JLN Options: Alibaba Is Star of Hedge Funds' Latest Reports; CBOE Breathes Life Into Treasury VIX; Obama Web Stance Sends Time Warner Cable Puts to Record

Nov 14, 2014

Observations and Insight

Victory Lap: Five Minutes (or so) with Dax Rodriguez of Victory Networks
Sarah Rudolph – John Lothian News

Dax Rodriguez recently joined Victory Networks, a market data and high-speed connectivity provider, as head of business development. An industry veteran in the fin-tech space, he has served as president of Livevol and worked at Deutsche Borse, Chicago Board of Trade, Ballista Securities and E*Trade Securities. We sat down with him to discuss his latest move, as well as recent developments in the technology space, what microstructure, how firms are cutting tech costs, plus compliance and transparency issues.

Read More –> http://jlne.ws/1EG1O2z

Lead Stories

Alibaba Is Star of Hedge Funds’ Latest Reports
William Alden, Matthew Goldstein and Michael J. de la Merced – NY Times
Alibaba, the Chinese e-commerce website, was the hot initial public offering of the year on Wall Street. And not surprisingly, shares of Alibaba wound up in the portfolios of many well-known money managers in the third quarter.
Jana Partners, Omega Advisors, Moore Capital Management and Tiger Management were some of the hedge funds that disclosed ownership of shares in Alibaba when they submitted filings to the Securities and Exchange Commission on Friday.
***DA: These guys know the power of momentum.

CBOE Breathes Life Into Treasury VIX
Chris Dieterich – Barron’s
Traders can now factor in bonds into the fear equation.
CBOE Holdings (CBOE) on Thursday launched a futures contract on its new volatility index tied to the future expectations of big swings in the 10-year Treasury note. It’s called the CBOE/CBOT 10-year U.S. Treasury Note Volatility Index. Even though it’s name is a mouthful, the new one operates by the same principles that govern the CBOE Volatility Index, an options-market based measure of expected swings in the S&P 500.
***DA: Fear gauges: coming soon to an asset class near you.

Obama Web Stance Sends Time Warner Cable Puts to Record
Inyoung Hwang and Jonathan Morgan – BloombergBusinessweek
U.S. President Barack Obama’s statements this week supporting an open Internet spurred record volume in options that protect (TWC:US) against declines in Time Warner Cable Inc. (TWC:US)
America needs “the strongest possible rules to protect net neutrality,” Obama said Nov. 10. The comments signaled to some investors that the government will seek bigger concessions from Comcast Corp. as it tries to take over Time Warner Cable for about $45 billion, according to Macquarie Group Ltd.’s Amy Yong.
***JB:  This is one place Obama is 100% correct.  Too bad it was Obama that put a cable industry lobbyist at the helm of the FCC.

S&P 500 bumps up to another record close, Dow slips
William Cummings, USA TODAY
Stocks closed mixed Friday as the S&P 500 managed to eke out a small gain that gave it its 41st record closing high of the year.
The Dow slipped slightly, retreating from its record high but posted gains for the fourth week in a row.
The Standard & Poor’s 500 index gained 0.49, or less than 0.1%, to a record closing high of 2039.82.

How Not to Front-Run the News
Adam Warner – Schaeffer’s Investment Research
When the going gets tough, the tough buy batteries:
It probably has more to do with Berkshire Hathaway Inc. (NYSE: BRK.A) CEO Warren Buffett seeing a way to cash out some Procter & Gamble Co (NYSE:PG) shares than any particular bullishness on Duracell. But, who knows? And, unless you’re invested in Buffett, who really cares?

Ebola And The VIX
Sam Ro – Business Insider
The S&P 500 fell more than 9% from its September 19 high to its October 15 low.
Experts attributed the sell-off to numerous concerns including the prospect of higher interest rates, the deterioration of the European economy, the deceleration of the emerging market economies, and escalating geopolitical tensions from Russia all the way to Iraq.
One particularly frightening concern was the spread of the Ebola virus.
***DA: Amazing how a story can be out there for a while and greeted with a shoulder shrug by the market until, one day, BAM! Then, just as quickly, the market shrugs again, even though the story has not gone away.

Yen call options in demand as speculators hedge their bets
By Reuters
TOKYO: The yen’s slide to seven-year lows against the dollar could have more room to run, but in the shorter term, investors are using options to hedge against a sudden rebound in the yen.
The yen has weakened after the Bank of Japan’s massive easing on Oct. 31, hitting a fresh nadir of 116.20 yen on Friday., its lowest since October 2007. But the currency options market has shown a different reaction, as yen calls – the right to buy the yen – are more in demand than yen puts – the right to sell.

Regulation and Enforcement

CFTC calls for international help on derivatives oversight
Financial Times
A top US markets regulator has called for his own agency to defer more oversight to overseas jurisdictions to prevent the vast global off-exchange derivatives market from fragmenting.
Mark Wetjen, a Democratic Commissioner at the Commodity Futures Trading Commission, on Friday joined the growing calls for his own agency to tweak its new swaps trading rules as traders shy away from US venues.
***DA: Seems to be the only path left for the U.S. if it is to receive mutual recognition from the EU on central counterparty rules.

Author Michael Lewis prevails in ‘Big Short’ libel appeal
Jonathan Stempel – Reuters
The author Michael Lewis did not libel a money manager in his 2010 best-seller “The Big Short,” a divided federal appeals court ruled on Friday.
By a 2-1 vote, the 2nd U.S. Circuit Court of Appeals in New York rejected an appeal by Wing Chau and his firm Harding Advisory LLC over 26 alleged defamatory statements.

CFTC fines broker Rosenthal Collins $700,000 for violations
Tom Polansek – Reuters
The U.S. Commodity Futures Trading Commission fined futures broker Rosenthal Collins Group $700,000 for failing to oversee an employee in a branch office over five years, the agency said on Thursday.


Tech Beat: Rethinking exchange reliability
Philip Stafford, The Financial Times
One of the hazards of trading is the frequency at which venues break down.
In the last month alone there have been minor glitches at Nasdaq, Singapore exchange SGX, Euronext, Bloomberg and several times at the Chicago Board Options Exchange. There are more.
Add in the high profile problems that befell the listing of Facebook, the troubles at Knight Capital, the alphabetic trading glitch at Goldman Sachs, the listing of BATS Global Markets and the three-hour Nasdaq outage last summer, and a depressing picture of reliability quickly emerges.


John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past Options Newsletters

Pin It on Pinterest

Share This Story