Observations & Insight

An Observation, and a Bit of Insight
John Lothian News

The observation, of course, is Memorial Day. We will not be publishing our newsletters this coming Monday in honor of the holiday. Please enjoy the extended weekend. For readers in Chicago, you can ride your bike on Lake Shore Drive on Sunday morning. On Monday, let us all remember those who put their lives on the line and made the ultimate sacrifice.

Now, for the insight. John Lothian News put together a number of interviews and commentary in and around the recent Options Industry Conference. Because the quantity of items may have been a bit overwhelming, we thought we would throw together a few links to help you catch up on anything that may have fallen through the cracks.

Happy reading/viewing. We’ll be back on Tuesday.

Clearing Evolution: Michael McClain on the changes at OCC

Swimming With the Sharks in Miami Beach: Shelly Brown of MIAX Talks Competition

Keeping Tabbs on the Options Industry

Options Industry Perspectives: Exchange Leaders Trade Viewpoints at OIC 2015

Daily Racing Form, Options Exchange Edition

Lead Stories

The Absence of Fear: How Low Can the VIX Go?
By Saumya Vaishampayan – MoneyBeat, WSJ
The stock market’s fear gauge is low. But just how low can it go?

Why volatility can be an investor’s best friend
By Jonathan Ratner – Financial Post
Stock market volatility is often held up as an investing bugaboo, but it should not be feared since it creates opportunities to generate some pretty healthy returns. But investors will have to pick their spots given the valuation run-up in recent years and the possibility of significant equity market pullbacks as interest rates rise.

***DA: Everyone’s a market timer these days.

The stock market is calm. Too calm
By Shawn Langlois – MarketWatch
In case you haven’t noticed, the steady assault on record highs by the S&P has come amid a market sapped of volatility and volume. For you stat wonks, there hasn’t been a 1% decline from any given intraday high since May 11, according to Georgetown professor Salil Mehta. That’s seven sessions, and it’s not the kind of tight range you see everyday. In fact, it’s happened only three times in two years.

***DA: We say that about the children as well. When the music is blaring, it means they are doing their homework. It’s when things are quiet that you have to watch out.

The Only Three People Worth Listening to on Greece
By Flavia Krause-Jackson – Bloomberg Business
While finance ministers, ECB officials and even rank-and-file lawmakers keep investors on their toes with their prognostications of where the talks between Greece and its creditors are heading, it’s this trio making the weather. Tsipras’s January election victory ushered in a new phase of upheaval for investors in Greek assets. The volatility on the country’s 2017 bonds has been 45 percent over the past 90 days. In the last three months of 2014 it was just 19 percent.

***DA: The short end trades more like a binary option these days.

Three strikes and you’re not out: put those Brexit nerves on hold
By Patrick Graham – Reuters
Two-thirds of the way through a trio of political earthquakes that a year ago looked set to shake British business and markets, the best lesson gleaned by financial investors for part three is to hold their nerve

***DA: More politics of brinkmanship.


CBOE holdings increases share repurchase authorization by $100 million
News Release
CBOE Holdings, Inc. announced today that its Board of Directors increased its share repurchase authorization by $100 million. Including this new authorization, the Board has authorized a total of $500 million for buying back shares since 2011.

Sebi may raise bar for derivatives trade
By Ashish Rukhaiyar – www.livemint.com
Market participants are divided on the possible impact of the capital market regulator’s recent decision to review the contract size of equity derivative instruments, which have seen a massive spike in turnover in the past few years, leading to regulatory worries especially in the context of retail investors.

ISE Announces Two New Board Members
Press Release
The International Securities Exchange Holdings, Inc. today announced the addition of Eric Levine and Tyler Sorba to the Boards of Directors of its two exchanges. Additionally, eight non-industry directors, two exchange directors, and the Chief Executive Officer director were re-elected.


6 Rising FinTech Startups
By Joseph Young – cointelegraph.com
The financial services technologies (FinTech) industry has had over 45 venture capital investments, equivalent to US$3 billion in global ventures in 2013. Kantox reported that the number of deals in 2014 and 2015 is projected to hit around 60-70, as the global growth rate of the industry reaches a 26%.


Strategist: Buy call options on these cheap stocks
By Giovanny Moreano – CNBC Pro
As the market hovers near a record, MKM Partners’ derivatives strategist identified a select group of stocks where call options are “cheap,” providing a cost-effective way for investors to ride the next leg higher of the bull run.

Hedge Your Portfolio with Low Volatility ETFs
After the Fed indicated overvaluation concerns over the broad equity market and the U.S. economy delivered mixed data at the start of 2015, it hasn’t been easy to invest in equity markets. Moreover, slowdown in some big nations like China and highly volatile oil prices continue to cast a shadow over global growth.

What the Pros Know About Options: Is Apple Vertically Challenged?
Is Apple Vertically Challenged? Some investors start by buying options outright and are immediately frustrated by theta (time decay). They often think there has to be a way to offset some of this time decay and yet, reflect the position they would like in this stock. This thought process brings many of them to the long vertical spread.


Beyond VIX: More Ways To Monitor The Stock Market’s Mood
TD Ameritrade Tickertape, via Benzinga
Are you one of those investors who are glued to CNBC first thing in the morning? Always wondering what’s trending in the world of finance? There are times in life when it’s OK to go along with the crowd. And then there are occasions when going against the investing herd might make sense.
You can start by sizing up the collective mood of the majority. Later, you’ll decide what to do with that information. The go-to measure of the stock crowd’s state of mind has long been the CBOE Volatility Index (VIX), affectionately known as the “fear” gauge. It’s earned its status as king of the sentiment indicators, industry analysts agree. But for the curious investor, there’s a lot more to market sentiment than just the VIX.

The First Spot-Price VIX ETFs (Podcast)
ETF Trends
On Thursday, I highlighted the newly launched AccuShares Spot CBOE VIX Up Shares and AccuShares Spot CBOE VIX Down Shares. The two new Spot VIX ETFs could provide a better way to track the widely monitored CBOE Volatility Index.

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