Equity traders make counter-intuitive bets on OPEC surprise
Blaise Robinson – Reuters
PARIS – Some equity traders have been buying up ‘call’ options on shares of oil majors ahead of Thursday’s OPEC meeting, betting the cartel will spring a surprise cut in output to revive crude prices.
The trade idea – which has very limited risk since it uses derivatives instead of buying shares – is a bet that sentiment toward the sector has become excessively negative and oil shares are ripe for a technical rebound if OPEC members opt for a bigger-than-expected output cut.
Oil Volatility Here to Stay Regardless of OPEC Decision
Inyoung Hwang and Jonathan Morgan – Bloomberg
Whatever the outcome of tomorrow’s OPEC meeting, options traders are betting on oil-price swings.
That’s because the decision from the Organization of Petroleum Exporting Countries isn’t likely to make much difference. Slowing global demand and a U.S. shale-drilling boom has created a glut that won’t fade any time soon, said Torbjoern Kjus of DNB ASA in Norway.
Half of analysts surveyed by Bloomberg expect a cut in production at the meeting in Vienna tomorrow; the rest don’t see a deviation from OPEC’s 30 million barrel-a-day target. Yet an index tracking expectations for moves in oil prices reached the highest ever versus a gauge that measures equity volatility, according to data compiled by Bloomberg going back to May 2007.
Lawsuit alleges manipulation of precious metals benchmark
Henry Sanderson – The Financial Times
A US jewellery company has filed a class-action lawsuit against Goldman Sachs, HSBC, Standard Bank and BASF alleging manipulation of benchmarks used to set the price of platinum and palladium.
The lawsuit, filed in New York, seeks damages for what it alleges was an eight-year conspiracy to manipulate the global benchmarks for physical platinum and palladium prices as well as futures and options tied to those prices.
Russell sets orderly schedule to close the Russell Equity ETF (ONEF)
Russell Press Release, November 25, 2014
Russell Investments announced today that the Board of Trustees of Russell Exchange Traded Funds Trust authorized the orderly termination and liquidation of the Russell Equity ETF (ONEF) on or before February 6, 2015.
The Fund will be closed to new investment on January 26, 2015. NYSE Arca, Inc. will suspend trading in the Fund before the open of trading on January 27, 2015. Full liquidation of the Fund is intended to be completed by February 6, 2015.
Russell is closing and liquidating the Russell Equity ETF because this product hasn’t generated the amount of interest as projected and as a result Russell believes it is in the best interests of shareholders to close it.
VIX at lowest close in two months
Chris McKhann – optionmonster.com
Equity indexes were mixed but little-changed yesterday, while the CBOE Volatility Index fell to its lowest close in two months.
The S&P 500 slipped 2.38 points, or 0.12 percent, to 2067.03. It hit 2074.21 in the morning, a new intraday high. The SPX has potential resistance at that level, with support at 2040.
The Nasdaq 100 added 3.91 points, or 0.09 percent, to close at 4288.23 after reaching 4302.44 in the morning. Both are new 14-year highs for the NDX, which has support at 4200.
Indian Stocks Advance Before Derivatives Expiry as ITC Rebounds
Rajhkumar K Shaaw – Bloomberg
Indian stocks rose for the fourth time in five days, with the benchmark index erasing an intraday loss, as some traders closed bearish bets before the expiry of monthly derivative contracts tomorrow.
ITC Ltd. (ITC), India’s biggest cigarette company, rebounded from the steepest drop in five months. Bharat Heavy Electricals Ltd. (BHEL) rose to the highest level since May. DLF Ltd. (DLFU) surged 7.2 percent, pushing up a gauge of property developers by the most in two months.
Stock-based derivative trading gains traction
Analysts concerned about high-leverage in the system
Sneha Padiyath – Business Standard (Mumbai)
Trading in the stock derivative segment is slowly picking up pace as investors get less risk-averse and much more confident about the market direction. Analysts said that investors were willing to take speculative positions on individual stocks by taking higher leverage, often without adequate hedges in the cash market.
The uptrend in the market, which has seen benchmark indices move up by about 30% since January this year, has made investors bold enough to increase exposure in the derivatives segment, industry officials said.
Nigeria bourse aims to offer derivatives by 2016
Duncan Miriri – The Africa Report
The Nigerian Stock Exchange plans to start allowing trading by 2016 of derivatives such as futures and options in interest rates, currencies and equity indexes, its chief executive said.
The exchange, one of the main entry points for foreign funds looking to tap Africa’s fast-growing economies, now only offers shares, bonds and exchange-traded funds.
Chief Executive Officer Oscar Onyema said the exchange’s surveys showed there was “encouraging” demand for derivatives, which help investors to manage the amount of risk they take on.
“Our target is to really get them by 2016 at the latest,” he told Reuters late on Tuesday, adding they were setting up a clearing house, which required significant investments.
ICE Endex Achieves Daily Volume Records in TTF Natural Gas and Dutch Power Futures Contracts
ICE Press Release via Businesswire
AMSTERDAM & LONDON–(BUSINESS WIRE)–Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today announced that ICE Endex achieved a record daily volume in TTF Natural Gas futures with 27,569 contracts traded on November 25, 2014. A new total daily volume record for Dutch Power futures across Dutch Power Baseload and Dutch Power Peakload was also reached, with 3,475 contracts traded on November 25, 2014.
Melamed says HFT represents an evolutionary step
Milton, Merton, Myron, Markets and Me
Leo Melamed via Futures Magazine
A speech by Leo Melamed during his November European Tour
A primer on futures
According to the Bank of International Settlements (BIS), the notional dollar value in 2013 of financial futures traded was an astounding one quadrillion, 886 trillion, 283 billion, and 4 million ($1,886,283.4 billion). Financial futures and options represented 81.3% of all futures contracts traded in 2013.
Here we are—after the crash of 2008, after derivatives were in some quarters blamed as one of the causes of the global meltdown—the use of futures markets and over-the-counter financial derivatives as tools with which to efficiently manage risk is stronger than ever.
Put A Collar On Hewlett-Packard Stock, Not Your Cat
Gregory W. Harmon – Investing.com
Some things look great with a collar on them. Maybe not your cat though. But a collar for protecting a stock position can look fantastic.
Last week I wrote about the Cup and Handle pattern in Hewlett-Packard Company (NYSE:HPQ) here. And if you bought Hewlett-Packard based on that idea, or were lucky enough to pick it up at the bottom on October 15th, you are now sitting with a position, and possibly a good sized gain into the earnings report tonight. So now what do you do? Pull out that collar.