Commentary and Insight


Special Report: A Bitcoin for Your Thoughts
What is it? And if you can determine that, how should it be regulated, taxed, or even traded? Is this the next asset class? Some may find potential there, while others still find it a joke or worse. Our special report features a column from JLN publisher John Lothian about his thoughts on Bitcoin, a short primer on the aspects of Bitcoin, as well as some of the best articles we have found in recent weeks. This special report is designed to inform and perhaps, raise the debate and dialog further.

Watch the video »

**JK – Rarely has there been a topic in the offices of John Lothian News that has raised debate, argument and conversation the way that Bitcoin has. What was once thought of as an internet-generated joke is now a topic covered by every mainstream media outlet around the world.

Lead Stories

2013: The Year Volatility Died
Dan Caplinger – The Motely Fool
The stock market in 2013 gave investors almost exactly what they wanted: sizable returns without any major correction along the way. But what drove such strong results, and can 2014 give investors another chance at such favorable conditions?

Volatility Trading Digest – Good News Is Good News
The Options Insider
Finally, the equity market took good employment news reported Friday as good news for the economy and ended a four-day price decline. Interestingly, since it sold down and reversed up on last month’s report as well we wonder if the market would have turned higher even if the employment numbers reported were less than expected. For now, we accept the popular interpretation that the employment gain was good enough, but not so good as to frighten bond market.

Could Options traders try to roadblock year end record S&P close?
Richard Roscelli  – Inside Futures
If brokers & traders watching or participating in Friday’s equities price action had a proverbial dime every time some form of the phrase “good news is good for the markets again” was uttered, practically no one would have left the exchange with losses.

Is the VIX Trying to Tell Us Something?
Adam Warner – Schaeffer’s Investment Research
I have to admit, I had no idea that VIX had rallied for eight straight days. That’s mainly because the lifts were so relatively shallow. VIX has spiked over 23% in single sessions, so that magnitude over basically Chanukah is somewhat underwhelming as far as lifts go. It took all of half a day on Friday to give back about 50% of those gains.

Videocast: Looking past December

We See This Week If It Was A Gold Friday Or Black Friday
JJ Kinahan – Forbes
With just three weeks until year-end, market watchers are eager to see if Santa can deliver a stock rally extension heading into the home stretch. The S&P 500 notched new record highs on the last day of November before suffering a series of modest losses in the early days of December.

Will the Volcker Rule crush Goldman Sachs?
Stephen Gandel – CNN Money
Goldman has traditionally made more of its money trading than other Wall Street firms, putting the bank at particular risk depending on how the final version of the Volcker Rule is structured.
**I’m willing to go out on a limb here and guess “no”. -JB

Banks Poised to Reduce Rate-Swap Trading as Revenue Seen Reduced
Matthew Leising – Bloomberg
Dealer revenue from negotiating interest-rate swap transactions is poised to plunge about 45 percent as new rules boost trading costs, pressures that may prompt banks to participate less in the $633 trillion over-the-counter derivatives market, Tabb Group LLC estimates.

‘Twas the Night Before Expiration – A Holiday Tale
Peter Lusk – CBOE
‘Twas the night before expiration, when all through the floor
Nothing was trading, not even a Condor
My trades were placed electronically with care
In hopes that a market maker would soon be there
Gutsy traders all snuggled in their big brass beds
While visions of arbitrage played out in their heads
Eileen in her flannels, and I in my Sox cap
Had just logged off my platform in time for a nap


The Changing Face of Nasdaq OMX
Gaston F. Ceron – Morningstar
In the evolving world of financial exchanges,  Nasdaq OMX Group (NDAQ) is zigging and zagging to remain vibrant. We believe the company is right to develop alternative revenue streams, which have widened via acquisitions. But given the changes, we think investors would benefit from an exploration of our view of the large exchange operator’s strategy and performance to better understand the potential upside to the shares.

Regulation and Enforcement

NFA Announces Rule Changes
Press Release (via Dan Collins Report)
Last week the National Futures Association (NFA) announced several amendments to existing rules. The changes involve risk disclosure statements for Securities Futures contracts; registration requirements for Futures Commission Merchants (FCMs) and Forex Dealer Merchants (FDMs), procedures and fees and risk management reporting requirements for registered entities.

SEC official says final Volcker rule ‘significantly different’
Eva Taylor and Sakari Suoninen – Reuters
The final version of the Volcker rule to ban banks from gambling with their own money is “significantly different” from the originally proposed version, making its impact on the markets difficult to gauge, a top U.S. securities regulator said on Monday.
**Is anyone surprised? -JB

CFTC lawsuit to affect wider market
Richard Henderson – The Trade
A lawsuit against chief US derivatives regulator supported by the world’s largest swaps agents seeks to correct what the industry believes is a divergence from the G-20 Pittsburgh agreement and may impact trading on swap execution facilities (SEFs).

Watchdog warns of chaos in competing derivatives rules
Huw Jones – Reuters
Failure to thrash out a common supervision of the $640 trillion global financial derivatives industry will split markets and bump up costs for end users, a top regulator said on Monday.


Boycott Closed-End Options Funds
Steven M. Sears – Barron’s
Unicorns and elves may exist, but it is hard to find convincing proof.
The same is true for the latest rage on Wall Street: Persuading fixed-income investors that they can generate solid returns by using conservative equity options strategies.

Option strategies for an options exchange
From the beginning of June to the beginning of December, the S&P 500 gained about 10.7% which is certainly nothing to scoff at. However, its performance does not look as good as the NASDAQ, which gained 17.4% in the same time period. The technology-heavy NASDAQ Composite index has recently been outperforming the S&P by a nice margin.

Options Education

How Constant Maturity Indexes Can Mislead You
The Options Insider
A constant maturity index of implied volatility provides a point estimate for IV at a specific time to expiration – for example, 30 calendar days – by interpolating from the implied volatilities of the nearest series of listed options. Constant maturity indexes of implied volatility are valuable because they allow like-for-like comparisons of different periods in time for one security and for cross-sectional comparisons among securities that may not have listed options in the same expiration months.



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