Observations & Insight
MarketsWiki Education Is More Than Paying It Forward
John Lothian – JLN
Pay it forward. Do something nice for someone because some other person did something nice for you. In the case of MarketsWiki Education, you can pass on your passion for the markets and the underlying industry by sending your interns, your newer employees, or your son or daughter to the event series
You can help change someone’s life for the better, I promise you. That is the kind of response we have had from some attendees. This response has prompted us to expand the program’s reach even farther from its Chicago roots. We will be in Chicago for the fourth straight year, and New York and London again this year, but also Frankfurt and Paris.
The speakers we have lined up are all giving their time freely, not for us, but for the young people to whom they will be speaking. The speakers are paying it forward.
Read the rest of the article on JohnLothianNews.com HERE
Volatility Update: Are Traders Bracing for Higher Volatility?
The Ticker Tape
The theme of quiet trading continues in May. Since March, the S&P 500 has seen average daily point moves of just under 11 points, compared to moves of more than 16 points during the first three months of the year.
Sterling hedging cost highest since 2009 before Brexit vote
The cost of hedging against swings in sterling rose to seven-year highs on Thursday while currency options indicated strong demand from investors betting on the pound’s weakness less than a month before a British vote on EU membership. While betting markets suggest Britons will opt to remain in the European Union, most polls are neck to neck, though of late they show that those wanting to stay are edging ahead.
Eurodollar Options Put Fed Rate-Cut Chances at Below 5%
The probability of the Federal Reserve cutting U.S. interest rates in 2016 has fallen below 5 percent for the first time since New Year’s Eve, according to options on eurodollar futures contracts.
Goldman: Markets Biggest Fear Is Neither Trump, Nor Sanders, Nor The Fed … It’s Brexit
As the market prices in Brexit volatility, where are the opportunities for traders? Shortly after an Investec research report noted that the perception regarding a Brexit volatility and a mean reversion trade might drive reality, and recommended buying a U.K. bank that was not Barclays, Goldman Sachs has a different take. Looking at the underlying market structure behind Brexit volatility, the bank’s option research team note a term structure unfavorable to near-term long VIX futures exposure. Different markets are treating Brexit volatility with variable degrees of pricing.
BlackRock strategist says VIX should rise to low-to mid-20s by fall
Investors expect VIX volatility index to rise to about 20 by fall but this may understate potential rise in volatility.
Hawkish Fed Could Trigger Correction For Equities
The May 18th FOMC Meeting Minutes contains direct references to a potential rate hike at the next June 14 – 15 FOMC meeting. Recall in March meeting, the Fed Dot Plot chart (see below) suggests that Fed believes two rate hikes this year is the likeliest outcome, albeit with the usual data dependent clause.
CME’s Duffy slams transaction tax plan
Futures & Options World – Let’s Talk Derivatives
CME Group executive chairman and president Terry Duffy has appeared before the Illinois House Revenue and Finance Committee to argue against a tax on financial transactions. The Financial Transaction Tax Act, called HB0106 and proposed by Democratic member of the Illinois House of Representatives Mary Flowers early last year, would impose a tax on engaging in a financial transaction on the Chicago Stock Exchange, the Chicago Mercantile Exchange (CME), the Chicago Board of Trade and the Chicago Board Options Exchange.
NYSE-Nasdaq ‘Backup’ Plan Parsed
So what’s the plan? That’s what equity market professionals were asking themselves just one week ago when the NYSE experienced a software-induced trading glitch that suspended trading in 199 stocks for approximately three hours. As reported by Markets Media and confirmed by an NYSE spokesperson, trading continued in the affected names on the markets other exchanges and at off-exchange venues as NYSE worked with its software vendor to resume trading. Trading did resume, but many in market were wondering about contingency plans surrounding the calculation of closing prices for the affected symbols should the market close and the bourse’s systems not be repaired.
Nasdaq Financial Framework Launches for Market Operators Globally
Nasdaq today unveiled the launch of its Nasdaq Financial Framework, a streamlined approach for the company to offer flexible end-to-end solutions to financial infrastructure providers globally, according to an official announcement, and based on three components that the new offering is built upon in its core.
BSE, NSE to conduct mock trading to test system performance
New Indian Express
Leading bourses BSE and NSE will conduct mock trading sessions on May 28 and June 4, respectively, to test system performance. BSE will conduct a mock trading session from its disaster recovery site. In three separate circulars, BSE said it will conduct a mock trading session from its disaster recovery site in currency derivatives, equity and equity derivatives segments on Saturday, May 28, 2016.
MIAX Options Exchange: Amendments To Rule 612, Aggregate Risk Manager
MIAX has received approval to amend Rule 612, Aggregate Risk Manager to allow a Market Maker to establish an Allowable Engagement Percentage at any percentage level equal to or greater than 1% for an option class in which such Market Maker is appointed. The amendment will be effective beginning Tuesday, May 31, 2016.
Regulation & Enforcement
India’s Regulator Plans Rules to Hobble HFT Firms’ Advantage
India’s markets regulator plans to increase penalties on high-speed trading firms that flood exchanges with orders that don’t result into actual transactions, as part of steps aimed at strengthening its oversight of computerized trading.
Taxing Derivatives Transactions: Getting Under the Covers of Section 871(m)
A new IRS rule attempts to clarify the taxation of dividends resulting from derivatives transactions. But the details aren’t so simple. Capital Markets Advisors’ George Bollenbacher breaks down the requirements.
This may be a great time to bet on the market rising
With volatility expectations slipping, options prices are falling substantially. That has some traders recommending buying upside call options as a way of generating exposure to market gains.
Earnings Next Week – 5/31 – 6/3
CBOE Options Hub
It’s a short week, next week as we move into the summer months. Despite that we still have a few companies set to report earnings next week. As always the data below is based on the last three years of earnings results, unless the data is in italics. In those cases less than three years worth of history is available. The columns show the biggest rally, biggest drop, average move, and what the stock did last quarter in reaction to earnings.
Commodities Relative Value – Capitalizing On High Volatility Across The Commodity Spectrum
Significant volatility across the commodities complex has created relative opportunities for hedge funds. A multiyear bear market in commodities has led investors to explore more active opportunities within the asset class. This is evident from an increased focus on commodity hedge funds on the part of institutional investors as an alternative to passive strategies. In this special report, we take a close look at this hedge fund segment, considering key characteristics and performance trends, and offering our outlook for the rest of the year and beyond.
Old State of Panic Moves to Glee: Getting Short or Hedging Gains in SPY, E-minis and Crude Oil
The recent rallies in Crude Oil and Stocks have completely cleared out the short-term memories of many traders. While an article of mine from just two days ago indicated that those with cash on the sidelines might put some of it to work, the rally of the last two days may provide an opportunity for pause. Like all commodities, including Crude Oil, the Stock Market, as represented by the E-mini S&P has a tendency to trade with hyperbole and cause the casual observer to believe that there is no rhyme or reason to its movement.
Covered-Call Funds Offer Big Payouts
The market’s manic moves might have you feeling like the main thing stocks are good for is raising your blood pressure, not raising your net worth. But there’s one type of investment that may both calm your nerves and boost your income: covered-call funds.
Forex GBP & JPY: Two islands drive currency volatility
Nadex Binary Options
Between the Brexit vote in the UK and the runaway strength of the Japanese yen, forex traders around the world have an exciting summer ahead, largely driven by two islands.