Observations & Insight
Alun Green, SunGard – The Technology Roadmap, 2015 Edition
“We as human beings have not evolved to be very good at reading and writing.”
Alun Green asks, “is the written word dying?” Perhaps dying is too strong a word, but Green makes an excellent point in that humans have walked the planet for millions of years, and only began using the written word within the past few hundred years – much too short a time span to have “evolved” to cope with the written word. Meanwhile, as technology continues to disrupt any and all human processes, our species may well revert back to the forms of oral and visual communication to which we are better suited.
As a career technologist facilitating the automation of manual processes, Green asks what human beings will do when the computers and robots take over. His answer? Machine learning is not the same as artificial intelligence, and we sentient beings will be needed for decision making and communication, but not necessarily the written kind.
The $US1.1 trillion elephant in the Federal Reserve room
Vesna Poljak – Sydney Morning Herald
A $US1.1 trillion ($1.5 trillion) S&P 500 options deadline coinciding with the US Federal Reserve’s blockbuster December meeting has added to the growing mood of tension about this week’s historic decision on interest rates and how markets will react.
Hedge funds add to record bearish positions in oil
John Kemp – Reuters
Rather than taking profits, hedge funds continued to add to their record bearish positions after the Organization of the Petroleum Exporting Countries (OPEC) failed to reach agreement on a production target at the start of the month.
By Dec. 8, hedge funds and other money managers had accumulated short positions in the main WTI and Brent futures and options contracts equivalent to 364 million barrels.
Volatility Update – Options traders jostle for position
Georgio Stoev – TradingFloor
Investors are getting progressively jumpier as the Federal Reserve’s rate decision closes in. The US central bank is widely expected to announce a liftoff in restrictive monetary policy, but the language or guidance will be key in terms of reading the impact on equities and bonds.
Over the last week, the S&P 500 Volatility Index has climbed some 50% to a high of $25.27 as traders make last-minute adjustments to their portfolios. We have witnessed a surge in put options leading one to believe that investors are trying to prepare themselves against a number of possible outcomes.
Why the Latest VIX Pop Is Abnormal
Adam Warner – Schaeffer’s Research
Now that we’re in official panic mode as we wait for the Fed, I wanted to put this volatility pop in greater context. Implied volatility (IV) has lifted in line with realized volatility (RV) almost perfectly. Ten-day RV in the S&P 500 Index (SPX) is up to the mid-18s, meaning that CBOE Volatility Index (VIX) in the low-to-mid-20s vol maintains that typical IV-HV premium near 4.
Is The VIX Screaming Stocks Are In Big Trouble?
Chris Ciovacco – Seeking Alpha
During the past several weeks, we have read numerous accounts of “we are reducing risk before the Fed”, which has a very rational fear-of-the-unknown basis. Over the same period, we cannot recall reading one anecdotal example of any institutional investor that was “loading up on risk before the Fed”, which means one possible scenario is lopsided expectations headed into the Fed; only time will tell.
Now Might Be the Time for VIX
Marya Alsati-Morad – Indexology
An alarming picture is being painted by an economically frail global economy: the threat of a U.S. Fed rate hike and renewed credit weakness driven by falling oil prices. The S&P GSCI (TR) was down 30.8% YTD, with all sectors in the index reporting negative returns for the year, but the S&P 500 and the U.S. stock market have not collapsed yet. In fact, U.S. equities are on pace to outperform commodities for the eighth consecutive year, which would set a new record. If this cycle changes, investors may need a way to protect themselves.
It Might Be Time For VIX ETNs, But…
Investors have been treated to plenty of talk about increased market volatility in recent weeks, and such talk can increase the allure of volatility exchange-traded products, such as the iPath S&P 500 VIX Short Term Futures TM ETN (VXX). Whether market participants actually gravitate to those products is a different story.
Fed Poised to Deliver a Gift to CME Group, Automated Traders
Brian Louis – Bloomberg
The Federal Reserve’s decision tomorrow on whether to boost interest rates for the first time since 2006 is poised to reinvigorate exchange operator CME Group Inc. and line the pockets of automated traders like Virtu Financial Inc.
CME Eyes China, India in Hunt for Higher-Margin Derivatives
Eduard Gismatullin – Bloomberg
Group plans to offer CSI 300 Index futures outside China
CME picks MCX for potential commodities joint venture in India
CME Group Inc., the world’s largest futures market, is targeting China and India as it scours the globe for higher-margin products to sustain recent profit growth.
CME Group’s Strategic Alliances Impress, Competition a Drag
CME Group boasts effective capital deployment, modest capital position, and a diverse derivative product line. Moreover, new product launches, strategic alliances and a global presence support the company’s growth.
New York Stock Exchange Leads in Global Capital Raising for Fifth Consecutive Year
The New York Stock Exchange, a subsidiary of the Intercontinental Exchange’s (NYSE:ICE) global network of exchanges, announced today that NYSE Group raised $136.0 billion from 397 transactions in 2015, more than any other exchange in the world. This includes eight of the largest 10 initial public offerings (IPOs) in the U.S., and resulted in NYSE’s fourth consecutive year as the leader in technology IPOs. In the last three years, the NYSE has listed 18 of the 20 largest IPOs.
ICE closes $5.2B acquisition of Interactive Data Corporation
In tune with an earlier announcement, international network of exchanges and clearing houses Intercontinental Exchange Inc (NYSE:ICE) today said it completed the $5.2 billion acquisition of Interactive Data Corporation (Interactive Data), a provider of financial market data, analytics and related trading solutions.
****SD: It’s official — no take backs.
Regulation & Enforcement
Cyprus Watchdog Takes a Bite Out of Short Term Binary Options
Avi Mizrahi – Finance Magnates
In recent years many binary options brands have established themselves in Cyprus because of the country’s status as an online trading hub, offering easy access to all European Union markets through the continent’s license passporting agreement. Now that whole business ecosystem might be shaken as local regulators appear to have suddenly become much less welcoming.
SEC Proposes Requirements for Funds’ Use of Derivatives and Other Financial Transactions
The National Law Review
If adopted, the proposed requirements would significantly alter funds’ ability to enter into derivatives and other financial transactions, present new operational challenges, expand reporting requirements, and impose new and enhanced oversight responsibilities on funds’ boards of directors.
Speakerbus’ US CEO Launches ‘World’s Smallest’ Trader Voice Platform Shrinking Costs
Roger Aitken – Forbes
The launch of the Micro OneBox, touted as the ‘world’s smallest’ trader voice communications platform or turret by Speakerbus, a specialist provider of critical voice collaboration solutions for global financial markets, further highlights just how technological innovation is progressing. And, anything that reduces costs for trading shops and barriers to entry must surely be viewed positively.
Xignite Market Data APIs Available On Soundhound Inc.’S Natural Language Voice Technology Platform, Houndify Enables Users To Receive Spoken Stock Quotes
Xignite, the leading provider of cloud-based financial market data solutions, announced today the integration of Xignite market data APIs into SoundHound Inc.’s new Houndify platform, the leading sound recognition and search technology provider. Introduced today, the platform allows developers to create voice-enabled apps that combine voice recognition and natural language understanding, allowing for the fastest and most accurate results. In addition to Xignite market data APIs, Houndify developers will also be able to access API data from Accuweather, Expedia, FlightStats, and Sportradar.
Another Day, Another Surge in Options Trading for HYG
Saumya Vaishampayan – WSJ
Investors once again snapped up options that protect against further pain in the high-yield market Monday.
Options tied to the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) traded heavily Monday, pushing total volume to more than six times the average, according to Trade Alert.
****SD: The high-yield march to oblivion continues. Here is the Schaeffer’s Research take from yesterday.
As Yum Struggles in China Nimble Traders Can Profit
Steven M. Sears – Barron’s
Investors interested in China’s restaurant business can get paid top dollar for trading options on Yum Brands.
Yum’s (ticker: YUM ) one- and three-month at-the-money options – the equivalent of stock – are priced near annual highs – as the restaurant company prepares to make a major change in China.
Emil van Essen on Energy Calendar Spread Options (VIDEO)
John Farley, a Portfolio Manager at Emil van Essen, discusses the benefits of Energy Calendar Spread Options.