Observations & Insight

A Party to Remember
The party for Gail Osten was held yesterday in Elmhurst, IL. Yes, a party, not a wake or memorial. That was Gail’s wish and had many at the party saying things like “This is a great idea.” I suspect Gail’s legacy will stretch to many others in many different ways in the coming years, as more of us choose a party to celebrate our lives, rather than a funeral to mourn our death. It was well attended by family and friends, with a large showing from the industry she loved and served. One notable absence was John, due to illness, possibly marking the only time he will have had a chance to attend a party in Elmhurst that was largely industry people. I think Gail, with her great sense of humor, is probably laughing about that. Our story on Gail, Think Positive: Gail Osten Leaves Fond Memories, was the most read story on John Lothian News, with more than 3,000 views this month.

Lead Stories

How a trader just made $2.4 million in half an hour
Lawrence Lewitinn – CNBC
In a very well-timed trade, a trader made over $2 million in just 28 minutes, playing what could be one of the biggest tech deals this year.
The Wall Street Journal reported on Friday that Intel is in talks to buy competitor chipmaker Altera. Shares of Altera shares soared 28 percent when the report was released, valuing the company at $13.4 billion by the end of trading on Friday.
For one trader, the report allowed for incredible profits in a very short amount of time.

**JK – Not even St. Patty’s Day either.”

Altera’s stock soared 28%, but some of its options rocketed 2200%
Tomi Kilgore – MarketWatch
The 28% surge in Altera Corp.’s stock to $44.39 on Friday, after a Wall Street Journal report of buyout interest from Intel Corp. has some options traders doing cartwheels.

Hedge Funds Are Shorting Gold at Highest Level Since 2006
Luzi Ann Javier – Bloomberg
Hedge funds are betting that gold’s recent rally won’t last and are holding the biggest wager ever that prices will decline.
The net-long position in gold dropped by 9.9 percent to 31,653 futures and options in the week ended March 24, according to U.S. Commodity Futures Trading Commission data published three days later. That was the lowest since December 2013. Short holdings rose for a seventh straight week to 84,022 contracts, the highest since the data begins in 2006.

Too Much of Everything Spurs Commodity Exodus as Price Wars Rage
Luzi Ann Javier and Marvin Perez – Bloomberg
Investors are bailing out of commodity funds at the fastest pace on record, and the exodus shows no signs of ending…
Hedge funds are exiting commodities, based on futures and options for 18 U.S.-traded items. Since bullish bets reached the highest ever in April, net-long positions on March 24 are down 98 percent to 37,708 contracts as of March 24, government data show. The measure tracks the number of contracts, not value, which ranges from about $120,000 for gold futures to $13,600 for sugar.

How to Prove Your VIX Thesis in One Easy Step
Adam Warner – Schaeffer’s Investment Research
Arbitrary time frames are the key to calling ‘trends’ in the CBOE Volatility Index (VIX)

Using Big Data To Project Where The VIX Will Go – (VIX)
The VIX was up 16 percent 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.

**JK – Many have tried to predict the VIX, to no avail.

Market Complacency Now Reigns Supreme; Nothing Can Go Wrong, Right?
Charles Hugh Smith – Investing.com
One of the more remarkable features of the Bull market in stocks is the ascendancy of complacency and the
banishing of fear. Take a look at this chart of the “fear index,” the VIX–more properly, a measure of volatility:

The Option Queen Newsletter
We are going to repeat a statement we made many months ago; the FOMC is not going to raise interest rates anytime soon. Why? Because it would snuff out any economic expansion in the pipeline, strengthen the US Dollar, stall the unimpressive job market’s growth and negatively impact corporate earnings. These are only a very few reasons why the Federal Reserve will take a wait and see attitude. The mess created by the Fed’s tinkering with the business cycle’s booms and busts will not end well. Sooner or later, the piper will have to be paid. There is no way we can tell you when only that this will occur. This is why we have and continue to advise keeping stops tight and paying attention to your investments.

**JK – One of the best summaries in a lead paragraph I’ve seen in awhile.


Does Amazon offer a template for exchanges?
Richard Baker, chief executive of Cleartrade Exchange – FOW
Financial marketplaces are changing. Fact. The more traditional approach of pit trading within a localised community – where you might come to deposit your grain for example and ultimately take a hedge on the futures market – is in decline. However, as the evolution of our market soldiers on, it’s important to take a step back and reflect on where the exchange trading market is heading… are we really on the right track?

ICE Clear Europe granted CFTC order permitting portfolio margining of futures and foreign futures contracts by non-clearing member FCMs
The US Commodity Futures Trading Commission (Commission) has issued an order granting a request from ICE Clear Europe Limited (ICE Clear Europe), a Commission-registered derivatives clearing organisation, for an order pursuant to Section 4d(a) and (b) of the Commodity Exchange Act.


Speed Traders Make Peanuts in Profits From Economic Data Plays
Annabelle Ju – Bloomberg
High-frequency traders treat the latest economic reports like predators stalking their prey, pouncing in tiny fractions of a second to buy or sell according to whether it was good news or bad.
For all the preparation and high technology, a new academic paper suggests they’re not minting money.


Options Trading Bullish on Banks
Steven M. Sears – Barron’s
Institutional investors that own major financial stocks are trading January options in anticipation that year-to-date weakness will turn into strength by year’s end.

As March ends, it’s time to buy volatility
Stephen Pope – TradingFloor.com
The chart below will show that over the past three years, the level of the Chicago Board Options Exchange VIX volatility index rises into April and May. The greatest change was in 2012, and although the increases in the subsequent two years were less pronounced they can undoubtedly be seen as well.


Are Financial Derivatives WMDs?
Greg McFarlane – Investopedia
Few words in finance carry a greater negative connotation than “derivative,” thanks in large part to the financial crisis of 2007-08. To the casual observer’s understanding, traders in designer suits and Barker Black shoes exchanged some extremely complicated financial instruments, which somehow resulted in tens of thousands of Americans with subprime mortgages losing their homes. Warren Buffett famously likened derivatives to WMDs–weapons of mass destruction–but then again Buffett often dishes out catchy aphorisms that the media treat as divine pronouncements.

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