Dormant VIX Belies Options Bonanza for Bets on Earnings Swings
Joseph Ciolli and Bailey Lipschultz – Bloomberg
U.S. companies with active options have seen high volatility
S&P 500 pushed aside geopolitical turmoil to reach records
Below the surface of the calmest stock market in two years lurks some of the highest earnings-related volatility of the past few decades. Since quarterly reports began last week, an options strategy that profits from a large stock move in either direction has seen returns that are more than 10 times higher than the 20-year average, according to data compiled by Goldman Sachs Group Inc.
As Investors Sing a Happy Tune, Smart Money Wonders if It’s Time to Sell Stocks
Randall W. Forsyth – Barron’s
Summertime and the livin’ is easy. Stocks are jumping and the market is at record highs. Apologies to George and Ira Gershwin, but on an idyllic midsummer’s day it seems churlish to carp or even worry. As the major averages take to the sky, however, signs of complacency and optimism are raising caution flags to contrarian-minded types.
Euro Traders Tell Draghi That ECB’s Policy Is Going Nowhere Fast
Andrea Wong and Anchalee Worrachate – Bloomberg
Euro traders are sending Mario Draghi a clear message: Monetary policy is reaching a dead end. Just look at how the world’s most-traded currency pair has done this year. Its 200-day moving average has been stuck around $1.10, and it has registered the smallest move of any of the major currencies. All the while, Draghi and the European Central Bank delved deeper into negative interest rates and more aggressive bond-buying — policies that might typically debase the euro.
Options traders suggesting stocks have leveled off
Akin Oyedele – Business Insider
The way two groups of investors on Wall Street are trading options suggests that stocks may be leveling off. Early on Thursday, the Dow threatened to end nine straight days of gains and seven consecutive sessions of hitting new highs. According to Randy Frederick, managing director of active trading and derivatives at Charles Schwab, the behavior of institutional investors and retail traders in the options market may be foretelling a flattening of the recent trend.
More money managers think U.S. equities overvalued, Northern Trust survey finds
Meaghan Kilroy – Pensions & Investments
More money managers believe U.S. equities are overvalued, said Northern Trust’s second-quarter investment manager survey released Thursday. Forty-six percent of managers now believe U.S. equities are overvalued, the highest reading in the survey’s seven-year history and up from 30% last month.
A Look Inside CCPs: Trends in the Data
Amir Khwaja – TABB Forum
Central Counterparties recently published their new, voluntary CPMI-IOSCO Quantitative Disclosures, offering a third quarter of quantitative data and a detailed view of the CCP landscape. Clarus CEO Amir Khwaja takes a look at some of the major trends.
LME e-trading down four hours over network issue
Alice Attwood – Futures & Options World
LME said it was forced to delay the opening of its trading system by four hours
The London Metal Exchange delayed the open of its trading system LMEselect by more than four hours early Friday morning due to a network issue, the LME’s first glitch since a major tech upgrade in November. A spokesperson for the LME told FOW members were unable to access Select via LMEnet, its network, on Friday due to an issue linked to scheduled maintenance work by external network provider Colt Technology Services, .
Moscow Exchange calls vote on restructuring
Julie Aelbrecht – Futures & Options World
The largest Russian exchange also named new board and council members
The Moscow Exchange has called a meeting of shareholders to vote on the proposed restructuring of the Russian exchange giant. The Moscow Exchange’s (Moex) supervisory board called on Thursday an extraordinary general meeting of shareholders for September 2 of this year. The shareholders will vote on the corporate restructuring of the exchange with the consolidation of its subsidiaries CJSC Micex Stock Exchange and MB Technologies, which supports co-location to the Russian derivatives market.
Regulation & Enforcement
New Mifid II algo rules “win for the market”
Alice Attwood – Futures & Options World
Latest RTS under Mifid II was adopted by the European Commission on Tuesday
The Mifid II rules on electronic trading published by the European Commission on Tuesday are “a win for the market” due to key changes in the language of the regulatory technical standards (RTS), according to industry lawyer Sam Tyfield. “The changes to the previous use of ‘disclose’/’publish’/’make available’ language in RTS 6 are a win for the market,” Sam Tyfield, partner at law firm Vedder Price told FOW Friday. The changes to the language in the rules means the requirements are easier to understand, Tyfield said.
Options trading, futures in eight new commodities recommended
Business Standard News
The Securities and Exchange Board of India’s advisory committee for commodity market has proposed introduction of options in liquid commodities and introduce futures trading in eight new commodities including tea, coffee, milk products, eggs in phased manner. The regulator will evaluate advisory committee’s recommendations before placing for final decision before its board but introduction of options is understood to be on uppermost agenda of the regulator, informed sources said.
Concurring Statement Of CFTC Commissioner Sharon Y. Bowen Regarding The Division Of Clearing And Risk’s Memorandum To All Registered Derivatives Clearing Organizations Regarding Recovery Plans And Wind-down Plans Maintained By Derivatives Clearing Organizations And Tools For The Recovery And Orderly Wind-down Of Derivatives Clearing Organizations
This staff memorandum provides thoughtful recommendations on central counterparty (CCP) recovery and wind-down. As Sponsor of the Market Risk Advisory Committee (MRAC), I have been a part of a number of public discussions on these crucial issues, including the committee’s very first meeting in 2015, which focused on CCP resilience in the event of a default of a significant clearing member.
A Clue to the Scarcity of Financial Crisis Prosecutions
William D. Cohan – NY Times
One of the enduring mysteries of the 2008 financial crisis has been why the Justice Department made so few attempts to prosecute the individuals responsible for it, given the abundance of tangible evidence of wrongdoing by Wall Street bankers, traders and executives in the years leading up to the great unwinding.
SIP Speeding Up
John D’Antona – MarketsMedia
Fast is about to get faster when it comes to processing speed for the Securities Industry Processor, known as SIP. As high-frequency traders and their hyper-fast computers and software have whittled equity executions to the low microsecond levels, many institutional traders have been left in the dust. But the game is about to get a lot more competitive, as the SIP — which most traders rely on to get their trade information, messaging and orders executed is about to get more improvements that can bring latency down to 50 microseconds, or 50 millionths of a second.
Lack of Fear in Markets a Bad Sign
Chris Vermeulen – ETF DAILY NEWS
I was recently looking at the CNN money website where they post this fear & greed index. It caught my attention because many other aspects of the market are now also showing signs an imminent correction in the stock market. This analysis is a contrarians play, meaning you believe that when mass majority of market participants are thinking and doing the same thing, you believe the market is about to change direction.
Earnings Next Week – 7/25 – 7/29
Russell Rhoads – CBOE Options Hub
Next week is the heaviest earnings week with respect to stocks with Weeklys that I can recall. As always the data below is based on the last three years of earnings results unless the ticker is in italics. The columns show the biggest rally, biggest drop, average move, and what the stock did last quarter in reaction to earnings.
The Clean-Plate Club
Meredith Kelley Zidek – CBOE Options Hub
Little did I know how soon I’d be back to report on the status of the last line of my most recent post – specifically my declared hope/dream to be rid of the SVXY that became like a pebble in my shoe.