JLN Options: Bearish ETF Bets Soar as Canada Stocks Climb Back Toward Record; The Only Way Is Up for Analysts Revising Hong Kong Targets; Bullish Momentum Meeting High Valuations

Apr 14, 2015

Lead Stories

Bearish ETF Bets Soar as Canada Stocks Climb Back Toward Record
Eric Lam – Bloomberg
As Canadian stocks climb back toward an all-time high, concern that oil’s collapse will take a toll on the economy is sending investors in search of protection.
Bearish bets for the iShares Standard & Poor’s/TSX 60 Index exchange-traded fund, Canada’s largest ETF by assets, have surged this year to as much as nine times the number of calls. The ratio reached the highest level ever on March 20, according to data compiled by Bloomberg.

The Only Way Is Up for Analysts Revising Hong Kong Targets
Kana Nishizawa – Bloomberg
As Hong Kong’s stock analysts rush to play catch-up to the city’s world-beating rally, their only question is how far the gains will go.
Three brokerages boosted Hang Seng Index forecasts Monday, with Bocom International Holdings Co. expecting the measure to rally 14 percent to a record 32,000 by June. Credit Suisse Group AG’s year-end projection of 28,000 was mown down in just a day, with the index up 2.7 percent yesterday to close above that level for the first time since 2007. Goldman Sachs Group Inc. raised its price target on the city’s exchange operator by 61 percent, less than a week after its last increase.

Bullish Momentum Meeting High Valuations – Weekly Market Outlook
Price Headley – CBOE Options Hub
The odds may have been a bit stacked against stocks heading into last week, but the market clearly overcame them. All told, the S&P 500 (SPX) (SPY) gained about 1.7% last week, crossing above some key moving average lines in the process, rekindling the bigger-picture rally.
Can it last? There are certainly some hurdles ahead, not the least of which is the market’s valuation, which is getting a bit frothy by some measures. Higher highs are not out of the picture though, because as they say, don’t fight the tape — short-term momentum in the broad market indexes is strong.

What VIX Isn’t Telling Us About Put Prices
Adam Warner – Schaeffer’s Investment Research
How post-meltdown risk controls may be inflating put prices

Gross Seeks to Keep Strangling Gains in Range-Bound Bond Market
Alexandra Scaggs and Mary Childs – Bloomberg
Bill Gross says he has a strategy to build on gains this year, betting the Treasury market will spend the rest of the second quarter in the doldrums.
Even if the Federal Reserve raises interest rates for the first time since 2006, the head of the $1.5 billion Janus Global Unconstrained Bond Fund doesn’t see much upside for 10-year Treasury yields before the third quarter. He doesn’t think they’ll decline much, either.

Why it may be time to start believing in banks again
Barbara Kollmeyer – MarketWatch
April hasn’t impressed? Wait until May.
“It marks the period of the year when you actively cheat on your spouse, run about the Hamptons with cocaine in your noses, and drink yourselves into a coma. On the other hand, you also get smoked in the stock market,” writes The Fly.
Of course, does May need to go so badly for investors?

Ackman Says Student Loans Are the Biggest Risk in the Credit Market
Bill Ackman says the biggest risk in the credit market is student loans.
“If you think about the trillion dollars of student loans we have outstanding, there’s no way students are going to pay it back,” Ackman, who runs $20 billion Pershing Square Capital Management, said today at 13D Monitor’s Active-Passive Investor Summit in New York.

***JB: Not sure I agree with this. Student loans are one of the few loans that cannot be discharged short of death (and a few other very narrow circumstances). They’ll garnish Social Security if it comes to it. It is a debt that will follow those people for life. You can’t get blood from a stone but darned if they won’t try.


BOX Options Appoints New CEO and President
Press Release – BOX
BOX Options (BOX), the all-electronic equity options market, announced today that Ed Boyle has been appointed Chief Executive Officer and Lisa Fall has been named President.

CBOE MSCI Index Options to Debut April 21
Press Release – CBOE
CBOE Holdings, Inc. (NASDAQ: CBOE) said today it will launch options on the MSCI Emerging Markets and MSCI EAFE Indexes on Tuesday, April 21. The CBOE ticker symbols are MXEF for options on the MSCI Emerging Markets Index and MXEA for options on the MSCI EAFE Index

Intercontinental Exchange – ICE Benchmark Administration Launches Consultation for LBMA Gold Price
Press Release – ICE
Intercontinental Exchange (NYSE:ICE), the leading global network of exchanges and clearing houses, announced that ICE Benchmark Administration (IBA) is today launching a market consultation on three aspects of the LBMA Gold Price auction process.
The three areas covered by the market consultation are: the approach for determining the LBMA gold benchmark price in the event that the minimum number of participants are not present, a review of the long-standing convention to add a ‘Seller’s Premium’ to the benchmark price for settlement purposes, and the usage of gold prices published in currencies other than US Dollars.

Regulation & Enforcement

Kraft case to test Dodd-Frank muscle
Mike Kentz – Reuters
Allegations of fraud and manipulative trading by Kraft Foods in derivatives markets are garnering attention beyond the fact that a household food and beverage-maker has been thrust into a regulatory doghouse normally reserved for the world’s largest banks.
The case could also affect the rest of the US corporate market as the CFTC seeks to expand the definition of manipulation in derivatives markets by using a new enforcement tool provided by Dodd-Frank regulations for the first time since the law’s passage.

Regulators warn over-the-counter derivatives are out of control
EU and US industry and regulatory figures have warned that the number and nature of repositories listing over-the-counter (OTC) derivatives trades is threatening to blind regulators to market risk.

It’s Time the Industry Focuses on Something Constructive: Reg SCI & Cybersecurity
The Regulation Systems Compliance and Integrity implementation date of November 3, 2015 is fast approaching, yet there are a myriad of questions that remain unresolved for third-party broker-dealers. While market participants have engaged in a heated debate for the past year around the inherent complexities of the U.S. market structure arising out of Regulation National Market Structure, the industry has become stymied by an unfortunate fictional narrative around trading illegalities. The unfortunate consequence of all this uncertainty is that individual investors once again shied away from investing in U.S. equities.

Ex-Rabobank Trader Conti Pleads Not Guilty in Libor Case
Patricia Hurtado – Bloomberg
A former Rabobank Groep trader pleaded not guilty to U.S. charges that he participated in a scheme to manipulate Libor, the benchmark for trillions of dollars of securities.
Anthony Conti, 46, of Essex, England, who didn’t fight extradition to the U.S., was released on a $500,000 bond secured by $40,000 in cash, permitted to keep his passport so he could return home and received permission to vacation in France.


Trading’s ‘next big thing’ | News | Operations & Technology
Jonathan Watkins – The Trade
The phenomenon of cloud technology and the much-talked-about latency race are just two examples of how technology has shaped the world of trading in recent years.
Trading has become faster, more efficient and increasingly reliant on technology advances. In these times of increasing market regulation and declining liquidity, technology is being welcomed by market participants as the cure to a great many ills.


As Chinese Stocks Surge, Here’s How to Ride Rally
Steven M. Sears – Barron’s
With investors giddy over China’s easy money policies, options, this ETF options trade can pay off big.

Volatility Ratio Warning
Lance Roberts – Investing.com
“There are a few indicators upon which I have come to rely heavily during this Fed induced bull market to avoid becoming too bearish. One is the slope of the VIX forward futures curve which can be readily approximated by (VXZ)/(VXX). Another is the BOAML US High Yield Option Adjusted Spread. These two, in particular, seem to be good barometers of investor risk tolerance. Since I expect that the next bear will likely have its genesis in the high yield space, the later should be a good warning signal as well.”

Can The Bulls March Through Earnings?
Chris Ciovacco – Seeking Alpha
If the market (NYSEARCA:VOO) anticipates that earnings will usher in a new bear market, we would expect to see structural problems starting to form in the bullish foundation. This week’s stock market video looks for cracks in trends, the VIX, and market breadth.


Best Undergraduate Degrees For Day Traders
Zaw Thiha Tun – Investopedia
Day traders live in the fast-paced world of price and volume data, taking advantage of an asset’s fluctuations within time spans of a few seconds to mere minutes. Day traders are up long before the markets open, reading the news, performing market scans, and watching channels like CNBC and Bloomberg in order to get a reading on the market direction for the day. When the opening bell sounds, day traders have already narrowed in on the stocks, derivatives, or currencies that are going to be traded for the day. Day in and day out, this cycle will repeat itself, as traders attempt to be one of the very few who can successfully sift through the random flux of the markets and make a profit. If a career in all of this maelstrom seems exciting to you, we explain the educational degrees that would be beneficial to trading in this incredibly lucrative, yet risky environment.

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