JLN Options: Timing of Apple Earnings Has Options Traders Scrambling; Stock-Index Trades Rising at Fastest Pace in Six Years: Options; Investors Embrace Risk on Tuesday

Jan 8, 2014

Lead Stories

Timing of Apple Earnings Has Options Traders Scrambling
Kaitlyn Kiernan – The Wall Street Journal
A later-than-expected earnings report date for Apple Inc.AAPL +0.47% has some options traders nursing losses Wednesday.
Apple said Tuesday that it would report its fiscal first-quarter results after the close of trading on Jan. 27, four days later than some brokerage and stock-data sources had predicted.
While that difference is relatively small, it spans two different stock-option expiration dates.

Stock-Index Trades Rising at Fastest Pace in Six Years: Options
Lu Wang, Inyoung Hwang and Nikolaj Gammeltoft – Bloomberg
Options trading in benchmark gauges such as the Standard & Poor’s 500 Index is growing at the fastest pace since 2007, spurred by investors seeking protection from widespread declines after the broadest rally on record.

Investors Embrace Risk on Tuesday
Wall Street Sector Selector
Good news from the Commerce Department’s Census Bureau had investors feeling bullish at Tuesday’s opening bell.  The nation’s trade deficit declined to $34.3 billion in November compared to October’s $39.3 billion, which was downwardly-revised from the initial report of $40.6 billion.  Economists were expecting a decline to $39.9 billion from October’s initial reading.  The fact that October’s revised reading was actually lower than economists’ estimates for November, helped bolster enthusiasm.

Nice gain for hedge funds in ’13 but they still fell way short
Investment News
Hedge funds trailed the Standard & Poor’s 500 Index (SPX) for the fifth straight year as U.S. markets rallied to record levels.
Hedge funds returned an average of 7.4% in 2013, after a gain of less than 0.1% in December. The Bloomberg Hedge Funds Aggregate Index is down 1.8% from its July 2007 peak. The index is weighted by market capitalization and tracks 2,257 funds, 1,264 of which have reported returns for December.

When ‘Safe’ Gets Risky, and Vice Versa
Brendan Conway – Barron’s
Bank of America Merrill Lynch strategists earlier this week said the parts of the S&P 500 often viewed as the refuge of risk-averse investors have “quietly become riskier than they appear.” The firm was referring to so-called “low beta” stocks, meaning the ones which exhibit the lowest price volatility.
Put simply, “safe” is becoming risky.

Pop Goes the VIX … But When?
Adam Warner – Schaeffer’s Investment Research
I’d best describe my view on the CBOE Volatility Index as “non-bullish.” It’s low in absolute value, so it simply can’t decline much more. Realized volatility (RV) has a non-zero floor so long as the market remains open, and VIX itself probably has something like a 10 or 11 floor, even if realized volatility goes to something like 4 or 5 and stays there.

Videocast: VIX momentum shifts

The S&P 500’s 5 Most Loved Stocks
Sean Williams – The Motley Fool
The broad-based S&P 500 may have kicked off 2014 on a sour note with three consecutive down sessions, but few will deny that 2013 was an amazing year, with the index gaining nearly 30% with few modest retracements.

Danger Rises With Market As Investors Lose Sense Of Fear
Mitchell Eichen – Forbes
I believe an effective indicator of market sentiment could help investors avoid subpar performance at market extremes. A number of sentiment indicators already exist such as the put/call ratio, the CBOE Volatility Index (VIX), as well as various surveys that attempt to take the “investment pulse” of individual and institutional investors.
Each of these indicators has its shortcomings, most often the omission of one or more important factors that may influence market sentiment.  With the goal of synthesizing a single indicator, my firm recently created, the Acertus Market Sentiment Index (AMSI).
**While this article is more like an ad for their product than an actual article, I thought it interesting enough to include.  -JB

COMMENTARY: Dark Pool Trading Is Climbing. Here’s Why
Keith Ross – Traders Magazine
The dark markets have become so efficient that the costs of execution and market impact are lower than at the display markets where the take fees are the highest and market impact is the most significant.

Regulation and Enforcement

Derivatives competition unlikely despite Mifid II push
Anish Puaar – Financial News
Competition among derivatives trading venues and clearing houses in Europe may never materialise, even if ongoing regulatory efforts to open up the market are successful, according to new research from Bank of America Merrill Lynch.

Options Education

The Top 5 Options Trading Myths
Felix Frey – My Options Geek
Tony Robbins says that when two people communicate, the one who expresses themselves with greater confidence usually influences the other person.  I happen to totally agree.  But sometimes the people who are most confident don’t completely understand what they are talking about.  Here are your Top 5 Options Trading Myths:



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