Observations & Insight
Scott Gordon, Rosenthal Collins Group – Seven (Slightly Unconventional) Career Tips From a Former Summer Intern
“Trying is the key. I’ve had some successes in my life and I’ve had a bunch of failures — some spectacular failures… But whichever you have, if it’s a success or a failure, they’re momentary. You can take a victory lap if you have a success or you can take a misery lap if you have a failure. But in either case it’s fleeting, it’s gone and you better get on with your life.”
Scott Gordon, CEO of Rosenthal Collins Group, has career advice that applies whether you are shoveling snow or breeding horses: start by taking a holistic look at what is going on in the industry, not just the day-to-day activities that involve you personally. If you are able to take that big picture look into account, the rest is fairly simple to implement. Once aware of the situation, be ready for anything, since careers are taxis not trains — they don’t take linear paths to their destinations. Gordon expands on his career advice in this video, perhaps most importantly reminding audiences not to obfuscate their lexicon.
Fortress, Bain Lead Hedge Funds Liquidating in Market Volatility
Saijel Kishan and Simone Foxman – Bloomberg
Fortress Investment Group LLC and Bain Capital are leading the list of big-name money managers liquidating hedge funds this year as volatility roils global markets.
Hedge funds with more than $16 billion have announced shutdowns so far in 2015, according to data compiled by Bloomberg. Fortress said Tuesday it’s closing its $2.3 billion macro business run by Michael Novogratz after posting losses for almost two years. Bain said last week it’s shuttering its macro fund, which sustained more than three years of declines.
The shadow convexity risk in the machine (and the VIX)
Izabella Kaminska – Financial Times
Every so often Chris Cole, of Artemis Capital, perhaps one of the deepest and most provocative thinkers in the volatility trading space, graces us with a rare glimpse into his imaginarium.
Market Volatility Boosts Options Volume
As stock-market volatility spiked in August, more market participants turned to options as a way to hedge against fluctuating equity prices.
Equity markets churned in August, as investors questioned China’s economic growth story and awaited an interest-rate increase from the Federal Reserve. In options, trading volume averaged 20.3 million contracts per day in the seasonally slow final summer month, 25% more than the 16 million daily average in January through July, according to OCC data.
VIX Charts Show How Unsettled the U.S. Stock Market Still Is
Oliver Renick – Bloomberg
Even after the best weekly rally of 2015, the U.S. stock market is a place fraught with peril.
Active Managers Catch Break as U.S. Stock Correlations Collapse
Stock correlations haven’t just unwound following the equity market meltdowns of August and September — they’ve come asunder, falling to the lowest level since 2007. That’s good news for active mutual fund managers, who thought they saw their year fall apart in the third quarter.
The collapse can be seen in the Chicago Board Options Exchange’s S&P 500 Implied Correlation Index, which uses options to measure expectations about whether the U.S. equities will move in unison and on Monday slipped to the lowest level ever. The gauge is down 30 percent after reaching a 10-month high amid the Standard & Poor’s 500 Index’s August correction.
CBOE’s Skew predicts a twist
Jamie Chisholm – Financial Times
First rule of technical indicator club: get yourself a hyperbolic nickname.
Moving averages give us the “golden cross” and “death cross”. The CBOE’s Vix index is known, much to many commentators’ annoyance, as “Wall Street’s fear gauge”.
Market’s Volatility Evaporates
Kristen Scholer – WSJ
16 – Level that the CBOE Volatility Index ended at on Monday, its lowest in about two months.
Where has all that volatility gone?
Is VIX Actually Cheap Right Now? (And How Can We Tell?)
Adam Warner – Schaeffer’s Research
I mentioned yesterday a trading idea I liked now that the CBOE Volatility Index (VIX) is “cheap.” That leaves an important question, though: Is VIX actually “cheap”?
Head of Warsaw bourse questioned in anti-corruption probe
Henry Foy – Financial Times
The head of the Warsaw Stock Exchange was questioned by agents of the country’s anti-corruption agency yesterday, in connection with the sale of shares in a state-run company that he was involved with in a previous role.
Rise of co-location: High-speed trading makes up 50% of TSE transactions
Nikkei Asian Review
High-frequency trading through a co-location service now makes up around half the activity on the Tokyo Stock Exchange, raising both hopes for a brisk market and fears of excessive volatility.
DTCC warns against growing contagion risk
Cian Burke – Futures & Options World
US clearing giant the Depository Trust and Clearing Corporation (DTCC) has warned market participants to draw up plans to address their financial market “interconnectedness” risks ahead of the finalisation of US regulations that will mandate the practice for clearing organisations.
Regulation & Enforcement
SEC Charges 6 Firms for Short Selling Violations in Advance Stock Offerings
The Securities and Exchange Commission today announced enforcement actions against six firms, including more than $2.5 million in monetary sanctions and, in the case of one previously sanctioned firm, an order barring the firm from participating in stock offerings for a period of one year as part of its ongoing enforcement initiative focused on violations of Rule 105 of Regulation M.
Intended to preserve the independent pricing mechanisms of the securities markets and prevent stock price manipulation, Rule 105 prohibits firms from participating in public stock offerings after selling short those same stocks.
SocGen to keep Symphony communication records – NY regulator
Societe Generale has agreed with New York’s financial regulator to keep a record of all the communication by its employees and clients using Symphony Communication Services LLC’s messaging service for seven years.
Orc and CameronTec to merge operations
Alice Attwood – Futures & Options World
Trading system firm Orc Group is merging with messaging developer CameronTec Intressenter Holding to create a full technology offering under owner Cidron Delfi, with Orc’s CEO set to head up the combined operations.
Applying the brakes is the new way to try to beat the market
Philip Stafford – Financial Times
High-frequency trading (HFT) attracted public attention with the flash crash of May 2010. The story of the market dropping 400 points in minutes and rebounding because of superfast technology opened a window into a world that only traders, executives and boffins previously knew about.
Following that came further tales of barely credible uses of technology. Software and hardware were modified and made hyper-efficient to save microseconds and reduce “latency” — the delay between a computer click and a deal’s execution.
More than Just Beaches: Barclays Accelerator Heads to Tev Aviv and Cape Town
Ron Finberg – Finance Magnates
The Barclays Accelerator, a program for fintech startups presented by Barclays and Techstars, has announced that they are expanding their program to Tel Aviv, Israel, and Cape Town, South Africa. Already open for new applicants, the programs are expected to begin in 2016. The new centers follow programs established in New York and London.
Earnings Take Center Stage
Henry Schwartz – CBOE Options Hub
In my experience option traders fall into one of two distinct camps: single stocks and index/ETFs. Despite similar contract specifications and pricing models, the mindset required to trade each product type is notably different. Single stock traders have earnings releases, takeovers, and other company-specific events to worry about, while index traders tend to pay close attention to macroeconomic headlines and global equity and volatility movements. On average in our markets about 50% of the volume trades in single stocks, with the balance trading among index and ETF products.
Simplifying Complexity: Trading Complex Order Books in Options-Part 1
Ivy Schmerken – Markets Media
The appetite for multi-leg options strategies is on the rise.
But this also means capturing liquidity that is fragmented across multiple options exchanges.
Complex orders or spread trades allow traders to simultaneously buy or sell a number of different options in what otherwise would require separate orders.
Option Assignment is Not Always Bad
Meredith Kelley Zidek – CBOE Options Hub
If anyone remembers (and even if you don’t), back in early September I griped a little about my booked gains/losses for the month of August not showing the premium I received for puts I wrote which were then assigned. The brokerage incorporates the premium received into the cost basis for the shares upon assignment. I may not have liked that then, but I sure do like it now. See illustration below on the transactions and the outcome in my account as of today: