Lead Stories

‘Risk Has Been Reset Big Time’
By Chiara Albanese – WSJ
The great rotation from bonds to equities is on. That’s according to Bank of America Merrill Lynch, whose data show that bond funds suffered about $10.3 billion outflows last week, the largest redemptions in about two years. During the same period, equity funds saw $10.8 billion inflows, the largest in three months.

US market set for record 2015
By Luke Jeffs – Futures & Options World
US futures and options volumes could increase by 6% year-on-year, Tabb said
The US futures and options market is set for a record trading year if it sustains its first quarter performance despite the number of brokers falling again through the start of the year, according to a new study.

Why Market Weakness Is Typical After Triple Witch Day
By Carley Garner – TheStreet
The S&P 500 has a strong tendency to find intermediate-term highs following a triple witch expiration. If you are unfamiliar with this term, the triple witch is an option expiration Friday in which (not witch) stock options, options on stock-index futures, and even the futures contracts themselves, expire. You might hear some refer to it as a quadruple witch, which includes single stock futures, but they are highly illiquid so they are often left out of consideration.

***SD: Well, we don’t call it a triple teddy bear day for a reason.

Quadruple Witching Could Whack Stocks
By Kristen Scholer – WSJ
Stocks have regained some of their mojo, but they could hit a minor speed bump in the days ahead.
Quadruple witching occurs Friday when stock index futures, stock index options, stock options and single stock futures all expire on the same day. This happens four times a year on the third Friday of the last month of each quarter.

Volatility is low and uncertainty never went away
By James Mackintosh – Financial Times
Conventional wisdom among economists, strategists and fund managers has it that we live in peculiarly uncertain times. What with the Federal Reserve poised to raise US interest rates, Greece about to run out of money (again), wild swings in bond yields and economies that keep wrongfooting forecasters, it is easy to accept.
There is a small flaw in the argument: it is nonsense. The economy is hard to predict. Markets are hard to predict, too, as are Greek finances and interest rates. But this was true last week, last year and five years ago. The outcome of complex systems such as economies and markets is always uncertain, and clashes of diplomatic egos even worse.

***SD: We can predict with certainty that the future holds much uncertainty. Welcome to the human condition.

Return of market shocks puts protection costs in spotlight
By Lionel Laurent – Reuters
Financial market volatility is making a comeback, tempting fund managers into taking out protection against stock-market falls after a near-unbroken five-year bull run in the United States and Europe.

To Every Season, Churn, Churn, Churn
By Adam Warner – Schaeffer’s Research
On one hand, everybody and their local billionaire are taking cover for the next market crash. For today’s piece of evidence, I bring you this, from Steven Sears:
“Major investors are preparing for the stock market to collapse…”

***SD: “A time to laugh, a time to weep.” Sounds about right.

The Many Signs of a Fearful Stock Market
By John Kimelman – Barron’s
In recent days, I’ve come across many accounts in the financial press of investors preparing for a downturn in stocks.
On Wednesday, my colleague Steve Sears penned a piece for this Website detailing how over the past 10 days, investors have been quietly amassing significant stakes in call positions on the CBOE Volatility Index.

This may be the world’s most overpriced market
By Alex Rosenberg- CNBC
Notwithstanding a recent turnabout, Chinese stocks have soared this year—and so have their valuations. Based on the widely used forward price-to-earnings metric, the Shanghai composite index appears to be the most richly valued major market on Earth.


IMC Becomes e-Specialist on NYSE Amex Options
Press Release – Business Wire
NYSE Amex Options, part of the Intercontinental Exchange (NYSE: ICE) global network of exchanges and clearing houses, today announced that IMC Financial Markets (IMC) has become the newest e-Specialist on the exchange. IMC has been allocated 20 issues and will be subject to the heightened market making conditions and quoting requirements taken on by all Specialists and e-Specialists to improve liquidity and market quality on NYSE Amex Options.

Regulation & Enforcement

FINRA and SEC Take Aim At Deficient Cyber Policies And Practices – Finance and Banking
By Mark Mermelstein, Aravind Swaminathan, Daniel J. Dunne and Antony P. Kim – Mondaq
On Feb. 3, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) each released reports regarding cybersecurity issues for brokerage and advisory firms, both of which should be considered required reading for chief information security officers, chief information officers, legal teams and anyone else responsible for managing cybersecurity risk.1 These reports highlight best practices for managing cybersecurity risk and areas for potential improvement, and should encourage firms to consider further investments in cybersecurity because, as FINRA specifically points out, it ”expects firms to consider the principles and effective practices presented in the report as they develop or enhance their cybersecurity programs.”2 As a result, firms should anticipate that elements covered in the reports will be benchmarks for measuring the effectiveness of a firm’s cybersecurity program in any enforcement action brought by either the SEC or FINRA.

Bitcoin Bucket Shop Kicks Bucket
By Matt Levine – Bloomberg
Sand Hill Exchange was a blockchain bucket shop that let people bet on the eventual public-market prices of hot startups. That is so illegal! It was shut down more or less as soon as anyone noticed that it existed, but the wheels of justice ground slowly on. A few weeks ago, Sand Hill announced that it had settled with the Securities and Exchange Commission for a $20,000 fine, but the announcement quickly disappeared, leaving me to suspect that the entire thing was just a dream, or a performance art project. But this week the SEC finally announced its enforcement action against Sand Hill, along with an Investor Alert warning of “fantasy stock trading websites.”


Block Trade Analysis – Short VIX Straddle + Long OTM Call
By Russell Rhoads – CBOE Options Hub
The June 2015 VIX futures and options met their demise on the open yesterday with settlement coming in at 14.67. One trader moved on to the following month with a trade structure that is unique in the option world, but pretty common in VIX world.

Number Of ‘Home Sweet Homes’ Sold Can Mean Trade Opportunity
By Darrell Martin – Benzinga
There are scheduled news events throughout the year and some that come out monthly. An annualized number of existing home sales for the previous month is one of them.
This includes all residential buildings and excludes new construction. When markets react consistently after several news releases in a row, then that can be an opportunity for a trade setup.


Why This VIX Ratio Is Worth Your Attention
By Helene Meisler – TheStreet
Bob Farrell may not be active in the markets anymore, but his American Association of Individual Investors’ Sentiment Index surely helped early Thursday morning. We can be sure that unless the market gives it all back in the next few days, this indicator will scoot higher as time goes on.

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