Observations & Insight

Top Stories from JLN Options 11/17
In case you missed them, the following were the most read stories from yesterday’s newsletter:

-Spot Trading’s Saez Says He Quit Chief Investment Officer Job

-ICE Goes Live with its First Asian Exchange

-Eton Park’s Mindich Raises Options Bet on Japan to $876 Million

-These Wall Street Jobs Are Poised for Biggest Swings in Pay

-Why terrorism has a limited impact on markets


Nils-Robert Persson, Cinnober Financial Technology – How to Manage a Challenge

“You should be prepared to walk on thin ice. It’s not dangerous if you know what you are doing.”

Thirty years ago, Nils-Robert Persson left a job at communications software giant Ericsson to join the financial technology space, where he has been ever since. Back then, when one made a trade, it was a cumbersome process that involved many hands over several hours, and bank settlement took three to five days. Now, that same trade can be placed on a fifth-generation Ericsson smartphone and be matched in 100 microseconds… and bank settlement still takes three to five days.

Persson says he was not wrong to leave Ericsson, just thirty years too early. The center of the tech world has shifted to the financial sector, and as executive chairman of Cinnober, he is now in the right place. He says you do not have to be at a startup to be entrepreneurial in your thinking, but it often requires you to navigate on thin ice.

Watch the video »

Lead Stories

After the Crash, One Slice of China’s Stock Market Still Thrives
Options trading jumps as investors seek substitute for futures
Open interest on China ETF rises to record as volumes pick up
Three months after China’s $5 trillion stock-market crash, the fallout from unprecedented state intervention is visible almost everywhere you look.

Tom Lee – S&P can still rise 10% this year
Though it has struggled to stay in positive territory, the S&P 500 could climb 10 percent by the end of the year, widely followed bull Tom Lee contended Tuesday.

UBS’ Director of FX Options, Louis McCauley Parts Ways with Bank
Jeff Patterson – Finance Magnates
UBS Investment Bank has lost one of its senior personnel with the departure of Louis McCauley, the group’s Senior Executive Director on the Foreign Exchange (FX) Options desk, Finance Magnates has learned.

Hedge Fund Rubicon Profits From U.S. Jobs Data
Laurence Fletcher – WSJ
The latest set of U.S. jobs numbers delivered a bumper payday for one London-based hedge fund.
Rubicon Fund Management, which specializes in big bets on currencies, bonds and other assets, made a profit of about $40 million, representing a rise of about 4.5% in the value of the fund, on Nov. 6, when nonfarm payrolls data smashed expectations, according to a person familiar with the matter.
The secretive fund, which uses options to boost returns, profited from a bet on the dollar, which gained 2% on the day against the euro. It also made money on large bets against U.S. Treasurys, as the yield on the two-year Treasury rose to its highest close since May 2010 on growing expectations of a U.S. interest rate rise next month.

Measuring the Volatility of the VIX [Video]
Bloomberg – Nasdaq
Capital Economics Founder Roger Bootle and Macro Risk Advisors CEO Dean Curnutt discuss market volatility. They speak on “Bloomberg Surveillance.”


HKEx To Introduce New Stock Option Classes And Stock Futures Contracts
Press Release
Hong Kong Exchange and Clearing Limited (HKEx) will introduce two new stock option classes and 34 new stock futures contracts in batches on Monday, 30 November 2015 and Monday, 7 December 2015.

With Shenzhen link on back burner, HKEx homes in on China’s OTC market
Don Weinland – South China Morning Post
After extinguishing hope for a direct stock market link between Hong Kong and Shenzhen this year, Hong Kong Exchanges and Clearing (HKEx) is talking up a different target for netting China’s financial markets: fixed-income and currency markets.

Press Release
BATS Global Markets (BATS) today announced the successful launch of its second U.S. options market, EDGX Options, which is based on a customer priority/pro rata allocation model. The new market launched on November 2nd and implemented a phased rollout of symbols, which was completed yesterday, November 17th.

NYSE to eliminate stop orders from February
Investors will not be able to make “stop orders” and “good till cancelled orders” on the New York Stock Exchange and NYSE MKT from Feb. 26, the exchange said, as it looks to reduce risks during choppy trading.

MIAX Options Exchange Announces Hiring of Joe Bracco as Its Senior Vice President — Head of Sales
PR Newswire
MIAX Options Exchange (MIAX) announced today that Joseph S. Bracco has been hired as its Senior Vice President – Head of Sales. His duties will include leading the MIAX sales teams and expanding MIAX’s institutional client base.

CBOE, C2 and CFE Trading Schedule For the Thanksgiving Day Holiday
Press Release

Regulation & Enforcement

China regulators may have overreacted but reform path intact: HKEx CEO
Michelle Price and Saikat Chatterjee – Reuters
China’s regulators may have overreacted with proposed new trading curbs to stamp out speculative behavior but the Hong Kong stock exchange remains hopeful that onshore markets will eventually rise to international standards, its chief executive told Reuters on Tuesday.


New Platform, Proximity Service to Boost TOCOM’s Market Share
Irina Slav – Finance Magnates
The Tokyo Commodities Exchange (TOCOM) is extending its service offering to high-speed traders with a new platform and a new proximity service, both to go live in September of next year. The provider of the proximity service, AT Tokyo, operates some of the largest data centers in the world, and was selected by TOCOM because of its good reputation and years of experience.

Thomson Reuters To Bring Eikon Messenger To Mobile Devices, Increasing Flexibility For Financial Professionals
Press Release
Recognizing that financial markets participants require greater flexibility in working practices, Thomson Reuters today announced that its Eikon Messenger service would be made available across all major mobile device types, providing its growing community of users with greater agility to connect and transact business with counterparties over an open messaging system.


How ‘Smart’ Are VIX Futures?
Adam Warner – Schaeffer’s Research
As the market opened up small Monday, and the CBOE Volatility Index (VIX) dipped ever so slightly, one of my Twitter people made an interesting observation.

Timing That Top or Bottom? Forget it! (Unless Perhaps You are Gaming the Fed)
Bob Lang – CBOE Options Hub
We would all love to continually call tops and bottoms in markets and be correct. After all, with that ‘magic’ we could never lose, right? Sell at the exact height of a bull run, get in at the bottom of a bear move. While that can be possible to do from time to time, nobody can call a top or bottom correctly on a regular basis. With so much emotion, psychology and irrationality there is just not a clean path to calling a top or bottom. Charts and technicals certainly are helpful identifying reference points, high/low volume areas and zones of interest.

Block Trade Analysis – VIX Weeklys Option Trades
Russell Rhoads – CBOE Options Hub
Tomorrow is November VIX settlement, but that hasn’t stopped some short term VIX traders from putting on new positions, in fact it may have encouraged them to do some trading.
I ventured down to the trader floor late today to see what may be going on in the VIX Weeklys options set to settle on the open next Tuesday. For those that know VIX well, you know that VIX futures and options normally settle on a Wednesday, 30 days before an expiration Friday. However, December 25th is a Friday (and a holiday) so we have SPX options expiring Thursday the 24th of December. Backtrack 30 days and we get a VIX Weeklys settlement on the open next Tuesday.

U.S. dietary supplement shares whipsawed by Justice Dept. announcement
Shares of dietary supplement retailers tumbled in heavy trading volume on Tuesday, spurring a surge in options hedging activity for those stocks even though fears they would be mentioned in a U.S. Department of Justice lawsuit did not materialize.

(GUSH), (DRIP) – Exploring Volatile Side Of The E&P ETF Trade
Perhaps it is a positive sign or maybe it is a harbinger of negativity to come, but the SPDR S&P Oil & Gas Exploration & Production ETF is down just 1.3 percent over the past month. Over the same period, the United States Oil Fund, which tracks front-month West Texas intermediate futures, has plunged 12.3 percent.
In both bullish and bearish environments, there are times when energy equities can lag the moves in the underlying commodity. Some options traders are preparing for near-term declines in XOP, one of the most popular and volatile equity-based energy ETFs.


What Turkeys Can Teach Us About Risk Management
Boris Marjanovic – Seeking Alpha
A turkey is fed for 999 days by a farmer. Each passing day confirms to its risk management department that the farmer loves turkeys “with increased statistical significance.” But on the 1,000th day, a little before Thanksgiving, the turkey is in for a big surprise. What appeared to be a very safe and predictable life for the turkey was in fact a ticking time bomb. This example builds on an adaptation of a metaphor by Nassim Taleb. The “turkey problem” (or what philosophers call the “problem of induction”) means that no amount of past evidence ensures any conclusion about the future. In other words, an empirical theory can be proven false, but can never be proven true.


FOW to host inaugural Trading Middle East event
Alice Attwood – Futures & Options World
Derivatives trading is in its relative infancy in the region, Dubai emerging as the centre
Over 200 delegates will meet on Thursday for FOW’s inaugural Trading Middle East event in Dubai.
The event, which is being held in partnership with the Dubai Gold and Commodity Exchange, will focus on how to increase participation in the region’s derivatives markets.
Derivatives trading in the Middle East is in its relative infancy and lags behind the strong physical trade in a range of commodities and products that dominates the region.

Introducing Weekly VIX Options on Metro NOW Platform
Options City Webinar, Thursday, November 19, 2015
On October 8, VIX Weekly options started trading at Chicago Board Options Exchange. New Weekly expirations for VIX futures and options will be listed on Thursdays and expire on Wednesdays.

OptionsCity’s Metro NOW, a high performance, sever-based options trading platform, can provide you a full access to CBOE’s products. Metro NOW is built for speed, and it ensures clients fast and reliable access to exchanges and products.

In this webinar, we are glad to invite Russell Rhoads from CBOE to join us and give us a brief introduction about the Weekly VIX Options; followed by a Metro NOW demo demonstration focused on trading this product given by Patrick Gardner from OptionsCity.

Register Here

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