JLN Options: 'Hundreds of thousands' of orders placed for Alibaba in debut: NYSE; Yahoo options popular ahead of Alibaba IPO; OCC ANNOUNCES RETIREMENT OF CEO MICHAEL CAHILL AT YEAR-END

Sep 19, 2014

Observations and Insight

Silicon Valley sucks
Jim Kharouf
If you want to find some truly innovative technology and talent, it’s time to start looking at cities such as New York, London and yes, Chicago. Thursday night’s City Lights awards dinner from the Illinois Technology Association featured the best tech firms and leaders in the state, and many of those compete nationally and internationally.

Among the winners last night was Kristi Ross, co-CEO and president of Tastytrade, who won the “Prominent Women In Tech Award.” The other co-founder of TastyTrade, an online financial media firm with a focus on equity options trading and education, is Tom Sosnoff, founder of Thinkorswim. Ross served as Thinkorswim’s CFO.

The financial services industry was well represented in other categories with nominations for Rick Lane, of Trading Technologies for “Technologist Of The Year” and Sanjib Sahoo, CTO of tradeMonster, which recently merged with OptionsHouse, for the “City Lights Award.”

I sat at a table hosted by ORC’s regional president of the Americas Jeremie Bacon and asked him how Chicago stacks up against other tech centers. He said it is coming along quickly and in the next five to 10 years, Chicago will be one of several powerhouse cities in technology and tech innovation. And with tech incubators and collaborative hubs such as 1871 and TechNexus, Illinois will not only keep some of its best young talent from schools such as the University of Illinois, one of the top computer science schools in the world, but also draw talent and venture capital from elsewhere.

Such trends bode well not only for Chicago and other non-Valley cities, but also for the financial services industry, which is always competing for talent. The fact that executives such as Ross, Bacon, Lane and Sahoo are plugged into the broader technology community, and are recognized for their talents means that the financial services sector is not walled off from other innovative people and ideas. A good sign indeed.

Lead Stories

‘Hundreds of thousands’ of orders placed for Alibaba in debut: NYSE
A top New York Stock Exchange executive on Friday said on CNBC that “hundreds of thousands of orders” for shares of Alibaba Group Holdings Ltd. (BABA.N) had been placed ahead of the stock’s trading debut, expected later in the morning.

Yahoo options popular ahead of Alibaba IPO
Saqib Iqbal Ahmed, Reuters
Alibaba Group Holding Ltd’s shares do not begin trading until Friday, so investors hungry for a bite of the Chinese e-commerce giant have turned their attention to Yahoo Inc’s options in recent days.
The volume of options trading in Yahoo – which has a big stake in Alibaba – has risen steadily over the last month. On Thursday, a day before Alibaba’s debut on the New York Stock Exchange, options trading peaked with more than 929,000 contracts changing hands.

Press release via email
CHICAGO (September 19, 2014) – OCC announced today that CEO Michael Cahill plans to retire from OCC at year-end after 32 years with the company. OCC’s Board of Directors has created a Board subcommittee to undertake a search for a new Chief Executive Officer.
 Under the Transition Plan approved by the Board of Directors, Executive Chairman Craig Donohue will oversee the orderly transition of Mike Cahill’s responsibilities to other OCC executives. OCC also announced that, as a part of the Transition Plan, Michael McClain will be promoted from Chief Operating Officer to President & Chief Operating Officer, reporting to Donohue.

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Relief, not euphoria, for UK markets as Scots vote to stay
Relief, not euphoria, for UK markets as Scots vote to stay Reuters Supporters from the “No” Campaign react to a declaration in their favour, at the Better Together Campaign headquarters in Glasgow, Scotland September 19, 2014. REUTERS/Dylan Martinez
By Jamie McGeever
LONDON (Reuters) – British financial markets rose and a collective sigh of relief echoed across the investment and business community on Friday after a Scottish vote against independence averted the deep uncertainty a United Kingdom break-up would have unleashed.

Rally drives volatility indexes lower
Chris McKhann, optionmonster
The S&P 500 and Nasdaq 100 pushed to new highs yesterday as volatility measures continued to fall.
The S&P 500 climbed 9.79 points, or 0.49 percent, to 2011.36 after peaking at 2012.34 intraday. Both are new all-time highs. The SPX now has support at 1980.

Internet IPOs: How Alibaba measures up
The Economist
ALIBABA’S shares were priced at $68 on September 18th, giving China’s e-commerce behemoth a market capitalisation of $168 billion as it started trading on New York’s Stock Exchange. The flotation will raise $21.8 billion, narrowly missing the record for the world’s biggest stock offering, held by Agricultural Bank of China with its $22.1 billion listing in 2010. But if some of the remaining options are exercised by their owners, Alibaba’s could yet be the largest.

Futures and Swaps Seek Happy Medium
Tullett Prebon has on-boarded the vast majority of the market participants who previously executed swaps in the inter-dealer market to its swap execution facility, where market participants can continue to execute swaps, albeit via the registered facility as opposed to the inter-dealer brokering entity.

Surprising FX Vol Developments And Spot Implications
Marc Chandler, Seeking Alpha
Euro and sterling implied volatility has come off this week, not risen as many suspect.
Yen vol remains elevated, but may also stabilize soon.
The FX market appears to have led the developments in the debt market.
I keep getting peppered with queries about the rising volatility. Some want to link it to the FOMC meeting this week or the modest participation in the ECB’s new TLTRO facility. However, the implied volatility picture is more complicated.

Regulation and Enforcement

Regulators move to tackle derivatives data-sharing impasse
By Philip Stafford, The Financial Times
Global regulators want to overcome a data-sharing impasse that threatens to undermine post-crisis market reform with a central utility that oversees sharing of sensitive derivatives information.
The Financial Stability Board, a national regulators’ umbrella association, on Friday recommended creating a single centralised repository, either physical or digital, to draw together fragmented data on trades for over-the-counter derivatives, worth a notional $700tn.


Despite the Excitement, There’s Reason to Think Twice on Alibaba
James B. Stewart – NY Times
Investors love a good story.
They lined up hundreds deep at the Waldorf-Astoria hotel in New York earlier this month to hear Alibaba’s executive chairman, Jack Ma, promote the Chinese Internet retailer’s initial public offering.
“It was a zoo,” said Vincent Rivers, senior portfolio manager for the London-based investment firm J. O. Hambro Capital Management. “There must have been 400 people waiting in line. Everybody was there. It was like a social event.”

Look for a Big Move in BABA By Year-End
Rick Rouse – InvestorPlace
Alibaba (BABA) will make its public debut on Friday on the NYSE and will likely be the biggest IPO ever. However, like most IPOs, BABA won’t trade options right away, which means I won’t be targeting a Momentum Options trade in the stock until its first options chains are available.
Most smaller players in the game won’t be getting a piece of the IPO, but that doesn’t matter. The options on Alibaba will likely price next week, and I am more interested in trading the options on the stock than the stock itself. (The Chicago Board Options Exchange said it expects to start listing BABA options on Sept. 29.)

When Will a Buy-Write Strategy Outperform?
A closer look at the CBOE S&P 500 2% OTM BuyWrite Index (BXY) relative to the SPDR S&P 500 ETF Trust (SPY)
by Adam Warner
Schaeffer’s Investment Research
As we noted yesterday, a general buy-write strategy has outperformed the market over the very long haul — 25 years, to be exact. And, perhaps most impressively, it does it while reducing the volatility of the portfolio.
But alas, your mileage may vary. It very much depends on timing. Here’s a comparison of CBOE S&P 500 2% OTM BuyWrite Index (BXY) to SPDR S&P 500 ETF Trust (SPY) in 2014.

Bank of America Stock Is On the Move Again
By Steven M. Sears, Barron’s
Bullish investors will profit from call options if the advance continues, while skeptics can sell calls.
The Bank of America whole-dollar options trading strategy is back with a vengeance.
After an uneasy hiatus sparked by BofA’s (ticker: BAC ) canceled capital-return plan, and a $16 billion fine to settle credit-crisis claims, investors are once more aggressively buying upside calls with strike prices just above the stock price anticipating that the nation’s second largest bank will keep grinding higher.


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