Observations & Insight
Connecting: HKEx’s Li Said It Will Help Connect To China’s Trillions
Hong Kong Exchanges and Clearing is all about connecting. HKEx’s CEO Charles Li says his exchange is the linchpin that connects mainland China’s markets with the rest of the world.
Li, who spoke with John Lothian News editor-in-chief Jim Kharouf at the FIA Boca conference, said his exchange is about strategic positioning with China and taking advantage of the explosive growth it sees, especially with the London Metal Exchange firmly integrated into its business.
“Our job is to find a way to make that connection,” Li said, of China, “the largest pool of capital that is yet to be globally deployed.”
Bond Traders Fear Oct. 15-Style Volatility Could Repeat
Matthew Boesler – Bloomberg
A group of U.S. Treasury market professionals sponsored by the Federal Reserve Bank of New York expressed concern that the large gyrations seen in that market on Oct. 15 could be repeated in the future, according to minutes of their meeting released Monday.
Market Volatility: The First Quarter By The Numbers
See It Market
With the first quarter nearly in the books, we have successfully logged 60 trading days so far this year and some might say that it has been a frustrating journey. The most notable thing that can be said about 2015 is that market volatility is back and may be here to stay for the foreseeable future.
India’s VIX Completes Second Monthly Decline as Fiscal Year Ends
Santanu Chakraborty – Bloomberg
India’s benchmark gauge of equity options fell for a second month as stocks posted their worst monthly loss in more than a year.
The India VIX Index, a measure of protection against stock market swings, rose 1.6 percent to 14.49 at the close, paring its drop in March to 15 percent. The CNX Nifty index was little changed on the last trading day of the current financial year.
Betting on VXX? Better Get Your Timing Right
Adam Warner – Schaeffer’s Investment Research
More and more people are putting money into the iPath S&P 500 VIX Short-Term Futures ETN (VXX)
Entering the Second Quarter of 2015, Investor Sentiment Remains Positive on the Outlook for U.S. and Global Equities
Press Release – Monex Global Retail Investor Survey, Vol. 16 via MarketWatch
As in the in previous quarter, options/futures, ETFs and stocks head up the list of favored investments by asset class – 77%, 76% and 71% of those surveyed, respectively, say these instruments present attractive opportunities in 2015. Technology and healthcare again topped the list of favored market sectors, as roughly three of four investors – 80% and 75%, respectively – expect these two sectors to post the biggest gains over the next three months.
FX options indicate big euro/dollar swings may pause
Recent sharp swings in the euro/dollar exchange rate have not been matched by moves in the currency options market, as a cautious outlook from the US Federal Reserve pushes back expectations of when rates will rise.
The VIX In 1 Month?
The VIX was up 16% last week, as the S&P 500 dropped for 4 straight days before recovering with a modest gain on Friday with a little help from Janet Yellen. It was the worst week for the U.S. market since January.
Once again though, the Fed is coming to the rescue of stocks. Her prepared remarks late on Friday reiterated that a rate hike “may be warranted”, but also provided some insight on long term rates saying that a return to a normal Fed Funds rate was “likely to be gradual”. Global Markets are up big this morning, as are U.S. Futures. So, for the time being, concerns over Yemen and Oil disruption, confirmation of a crappy GDP number and increasing profit warnings from companies have been swept under the rug.
Investors Purchase High Volume of iShares MSCI Japan ETF Put Options (EWJ)
iShares MSCI Japan ETF (NYSE:EWJ) was the recipient of unusually large options trading activity on Monday. Traders acquired 11,000 put options on the stock, AnalystRatings.Net reports. This represents an increase of approximately 1,217% compared to the typical volume of 835 put options.
CBOE Extends VIX and SPX Options Trading Hours
Greg Bender, John Gardner and Gary Stone – Bloomberg
Incrementally inching closer to a 24-hour market, earlier this month, the CBOE introduced an extended trading session for VIX and SPX options, respectively.
By introducing an extended session, the CBOE seeks to provide overseas investors with the opportunity to efficiently gain exposure both to the U.S. market (SPX) and U.S. market volatility (VIX). The extended session works quite differently than the regular session.
Nasdaq To Commence Trading Futures – The Beginning Of The End
A few weeks ago, NASDAQ OMX Group (NASDAQ:NDAQ) announced that it would expand into energy futures and options. In order to break into the market, dominated by the Chicago Mercantile Exchange (NASDAQ:CME) and the Intercontinental Exchange (NYSE:ICE), NASDAQ will offer products at less than half the prices of those offered by the existing exchanges.
Euronext to launch dairy derivatives on April 13
Euronext will launch its new dairy derivatives on April 13 and will offer a full waiver for its trading fees until June 30, the exchange said on Monday.
It had previously said it was aiming to launch trading in the products at the end of the first quarter.
Japan Exchange targets high-speed trading
Luke Jeffs – Futures & Options World
Japan Exchange has listed among its priorities for 2015 tighter oversight of the trading systems used by members to ensure they are compliant with its rules, marking the latest move by a large exchange to clamp down on abuse by high-speed traders.
Regulation & Enforcement
Commodities traders’ alarm over Europe’s stricter regulations
Neil Hume – Financial Times
If you thought US plans to cap speculative activity in commodities were broad, then take a glance at what’s unfolding on the other side of the Atlantic.
Policy makers in Europe want to place position limits, or caps, on the number of contracts speculators may control, on around 1,900 commodity derivatives (and securities priced off commodities), according to calculations by the UK’s Financial Conduct Authority.
JPMorgan Execs Said Deposed in SEC Asset-Management Probe
Neil A. Weinberg – Bloomberg
JPMorgan Chase & Co. executives have been deposed and thousands of pages of internal documents subpoenaed as part of a U.S. investigation into the bank’s asset-management unit, according to people familiar with the situation.
The Securities and Exchange Commission’s enforcement division is looking at whether senior asset-management executives at the bank developed a policy of improperly steering clients into investments for JPMorgan’s own financial gain, these people said. The SEC is scrutinizing, among other things, how the largest U.S. bank by assets managed pensions and other accounts that hold it to a so-called fiduciary standard, which obligates it to put clients’ financial interests ahead of its own.
Stalking Jon Corzine
Leah McGrath Goodman – Newsweek via ValueWalk
Few of the financial titans who ran firms into the ground over the past decade are as deeply connected on Wall Street and in Washington, D.C., as Jon Corzine, onetime New Jersey governor and U.S. senator and the former CEO of both Goldman Sachs and the now-defunct brokerage house MF Global.
Russell Investments Strategists’ Outlook – Q2 2015 Update
Press Release – Russell Investments
Russell Investments released its Strategists’ 2015 Global Outlook – Q2 Update report today, which highlights the most recent economic insights and market expectations from the firm’s global team of investment strategists.
Goldman Says to Bet Chinese Rally Continues
Steven M. Sears – Barron’s
Thanks to low volatility, investors can buy cheap options that will pay off big if stocks keep it up.
Apple Inc. (AAPL): 2 Tasty Trades on Apple Stock
Tyler Craig – InvestorPlace
Apple Inc. (NASDAQ:AAPL) has stumbled amid the broader market selloff this past month. Following Friday’s drop, shares of the tech titan were 8% off their highs.
While Apple stock holders may be displeased with its recent bout of weakness, option sellers should be applauding the downturn — it has re-inflated the otherwise flaccid premiums available in AAPL options.
Shorting The VIX: How To Protect Profits In A Volatility Spike
Despite the S&P 500 dropping 2.2% last week for the largest weekly loss in a month, finally injecting some volatility into the markets, the past two months have largely been a snoozefest. A short position in any of the major volatility ETFs has returned a tidy profit, as the VIX settled near 4-month lows. This profit comes due to both the slumping volatility itself along with a strong assist from the contango currently present in the VIX futures market on which volatility ETFs are based. This is a recipe for easy money. However, the enemy of profitability is complacency.