JLN Options: Traders Bet Record Japan Dividends to Surprise Analysts: Options; Volatility Update: Top-Heavy Markets Beg the Question — Too Calm Right Now?; S. Korea resumes stock option trading after over 3-year hiatus

Nov 17, 2014

Observations and Insight

Hunting Guide: Paul McCormick Helps Students Find Financial Jobs

London’s financial industry employs about 250,000 people and the hurdles are high for new graduates and young professionals.

Paul McCormick, of Thomson Reuters in London is trying to help the next generation into the markets with helpful advice about getting a job. His blog, www.openingcitydoors.co.uk, may assist in bringing the best and brightest to firms.

“There’s a couple hundred companies in this industry,” he said. “All of these companies have got demand for talent each year. But from a graduate point of view, where do you start, you know? How do you find those opportunities?”

Watch the video »

Lead Stories

Traders Bet Record Japan Dividends to Surprise Analysts: Options
Adam Haigh and Yuko Takeo – Bloomberg
Investors are using futures to bet that record Japanese company dividends will grow even faster than analysts estimate as firms heed government calls to boost shareholder returns.
Dividends on the Nikkei 225 Stock Average will contribute 262 points to the index in the 2015 fiscal year and 276 points the year after, according to analyst forecasts compiled by Bloomberg. Futures tracking payouts on the gauge are more bullish, implying shareholders will receive about 11 percent more than analysts foresee in 2015 and 14 percent more in 2016, Singapore-traded contracts showed.

Volatility Update: Top-Heavy Markets Beg the Question — Too Calm Right Now?
JJ Kinahan – Forbes
Talk about mood changes. Flash back to mid-October, when the CBOE Volatility Index (VIX) was screaming north of 31 for the first time in years amid concerns about three Es: earnings, the economy, and the Ebola outbreak. And now? Anxiety has apparently eased, with most measures of volatility, including VIX, well off those highs.
Such a change begs a big question. Can we expect another period of quiet trading into the holidays, or is this a lull before a storm?

S. Korea resumes stock option trading after over 3-year hiatus
Kim Eun-jung – GlobalPost
South Korea’s bourse operator said it resumed trading of stock options in the derivatives market on Monday after a 40-month hiatus, offering investors more options for hedging and profit-taking.
The Korea Exchange (KRX) said a total of 2,142 option contracts changed hands on the first day of trading, which was last held in July 2011.

S&P 500 ends at record high; mergers offset Japan recession
Caroline Valetkevitch – Reuters
The S&P 500 edged up to close at a record high on Monday as deal activity worth $100 billion offset concerns about overseas growth after Japan’s economy slipped into recession.
Shares of Baker Hughes, up 8.9 percent, and Allergan, up 5.3 percent, gave the S&P 500 its biggest boost after Halliburton said it would buy Baker Hughes and Allergan agreed to be bought by Actavis.

Options Trader Triples Money On Baker Hughes Incorporated-Halliburton Company Deal
Ritesh Anan – Benzinga
Shares of Baker Hughes Incorporated (NYSE: BHI) are on a roll after the company announced Monday that is has reached a definitive agreement to be bought by Halliburton Company (NYSE: HAL) for $78.62 per share.
At the time of writing, Baker Hughes was trading at $65.78, up 9.8 percent, but 16 percent lower than the offered price; Halliburton was down more than 10 percent at $49.10.

Did Ebola ‘Cause’ the October Sell-Off?
Adam Warner – Schaeffer’s Investment Research
I’ve written somewhat sarcastically a few times about the degree to which Ebola “caused” the market ugliness in October. I didn’t mean to minimize Ebola — it’s horrible. I just meant to highlight what I thought was a pretty unlikely causality.

Hot Potato: Playing Chicken With The VIX – iPath S&P 500 VIX Short-Term Futures ETN
Seeking Alpha
We are exactly one month removed from the bottom of October’s stock market swoon that saw the Dow Jones touch briefly below 16,000 on October 15 as the end of QE3 and growth concerns fueled a rush for the exits. Since then, the market has skyrocketed higher as strong earnings and bullish jobs numbers have sent the bulls diving headfirst back into the market.

Small, But Growing, Reasons To Be Concerned Here
Price Headley – CBOE Options Hub
Stocks may have technically made a fourth straight weekly gain last week, but the real story was the incredibly quiet, flat market action.  We’ll delve into overall stock market index analysis, and some factors that have us concerned despite the overall bullish trend momentum picture, after we take a look at the recent and upcoming economic releases.

With stocks no longer cheap, investors reassess
Alex Rosenberg – CNBC
Stocks used to be cheap. Now they’re not.
That’s how some analysts see it in the context of recent valuations. The question now is whether investors should be concerned—and if so, how should they alter their market strategy.
The most popular valuation metric for the market, the S&P 500’s forward price-to-earnings ratio, is sitting at a seven-year high, and is mighty close to 10-year highs.


Shanghai Stock Buying Through Exchange Link Reaches Limit
Investors piled into Shanghai shares on the first day of exchange-link trading, buying the maximum amount allowed in a sign of global demand for mainland equities as China opens up its $4.2 trillion market.
International investors purchased 13 billion yuan ($2.1 billion) of Shanghai shares by 1:57 p.m., triggering a halt in buy orders for the rest of the day. Mainland investors used about 1.8 billion yuan of their 10.5 billion yuan quota in Hong Kong. Trading through the link ran smoothly, according to brokerages including First Shanghai Financial Holding Ltd. and Emperor Securities Ltd.

Regulation and Enforcement

U.S. regulator says swaps rules need tweaks to preserve global market
Huw Jones – Reuters
New rules aimed at making derivatives markets safer and more transparent need tweaking to stop the $690 trillion global market splitting up, a top American regulator said on Friday.
Several shallower pools of trading are emerging in what had been one deep, efficient market as brokers outside the United States seek to avoid having to comply with sometimes conflicting U.S. and home country rules.

CBOE Makes Enhancements to Its Market-Maker Trade Notification System
James D. Van De Graaff – The National Law Review
The Chicago Board Options Exchange (CBOE) has issued Regulatory Circular RG14-155 regarding enhancements to its Market-Maker Trade Notification system. When a floor broker uses the CBOE’s Public Automated Routing system to complete the trade endorsement process and a market-maker is a contra party on the transaction, a Market-Maker Trade Notification (MMTN) is generated by CBOE systems and made available to CBOE market-makers and their vendors.


The Error-Proof Portfolio: Risk, Not Volatility, Is the Real Enemy
If you had four options, what would you do if your investments lost 10% in a single day?
a. Add more money to my account.
b. Hold steady with what I’ve got.
c. Leave my money in, but be beside myself with worry.
d. Yank my money; I wouldn’t be able to stand any more losses.
Wait a second–don’t answer that. True, such questions are standard fare on risk-assessment questionnaires that you’ll find all over the Web, and they have their roots in a well-meaning idea. If investors buy the right investments but sell them at the wrong times because they couldn’t handle the price fluctuations, they may have been better off avoiding those investments in the first place.


Options Alliance Annual Conference Dec 8
Press Release – Options Alliance
Join us on December 8 for a deep dive into the exploding world of financial startups. Meet and mingle with your fellow entrepreneurs as you learn how to market, grow and fund a wide range of financial startups. The program begins at 1 pm at the Arditti Center for Risk Management at DePaul University’s Chicago Loop campus. The three panels cover the marketing, growth in AUM and funding of startup firms. A networking cocktail reception follows.

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