more on her, check out this longform from the “failing” NYT in April.
Regulation & Enforcement
Wall Street regulators make budget pitches to Congress
Sarah N. Lynch – Reuters
Wall Street’s top two U.S. regulators will urge Congress on Tuesday to approve budgets for fiscal 2018 that are at or above their current funding levels.
New era for financial regulation as top rulemakers step down
Caroline Binham – Financial Times
Ever since the financial crisis, the world’s policymakers have focused on eliminating the problem of banks that are “too big to fail”. But global regulation is set to take a new direction as top international rulemakers step down and the post-crisis appetite for reform fades away.
How Electronic Futures Trading Went Global
Open Markets/CME Group
Electronic trading systems have changed the face of the exchange-traded derivatives industry on a scale that was virtually unimaginable 20 years ago. The advantages of electronic trading include ease of access from virtually anywhere worldwide almost 24 hours a day, speed, efficiency and lower costs.
****JB: An interesting look at the history of CME Globex.
Lack of oversight a key challenge for blockchain: Europex
Lack of oversight in blockchains may be perceived as an advantage but it comes with risks, according to energy exchange association Europex in a new report, Our Vision of an Evolving Energy Sector.
Enthusiasts believe that the technology “has the potential to turn the financial sector upside down” by using decentralized networks instead of central intermediaries to manage transactions and guarantee data security, the report says.
****SD: Best part of blockchain: it’s decentralized. Worst part of blockchain: it’s decentralized.
Anxious Investors Try to Hedge Against a Big Selloff, Even as Good Times Roll
Ira Iosebashvili, WSJ via Fox Business
Stock volatility is near an all-time low and corporate profits have bounced back from a year ago, but investors are increasingly moving to protect themselves from big swings in financial markets.
****SD: Article also mentions there are of course those selling puts on the major indices looking to ride the good times. CNBC today also had Here’s how one trader is cashing in on the slow summer markets, which was pretty much an “I’m selling put spreads on the S&P” story. But, as has been mentioned time and time again, options selling programs in periods of extremely depressed volatility can bite ya in the behind in a blink and, as certain quants have pointed out, could potentially exacerbate a market shock especially in an increasingly automated environment. If the rote phrase is “picking up pennies in front of a steamroller,” then what is this? Picking up Indonesian rupiahs in front of a rampaging Godzilla? (And yes, I did have to look up a currency worth less than a cent. Don’t think I’m that versed in EM currencies.)
3 Ways To Trade Volatility
Tautvydas Marciulaitis – Seeking Alpha
Everyone knows that for quite some time now we’ve been living in low volatility environment and that it is unprecedented (please read this great peace about it here on SA). VIX is at levels seen only during the years before the Great Recession of 2008. Thus more or less everyone agrees that such situation should not last and in foreseeable future VIX will go up and markets will crash. So how do we play this out ?
****SD: Check out the last third.
Keep calm and carry trade in summer FX lull
Michael Hunter – Financial Times
Are the dog days of summer arriving in the currency market, and if so, how far will investors have to go to find some action?
Research from MUFG describes “a lack of conviction” among traders over the direction of developed world currencies, with options data “indicating a reversion back toward balance” and “abnormally low volatility” for G10 currencies.
EU fines Google record $2.7 billion in first antitrust case
Foo Yun Chee – Reuters
EU antitrust regulators hit Alphabet (GOOGL.O) unit Google with a record 2.42-billion-euro ($2.7 billion) fine on Tuesday, taking a tough line in the first of three investigations into the company’s dominance in searches and smartphones.
****SD: Google’s response from their blog – The European Commission decision on online shopping: the other side of the story
MSCI Already Talking About Adding More Chinese Stocks
Gregor Stuart Hunter – WSJ
Less than a week after its landmark decision to include Chinese stocks in its key benchmarks, index provider MSCI Inc. is considering nearly doubling the number of stocks it admits.
****SD: Could add 195 to the announced 222 companies. Also see the South China Morning Post’s MSCI says Chinese regulator mulls over raising Stock Connects’ daily quotas
A weekend in Texas with ZeroHedge readers, Part 1
Alexandra Scaggs – Financial Times
Just travelling from New York to Marfa is an initiation into the disorienting scale of Texas space — a five-hour flight to Phoenix, one-hour flight to El Paso and three-hour drive to Marfa, with three time-zone changes along the way.
I made the trek last weekend to join readers of the conspiracy-minded financial blog ZeroHedge. It wasn’t an official blog event, as we were repeatedly told by its organiser, who writes for the blog under the name hedgeless_horseman. His posts announcing the ZeroHedge Live Fight Club and Symposium initially provoked some worry among left-leaning residents of Marfa, a roughly 2000-person “hipster paradise” and hub of contemporary art in the Chihuahuan Desert.
****SD: Save this for a train ride or something. I’m looking forward to Part 2 which is about conspiracy theories.