JLN Options: The Case Against an Options Ban; Goldman Sachs Sees Best Time in Two Decades to Buy S&P 500 Calls; Iron Ore Jumps Most on Record as Market Goes ‘Berserk’

Mar 7, 2016

Lead Stories

The Case Against an Options Ban
Steven M. Sears – Barron’s
By late March, investors should learn if the Labor Department will ban options trading in retirement accounts. The outcome right now is too hard to call. The proposal, part of a larger plan to expand the definition of a qualified fiduciary to prevent conflicts of interest among financial advisors, remains under tight wraps, and Wall Street lobbyists have no idea what’s in it, a senior derivatives industry executive says.

Goldman Sachs Sees Best Time in Two Decades to Buy S&P 500 Calls
Cecile Vannucci – Bloomberg
It’s the best time to buy bullish options on the Standard & Poor’s 500 Index in 20 years, Goldman Sachs Group Inc. says.
The U.S. benchmark has a 21 percent probability of rising 5 percent in the next month, according to a model by the New York bank that looks at free-cash-flow yield, return on equity, Institute for Supply Management data and capacity utilization. The options market is pricing in only a 5 percent chance the S&P 500 will move as much.

Iron Ore Jumps Most on Record as Market Goes ‘Berserk’
Jasmine Ng and Jesse Riseborough – Bloomberg
Iron ore soared the most ever after Chinese policy makers signaled their willingness to buttress economic growth, boosting the outlook for steel consumption in the top user and igniting speculation that some investors who’d bet against the market had been caught out.

Best U.S. Stocks Rally Since 2014 Fueled by Optimism in Economy
Joseph Ciolli – Bloomberg
Investors spent the first six weeks of the year concerned the economy stood on the precipice of a recession. Now they’re enjoying the best three-week stretch for U.S. stocks since 2014.

This is the sound of stocks sighing in relief
Alex Rosenberg – CNBC
After starting off the year humming the theme to “Jaws,” investors suddenly find themselves whistling “Zip-a-Dee-Doo-Dah.”
The VIX, which roughly measures market fear, fell Friday to the lowest levels it has seen since 2015. This as the S&P 500 managed to break above 2,000 on the back of a strong employment report.

U.S. interest-rate futures traders see next Fed hike in November
Ann Saphir – Reuters
Traders are betting the Federal Reserve will next raise U.S. short-term interest rates in November, about six weeks earlier than previously thought, after the government reported U.S. employers added many more jobs than expected in February.

The Option Queen Newsletter
Jeanette Young and Jordan Young – The Option Queen Newsletter
Why is gold rising? Believe it or not, the likely culprit is negative interest rates. Why do we say that? A side of effect of low to negative rates, initially installed in an effort to stimulate borrowing, spending and thus the economy has been an indirect currency war. As rates go negative in a country, money migrates away and towards better yielding foreign debt. Subsequently, the demand for currency erodes as does demand for bonds and the currency devalues.

BigTrend.com Weekly Market Outlook – How Long A Pause?
Moby Waller – CBOE Options Hub
Friday’s finish was a lackluster one, possibly hinting that this leg of the rally has finally run out of gas and the bulls need a breather. Of course, after what was nearly a 10% runup from the mid-February low, a break for the bulls is neither surprising nor especially troubling just yet. The crux of the matter is when, where, and if any rest period for the rally comes to a close and the bullishness is rekindled.


Fight Over Sale of London Stock Exchange Is About to Get Nasty
Matthew Leising, Annie Massa and John Detrixhe – Bloomberg
A fight for control of London Stock Exchange Group Plc could get bare-knuckled as potential buyers jockey for dominance in an industry that’s quickly consolidating.
After LSE said it was in merger talks with Germany’s Deutsche Boerse AG, the two largest exchange owners in the world, CME Group Inc. and Intercontinental Exchange Inc., or ICE, may step in with unsolicited offers.

LSE’s Derivatives Market to Launch Despite Talks With Rival
John Detrixhe – Bloomberg
London Stock Exchange Group Plc will go ahead as planned with the launch of its new derivatives market, even though the venue will compete with a market run by potential merger partner Deutsche Boerse AG.

LSE’s derivatives market to launch despite talks with rival
The venture is a consortium with banks and the Chicago Board Options Exchange, and is explicitly designed to take on the giants of European interest-rate futures trading

CBOE and Bloomberg Expand Connectivity to CBOE’s PULSe Trader Workstation
Press Release – CBOE
Chicago Board Options Exchange (CBOE) announced today that it has joined with Bloomberg to establish direct connectivity between CBOE’s PULSe trader workstation (PULSe) and Bloomberg’s Execution Management System (EMSX), which can be accessed through the Bloomberg Professional service.
The linkage between CBOE and Bloomberg expands access to the PULSe trader workstation, allowing Bloomberg EMSX users to send, execute and confirm orders electronically with CBOE floor brokers and other PULSe users.

Nasdaq could be next after LSE deal, says Credit Suisse
Joe Parsons – The Trade News
Nasdaq could become the next exchange group to be acquired if the planned merger talks with the London Stock Exchange (LSE) and Deutsche Boerse go ahead, according to an analyst note from Credit Suisse.

Regulation & Enforcement

SEC to Decide on IEX Group Stock Exchange
Bill Alpert – Barron’s
America has been a good place for retail stock traders. Thanks to automated brokers and market-makers, it’s never been cheaper or faster to trade 500 shares of stock—as a Barron’s computer study showed last year (“The Little Guy Wins!” March 2, 2015). Yet many institutional investors feel ill-served by today’s microsecond markets—as writer Michael Lewis showed in his 2014 book Flash Boys. And that’s a problem for little guys, too, since so many people invest through funds. No wonder the Securities and Exchange Commission has agonized for six months over a decision that seems to pit the big money against the retail crowd.


Has The Indian Stock Market Hit Its Bottom?
Nikhik Gupta – Seeking Alpha
The Indian stock market is off to a flying start in March as the benchmark index Nifty 50 climbed 6.5% in the first week alone. After a highly volatile Budget session on 29th February, the market decimated the bears, climbing from a low of 6,825 points to touch a high of 7505.90 points. The hot rally has coerced the analysts into revising their price targets to the upside.

Options Trading Ideas Since Gold Rallied Again “Somewhat Mysteriously”
Fred Oltarsh – MoneyShow.com
For those interested in trading options and initiating options trading strategies based on implied volatility, Fred Oltarsh at Options Strategy Network thinks the recent Gold futures situation might be an excellent opportunity to design a limited risk long options position enhanced by a comparatively low implied volatility.

VIX: How to Buy Market Protection Now
Serge Berger – InvestorPlace
As a result of the sharp rally in stocks in recent weeks, the implied volatility of options on the S&P 500 — as represented by the CBOE Volatility Index, or the VIX — has come crashing down to the tune of more than 40%.Only a few weeks ago, the VIX was in the high 20s, but the risk-on move has brought it down into the teens. Over the next two weeks we will hear from the European Central Bank, the Bank of Japan and the Fed. While stocks could rally right through these likely dovish central bank statements, buying some protection with a bet on the VIX could now be a smart move for active investors.


VIX Death Cross Update
Russell Rhoads – CBOE Options Hub
This past week I got to attend CBOE’s Risk Management Conference in Florida and finished my week at Oklahoma State as a guest lecturer. When I travel like this I am not watching the markets as closely as I would like and as I updated charts this morning I nervously scanned the numbers used to create the chart below. I say nervously because I was afraid I had dropped the ball on catching the VIX Death Cross. It turns out I updated charts just in time.

Trading Memories, Part 1
Bob Lang – CBOE Options Hub
With the passion I have for trading, I remember many seminal events in my trading career. These memories run along the spectrum of the best wins to the most awful losses. I remember things that happened years ago with pinpoint accuracy, not because I like to reminisce over past glories or failures, rather these are embedded in my memory bank so I do not make the same mental mistakes twice.
Let’s face it: trading is so much a mental game. We can overthink a situation to the point where we can talk ourselves out of a trade, feel regret and then end up breaking our rules – we know what always happens henceforth.

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

Seeing red: tricky times in the markets

Seeing red: tricky times in the markets

$34,126/$300,000 (11.4%) ++++ Lead Stories Seeing red: tricky times in the markets Stefan Wagstyl - Financial Times As investors we like to think we're acting rationally, even though there are mountains of evidence to show that, all too often, we're not. A successful...

Pin It on Pinterest

Share This Story