Lead Stories

Backbone of U.S. Stock Trading Said Poised for Upgrade
Nick Baker – Bloomberg
Following malfunctions that froze U.S. stock and options markets in the last year, the systems that serve as the backbone for trading are getting closer to an upgrade, according to two people with direct knowledge of the matter.
IntercontinentalExchange Group Inc. (ICE)’s SIAC unit, Deutsche Boerse AG (DB1)’s International Securities Exchange and Miami International Holdings Inc.’s MIAX Options were picked as the three final candidates to run the options industry’s main price feed OPRA, and make it faster, less costly and more reliable, according to the people, who asked to not be named because the decision hasn’t been made public
http://jlne.ws/1kdJ4jg

A High-School Freshman’s Investing Lesson: Time Horizons Matter
Jonah Jakab – The Wall Street Journal
You don’t have to be old enough to drive to play master of the universe. I’m just 15 years old, but in a national stock-market game sponsored by the Securities Industry and Financial Markets Association, I quickly grasped the way hedge fund managers must feel when they make decisions…
…Deciding the market probably would rise, we sold short securities that produced double the daily return of VIX futures. My dad explained that, on average, they should lose over 90% of their value each year.
http://jlne.ws/1kdMlPH

Traders betting on gains for silver
Bloomberg News
Silver rallied to a 2014 high of $22.215 an ounce in New York in February, before tumbling to reach a low of $18.95 on Thursday
Options investors are bargain hunting after a two-month slump in precious metals prices.
While silver has wiped out almost all of a 15 percent gain through the first two months of the year, the cost of bullish contracts on an exchange-traded fund tracking the commodity has climbed to a three-year high relative to bearish ones. Traders are betting prices will rise with gold amid quickening inflation, a return of overseas demand and as the conflict in Ukraine continues.
http://jlne.ws/1ilAnPE

Are exchanges and brokerage houses the new deep pocket targets?
By Danel P. Collins, Futures Magazine
High Frequency trading has been a controversial subject for several years now but it has mostly been an “inside baseball” type of story for people involved in trading equities, options and to a lesser extent futures.
http://jlne.ws/1ilAVVy

Are Volatility Expectations Waning?
The near-perfect inverse correlation of the SPY and VIX
Adam Warner – Schaeffer’s Investment Research
As we noted yesterday, India stocks and the India VIX are moving in about a 0.5 correlation to each other lately. How odd is that?
Well, glad you asked. I looked at the SPDR S&P 500 ETF Trust (SPY) vs. our CBOE Volatility Index (VIX) from the beginning of 2010 up until last Friday, and they moved with a negative 0.81 correlation. So, yes, moving at 0.5 is a huge outlier.
But enough about Indian VIX!
http://jlne.ws/1kdLfn3

Videocast: VIX premiums jumping
optionMONSTER
http://jlne.ws/1kdLC0O

Weekly Market Commentary 4.25.14
By Larry McMillan, CBOE Options Hub
The stock market is once again nearing all-time highs, although it has
not broken out (yet).  If $SPX can’t punch on through to new highs, then it will remain
within the widened trading range.  At this point, most of the technical
indicators are bullish, so we would expect at least an attempt to
challenge the highs.
http://jlne.ws/1iAZcIc

Exchanges

Nasdaq seeks upside from markets debate as profits rise
John McCrank – Reuters
Author Michael Lewis’ claim that the U.S. stock market is rigged was “irresponsible,” but the debate it has sparked could lead to positive change, said Bob Greifeld, chief executive of Nasdaq OMX Group, which reported higher earnings on Thursday.
http://jlne.ws/1kdHWw0

CME Europe set for launch
FTSE Global Markets
Chicago Mercantile Exchange Group (CME) will officially launch its London-based European derivatives exchange CME Europe this Sunday.
The new venture, which will be supervised by the FCA, is the first trading platform launched by CME outside the US and will initially offer 30 FX futures products and a suite of commodities contracts.
http://jlne.ws/1faqpGt

Regulation and Enforcement

Nasdaq not yet subpoenaed in N.Y. high frequency trading probe-CEO
Reuters
Nasdaq OMX Group Inc has not to date received a subpoena from the New York attorney general as part of its industrywide probe into allegedly unfair technological advantages on Wall Street, Nasdaq Chief Executive Officer Robert Greifeld said on Thursday.
http://jlne.ws/1kdJmqp

Schwab fined $500,000 for FINRA violations
Sital S. Patel – MarketWatch
Charles Schwab & Co. has been fined $500,000 for adding language to its customer-account agreements that would help it avoid group arbitration, according to an announcement by the Financial Industry Regulatory Authority Thursday.
http://jlne.ws/1kdJy9g

SEC Plans Review Of Hedged Mutual Funds
Teresa Rivas – Barron’s
Earlier this week we reported that the hedge fund industry’s assets sailed to a record $2.7 trillion for the period, the seventh straight record.
Perhaps no wonder then that some mutual funds want to imitate their riskier counterparts.
But that won’t come easy, if the Securities and Exchange Commission has its way.
http://jlne.ws/1kdJOVH

Strategy

Is VXST the Best Volatility Play You’ve Never Heard Of?
The CBOE Short-Term Volatility Index is an underappreciated trading vehicle.
Steve Smith, Minyanville
Launching investment products during market declines is usually a bad idea — unless you’re selling volatility.
The Chicago Board Options Exchange (NASDAQ:CBOE) began listing options on the CBOE Short-Term Volatility Index (INDEXCBOE:VXST) on April 10.
That turned out to be a great time for VXST to show its value as a volatility play.
http://jlne.ws/1ilAFpD

Sell in May and Go Away Alternatives (Part 3 – PUT)
Russell Rhoads – CBOE Options Hub
Recently I took a look at the old saying, “Sell in May and go away” which is an old saying kicked around on Wall Street that says investors are best off exiting the stock market from May to October each year. This saying, which will get several mentions on the business networks in the next few days, means investors would do well to exit at the end of April and get back into the stock market on November 1st each year.
http://jlne.ws/1kdHLkp

Expanding the Efficient Frontier: Options-Based Strategies in Portfolios
Eric Metz in ThinkAdvisor
In March, I attended the 30th annual CBOE Risk Management Conference in Florida and was joined by John Marshall, head of equity derivatives at Goldman Sachs, on a presentation discussing how mutual funds are using options. He shared the chart below which highlights the effectiveness of options-based strategies in reducing volatility and improving Sharpe ratios.
http://jlne.ws/1lQt5aB

How A Trader Thinks About Russia’s Sliding Economy
Dan Nathan, Risk Reversal
As we head into the back half of Q1 earnings season, some of the buzzwords (excuses) explaining away lackluster year over year earnings growth in the U.S. in the fifth year of our economic recovery will hibernate until we get into Q2 pre-announcement season towards the end of June.
http://jlne.ws/1lQu3Ug

Options Education

Stop Loss or Trailing Stop?
Dan Passarelli for The Options Insider
The market has moved higher, lower and higher again over the last month or so. Even though the market has rallied as of late, there’s still a  potential for the market to move lower. Regardless, whether the market continues to move higher or lower once again it is always a good time to talk about stop losses. Traders may hear the terms trailing stop loss and stop loss order and wonder exactly what those terms mean and how a stop loss can potentailly enhance a trading strategy. Well, worry no more because that is exactly what we will review in this blog entry.
http://jlne.ws/1lQrd1B

3 Foolproof Solutions for Options Mistakes – Know Your Options
NASDAQ
With the market going up, there will be an increasingly larger number of people buying call options on those stocks they expect to go up even further. However, there will also be an increasingly larger number of people losing money on those very same call options designed to make money as the market rises.
It’s sad, but true.
http://jlne.ws/1kdIgea

Protecting Precious Capital
Brandon Wendell – The Options Insider
“Cut your losses short and let your profits run.” So many traders chant that mantra while working in the markets. Anyone who has, or ever had, money in the markets knows that this is an easy thing to say but much harder to do. The emotions of fear and greed creep into our trading environment and influence our trading decisions. My students often ask me if there is a way for them to hold on longer to their trades for greater profits or better protect their capital.
http://jlne.ws/1kdK5YD

Two Most Common Investing Mistakes
Sam Seiden – The Options Insider
The world of market speculating is made up of everyone from the active day trader to the longer term investor, speculating in all kinds of markets and asset classes, people all around the globe pushing buy and sell buttons each day in hopes of achieving income and wealth. Never in history has there been so many books written and so much information on the internet on how to speculate in markets for traders and investors.
http://jlne.ws/1kdKri2

Who’s The Real Boss In Your Trading?
Sam Evans – The Options Insider
I would like you all to think back to the days when you first considered trading the markets and more importantly, the reasons why you wanted to embark on such a career progression. For some people, they simply want greater financial security by generating regular short-term income or maybe they want to find a way to protect and grow their long-term wealth, or maybe even both? For others, it is all about having more time but one thing I have found to be a common theme amongst everyone, is that they love the idea of not having a boss and working for themselves.
http://jlne.ws/1kdKM47

 

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