In copper options debut, Shanghai sets challenge to New York, London
Josephine Mason – Reuters
China’s top state copper companies threw their weight behind Shanghai’s first copper options on Friday, with early turnover trouncing its New York rival and raising a challenge to the 141-year-old London bourse in the $270 billion global market.
****SD: Pretty stellar first day as far as product launches go.
A New Understanding of October Volatility
Steven Sears – OCCAM
October is more than just a seasonal hobgoblin that pundits and strategists trot out each year like some Halloween ghoul to try to scare investors.
A recent Goldman Sachs study found that October, traditionally the month of historical corrections, is actually 25% more volatile than other months. The bank’s strategists believe this increase in realized volatility – a factor in the options market that measures the historical volatility of how stocks have behaved in the past – reflects the pressure management teams feel to satisfy full-year expectations, and for institutional investors to navigate the final earnings season of the year.
****SD: “Since 1928, October’s realized volatility has been 19 on the Standard & Poor’s 500 Index versus 15 for other months, Goldman’s options strategists, led by John Marshall, found in their study. This elevated volatility appeared in each major index and sector over the past 30 years, and also 60 sub-sectors.” As Sears notes, it is pretty cool Goldman was able to dig this far back, as options analysis frequently is limited by a lack of available historical data.
Think Marijuana Stocks Are Crazy? The Options Are Insane
Gunjan Banerji – Barron’s
Options investors relish volatility. But they should think twice before betting on marijuana stocks, which have recorded explosive moves this week.
Traders flocked to medical-marijuana producer Tilray (TLRY)—and to options bets on the stock—after the company won approval from the Drug Enforcement Administration to import a cannabis product drug into the U.S. for a clinical trial.
****SD: Irrational exuberance isn’t crazy. Bloomberg has Pot Frenzy Has Options Traders Piling In
Triumph of the Market Pessimists; A ‘Black Swan’ fund that has managed to make money in the great bull market is taking advantage of what it sees as overvaluation and investors’ complacency to reap a far bigger bonanza
Spencer Jakab – WSJ (SUBSCRIPTION)
The 10th anniversary of the financial crisis is a natural time to fret about the next bust, but betting against the market is usually a loser’s game. Or is it?
Record stock prices, bubbling trade wars, Donald Trump’s legal peril and sputtering emerging markets give some teeth to fears of another market rout. So did a host of mostly forgotten crises – Brexit, the fiscal cliff, the taper tantrum – that turned out to be great buying opportunities. The S&P 500 has returned over 200% since the day Lehman Brothers went bust – more fodder for the investing classic “Triumph of the Optimists” that underlines the benefits of staying in the market through thick and thin.
Asia options market not growing as quickly as expected – OptionMetrics
Louisa Chender – Global Investor Group (SUBSCRIPTION)
Options and ETFs have been slow to take off in Asia while interest lies in global indices, according to experts
Sterling derivative bets rise as Brexit endgame nears
Saikat Chatterjee and Maiya Keidan – Reuters
As negotiations become fraught before Britain’s exit from the European Union in March, tensions of a different kind are surfacing on the currency markets — derivatives activity is rising sharply as investors bet on a weaker sterling.
Get Out the Brooms: Quadruple Witching Day Could Ramp Up Volatility
JJ Kinahan – The Ticker Tape
Halloween is still more than a month away, but today looks like it might be a good day for a “witching.” A “quadruple witching,” actually.
****SD: I only get out the brooms if the Sox are going for a sweep.
Exchanges and Clearing
BSE, NSE to conduct mock trading in commodity derivatives on Saturday
Business Standard News
Leading stock exchanges BSE and NSE will conduct mock trading in commodity derivatives segments on Saturday, in order to familiarise brokers with the trading systems.
****SD: Somehow I hear “mock trading” and think of somebody teasing someone else over their positions. “Oh, you got long Tilray at $240? Dummy.”
Asia, MSCI and Eurex’ extended trading hours – all good things come in threes
Eurex is the only exchange to offer a comprehensive suite of MSCI products consisting of futures and options on regional and country indexes. Close to 60 percent of these products are related to the Asian-Pacific time zone and show rapid growth. This makes the products particularly relevant for Asian clients.
Regulation & Enforcement
Court ruling poses threat to retail brokerage industry
John Dizard – Financial Times (SUBSCRIPTION)
Yes, America is truly the land of the free?.?.?.?free securities brokerage if you are a retail customer of many big companies. Strangely, large institutions, sophisticated individuals and rich families still pay for brokerage.
JP Morgan writes letter on transaction fee pilot
Frank Chaparro – Business Insider
JPMorgan recently submitted a letter to the SEC outlining its position on the so-called transaction fee pilot — a controversial proposal to shake up stock trading in the US.
The proposal is supported by startup stock exchange IEX but opposed by legacy exchanges like the New York Stock Exchange and Nasdaq.
It’s the most recent big bank to weigh on in one of the biggest fights tearing Wall Street apart.
JPMorgan, which is listed on NYSE, is surprisingly not taking the exchange’s side in the debate.
Commodities trading: time to let go of manual legacies?
Mike Wilkins, Fidessa – Global Investor Group
From 2019, Audi will no longer sell a new car with manual transmission in the United States. America has long preferred automatic, but it feels significant; like a turning point where the manual world for motorists begins to fade into obsolescence. Maybe in a few years we’ll witness the final few petrolheads resist a change that has since become inevitable.
****SD: This is not paywalled.
Another World: Virtual and Augmented Reality Infiltrate Trading Floors
Emilia David – WatersTechnology (SUBSCRIPTION)
As augmented reality and virtual reality devices become more accessible, financial institutions are seeing the technology’s potential to overhaul how their staff communicate and bring data to life in ways that simply weren’t possible before. But projects may still have to wait years before they make their way to the trading floor.