Observations & Insight

Hamilton the Musical is a Market Obsession
John Lothian – JLN
Since I first heard of Hamilton the musical I have wanted to see it. So have my kids. And my staff. I am a big Alexander Hamilton fan. There is a lot of demand to see this Broadway musical, and I confess that seeing it has become an obsession of mine. I was advised recently that I have included a few too many Hamilton references in the newsletter, and that I should concentrate more on the important issues of the day – market structure, market regulation, algorithmic trading, listed versus OTC markets, futures and options.

Lead Stories

New Fiduciary Rule Spares Options
Steven M. Sears – Barron’s
Last week, the Labor Department backed away from a controversial plan to ban the use of options in retirement accounts. It was an entirely unexpected outcome.
Until the final moment, options had seemed destined to become victims of a broad government effort intended to protect investors from unscrupulous financial advisors. Somehow, options and futures were pulled from the final 1,000-page rule requiring advisors to ensure that the retirement advice they provide serves the client’s best interests.

***JB: Much has been written on this the past few days but as is often the case Mr. Sears is the one you want to hear from.

This Fear Gauge Just Hit An All-Time High
Luke Kawa and Julie Verhage – Bloomberg
While the Chicago Board Options Exchange Volatility Index (VIX) has continued moving lower following its February surge, suggesting that some calm has returned to the markets, Credit Suisse Group AG’s Fear Barometer just hit a new high.

Derivatives: Caught in the Brexit Cross Fire
The Brexit campaign is heating up with the City of London being one of the main battlegrounds. Campaigners on each side are drawing their distinct lines in the Square Mile but it is difficult to predict the outcome, not to mention the fate of one of the world’s leading financial centres.

The Option Queen Newsletter
Jeanette Young and Jordan Young
The new Fiduciary rule regarding the sales of investment products in retirement accounts puts a restriction on investment advisors, cautioning them to only deliver products that are appropriate for the client. This puts the onus on the compliance officer to make sure the brokers under his or her watch comply.

BigTrends.com Weekly Market Outlook – Hawkish Fed?
Moby Waller – CBOE Options Hub
It’s too soon to assume the worst yet. On the other hand, it’s not too soon to prepare for the worst even as we hope for the best.
Last week, stocks lost ground for the second time in three weeks. More than that, the major indices are now putting a great deal of pressure on some critical support levels. Worse still, we’re seeing clear signs of waning bullish momentum. That’s not to say that bearish momentum has developed yet. It is to say, however, this is how bearish momentum starts. The good news is, there’s a ton – far more than usual – technical support in place ready to rekindle the bullishness that materialized in the latter half of February. It’s just a matter of using it.

Is the Glass Half Full for the S&P 500 Index?
Todd Salamone – Schaeffer’s Investment Research
I found it interesting on the heels of past observations I have made in making comparisons to double-digit percentage rallies in the S&P 500 Index (SPX – 2,047.60) and the SPDR S&P ETF Trust (SPY – 204.49) in September-October 2015 and more recently, off the February lows. But, one contrast I have pointed out is the behavior of the shorts, as we detailed last week, suggesting there is more short-covering potential and skepticism greeting the current rally, relative to last fall’s.

Wall Street Wages Double in 25 Years as Everyone Else’s Languish
Jennifer Surane – Bloomberg
Dear Wall Street: Stop complaining about your pay.
Five years after Occupy Wall Street protesters took over Zuccotti Park in downtown Manhattan, spawning a national discussion about the divide between America’s highest and lowest earners, the pay gap has only gotten wider. Now, even as bankers bemoan their declining bonuses and job prospects, it’s helping fuel the campaigns of Donald Trump and Bernie Sanders.

***JB: That boat and bungalow in the Bahamas won’t pay for themselves!

Regulation & Enforcement

Japan’s FSA Says HFT Trading to Be Discussed at April Meeting
Yuji Nakamura – Bloomberg
Japan’s financial watchdog is taking the next step in its examination of high-frequency trading.
The Financial Services Agency said on Friday it will discuss HFT at the next meeting of the Financial System Council, which will be held in early April. The Council will review if the practice is contributing to market volatility and whether it is having a negative effect on the long-term value of listed companies.


A Portfolio Of Puts
Jeff Klearman – Seeking Alpha
But what about a portfolio of covered put positions? After all, investors may desire to sell put options on a portfolio of underlyings where a put option on that portfolio is simply not available. What, then, are the characteristics of a portfolio of covered put options?

Two Rivers manager uses options to combat current volatility
Kathleen Gallagher – Journal Sentinel
Plagued by low interest rates and heightened market volatility, a Two Rivers money manager is turning more and more to a strategy for combating them: options trading.
While options aren’t without risk, George V. Reis says selling covered calls and puts is a good way to earn some extra income on shares that investors are planning to buy or sell anyway.

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