Observations & Insight

The Out of Options Motorcycle Club to Ride to Miami to Options Industry Conference
John Lothian – JLN

The Out of Options Motorcycle Club comes together to raise money by doing a charity motorcycle ride to the options conference. The group is riding for this year is the Babies Heart Fund, which supports the pediatric cardiology division at Columbia where ISE’s Molly McGregor’s son is a patient. She credits them with saving Nathan’s life and says the research they are doing now is simply amazing. The group is also riding for cancer research at St. Jude’s, an equally important cause and an amazing institution.

From Bill Ryan of NYSE

I am sending this message on behalf of the Out of Options Motorcycle Club members Paul Jigani, Barry Nobel and Joe Valenza.

As many of you are aware, Michael Brady, the grandson of Tom Brady, a legend in the options world for many years, was diagnosed with cancer and was treated at St Jude Children’s Research Hospital with great results. Many of you may not know that Molly McGregor, who oversees communications and marketing for ISE and is a member of the OIC Roundtable, has a cause that is near and dear to her heart and that of her young son Nathan. Nathan was born with two Critical Congenital Heart Defects (CCHDs, affect 1 in 10,000 babies). Nathan is doing well now thanks to the amazing efforts of the Columbia University Medical Center and their team of pediatric cardiologists.

Read More –> http://jlne.ws/1DTS7Nd

Lead Stories

SEC Announces Insider Trading Charges Linked to China Tech Deal
Ned Levin – WSJ
The U.S. Securities and Exchange Commission announced insider trading charges against two Beijing residents on Wednesday, alleging they purchased stock options ahead of Chinese e-commerce company 58.com ‘s purchase of a $1.6 billion minority stake in rival Ganji.com.
The regulator said a court had granted its request to freeze assets in the U.S. brokerage accounts of Xia Xiaoyu and Hu Yanting.

***DA: I keep reading how the U.S. is having a hard time getting China to import our stuff. Looks like they imported insider trading.

See You In September? Fed’s Soft Economic Outlook Rules Out June Rate Hike
Samantha Sharf – Forbes
The Federal Reserve has maintained near zero short-term interest rates for roughly 77 months. And Wednesday the central bank indicated it will hold tight at this historic low for at least three more if not longer.
Following a two day meeting the members of the Federal Open Market Committee released their latest policy statement which seems to confirm what many had suspected — a June rate hike is off the table. But it is not immediately clear what option replaces it, with the Fed removing the date based guidance introduced last month. The policy guidance now reads: “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

***DA: By September they will have moved it out to December, and so on.

S. Korean firms’ derivatives trading falls in 2014
South Korean financial companies’ derivatives trading fell 16.3 percent in 2014 from a year earlier due to a protracted market slump, the financial watchdog said Thursday.
The combined trading volume of derivatives such as stock options and futures reached 43,649 trillion won (US$40.6 trillion) last year, compared with 52,145 trillion won tallied a year earlier, according to the Financial Supervisory Service (FSS).

Making Sense of the Twitter, Inc. (TWTR) Earnings Mess
Adam Warner – Schaeffer’s Investment Research
As you may have heard, Twitter Inc (NYSE:TWTR) reported earnings “after” the close on Tuesday. At least, they intended to report earnings after the close.
The options board priced in about an 11% earnings reaction. On the surface, that seemed about in line with past TWTR earnings moves. Although it’s a new company, so there are only five quarters of history to go on.
Well, as it turned out, the stock barely moved on earnings. That is, if you start measuring from after the close:

***DA: When I was in college, the adage was, if you are reading about it in the Wall Street Journal, it was already too late. Nowadays, if it hit your Twitter feed, it was too late. Especially if one’s stock symbol is TWTR.

Earnings Next Week (Part 1) – 5/4 – 5/5
Russell Rhoads – CBOE Options Hub
Time caught up with me and I was only able to knock out Monday and Tuesday earnings numbers for the week of May 4th to May 8th. I’ll get the balance of the week done when I return from finals week in my PhD program.

Is There Any Truth To The Adage ‘Sell In May And Go Away’? A 21st Century Take On A 19th Century Rhyme
Seeking Alpha
One of the most enduring of Wall Street axioms – falling somewhere under “buy low and sell high” but above “greed is good” – is to “sell in May and go away.” The idea, of course, is that stocks tend to underperform during the six-month period beginning in May and ending October and outperform during the winter and early spring.

***DA: A fool who trades on axioms, and his money, are soon parted.


CME Group profit rises 24 pct on higher trading volumes
CME Group Inc, the world’s largest futures exchange operator, reported a 24 percent rise in quarterly profit due to increased trading volumes.
Net income attributable to CME Group rose to $330.4 million, or 98 cents a share, in the first quarter ended March 31, from $266.8 million, or 79 cents a share, a year earlier.

CME Group Inc. Reports Strong First-Quarter 2015 Financial Results
Press Release – CME Group
CME Group Inc. (NASDAQ: CME) today reported revenues of $843 million and operating income of $507 million for the first quarter of 2015. Net income attributable to CME Group was $330 million. GAAP and adjusted diluted earnings per share were $0.98

BOX Focuses on Fundamentals
The options industry is faced with myriad challenges including exchange fragmentation, with 12-going-on-14 exchanges, and a shortage of liquidity that has resulted in institutional traders having to curtail some trading strategies.
Against this backdrop, BOX Options Exchange has elected not to follow the path of some of its competitors by opening multiple trading venues, but rather to focus on product innovation and adding value for customers, according to new CEO Ed Boyle.

***DA: John Lothian News is putting the wrapper on a video interview with Mr. Boyle. Look for it (hopefully) tommorow.

Regulation & Enforcement

Exchanges win dismissal of U.S. high-frequency trading lawsuits
A federal judge has dismissed lawsuits accusing several major U.S. exchanges of cheating ordinary investors by selling early access to market data to high-frequency traders, giving them a split-second advantage in making trades.
In a decision released Tuesday night, U.S. District Judge Katherine Forrest in Manhattan said the claims raised against Nasdaq, Intercontinental Exchange Inc’s New York Stock Exchange, BATS Exchange and other exchanges must be reviewed first by the U.S. Securities and Exchange Commission, not the courts.

***DA: The court decided that it was all Navinder Singh Sarao‘s fault.

The ‘Flash Crash’ Case Doesn’t Add Up
Kurt Eichenwald – Newsweek
Few things are more satisfying than watching corporate criminals get what they deserve. The damage these people inflict on their victims always outweighs the impact of some schmuck who robs a liquor store. But all too often the silk-suited crowd gets off without even a hand slap, while the other crook gets dumped in prison for decades.

***DA: The author may have seen too many gangster movies, but he has a point.

SEC Investigates Bank of America for Doing Nothing
Matt Levine – Bloomberg
Here’s a Wall Street Journal article about a Securities and Exchange Commission investigation into “whether Bank of America Corp. broke rules designed to safeguard client accounts” by doing “an array of complex trades and loans” with clients. Generically, I delight in this sort of thing, but specifically, I don’t know what those complex trades were or how they worked. But here we are on the Internet, so let’s not let that slow us down. Instead, let’s just reason the trades out from first principles.


Crude Reality: Time To Think Longer-Term Options For Oil?
If you’ve been an owner of crude oil contracts for a while now, this sideways range between $42 and $55 since the start of the year has got to be welcome relief.
At least the bleeding has stopped.
If oil hasn’t been in your portfolio, you may be starting to wonder: is this the start of a bottom in oil prices? You’re faced with an age-old conundrum, as old as fossil fuels themselves. Do you jump in now and risk getting run over if the landslide in oil prices continues? Or do you wait, and potentially miss out if prices rebound?
One way to participate in oil is with options.

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