Observations & Insight

Out of Options Motorcycle Club Raises Thousands for Children’s Charities
Sarah Rudolph, JLN

Earlier in this space we wrote about the Out of Options Motorcycle Club, which was planning to ride from the New York area up to Maine and then down to Miami Beach for the Options Industry Conference. Well, they completed their ride and raised thousands of dollars for both St. Jude’s Children’s Hospital and the Babies Heart Fund.

It was the third such trip for the four riders – Bill Ryan of the NYSE, Barry Nobel of Nasdaq OMX PHLX, Joe Valenza of Goldman Sachs and Paul Jiganti of TD Ameritrade (who rode from Chicago to Virginia Beach and then to Miami). With all three trips the club raised a total of about $100,000 in donations to St. Jude’s and slightly more than $5,000 for the Babies Heart Fund, according to Bill Ryan.

Donations came from people who had heard about the ride from the Motorcycle Club’s emails, tweets, and Facebook postings, as well as by word of mouth. The majority of those who donated were in the options business, Ryan said.

St. Jude’s is better-known and so received more donations than the somewhat younger Babies Heart Fund, he said. The research hospital provides treatment, housing, food and transportation for children with cancer and their families, without charge.

According to Ryan, when they develop a treatment protocol they share it with everyone who needs it. “And they run on donations only, so they don’t have to have fundraisers that take 20 percent. It all goes to the research,” he said.

The Babies Heart Fund was founded in 1986 by the family members of a young patient at Columbia University Medical Center in New York who were so impressed with the care given to their child that they wanted to give back and help the Division of Pediatric Cardiology, according to the fund’s web site.

The inclusion of Babies Heart Fund was inspired by Molly McGregor, marketing officer for the International Securities Exchange, whose son was born with a heart problem and was treated successfully at Columbia.

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Lead Stories

Traders Dump Hedges on U.S. Retailers in Sign of Profit Optimism
Joseph Ciolli – Bloomberg
Traders are backing away from bearish bets on U.S. consumer stocks just before a big batch of earnings reports, unconvinced that stagnant retail sales spell doom for the industry. Demand for options that protect against losses in an exchange-traded fund tracking retailers and suppliers of other nonessential consumer goods in the Standard & Poor’s 500 Index fell to the lowest level in more than a year relative to bullish ones, according to data compiled by Bloomberg. Short interest on the ETF is four percentage points below its five-year average.
jlne.ws/1A3jn0j

***DA: And the rally resumes. Plenty of headwinds, though.

Citigroup Calls End to Best Currency Run as Ruble Bulls Retreat
Ksenia Galouchko – Bloomberg
Investors are starting to believe Russia when it says the ruble rally has gone too far.
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***DA: And the ruble pounding resumes. Even more headwinds.

Volatility for Stocks Stays in Check
Saumya Vaishampayan – Wall Street Journal
U.S. stock investors haven’t had much need for those crash helmets. After an extended period of relative calm in the market, many investors came into 2015 bracing for a return to wide price swings. The fear was that when the Federal Reserve got closer to raising interest rates for the first time since the financial crisis, stocks would start to see more frequent, steep declines. Many thought the Fed would by summer be close to pulling the trigger.
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***DA: It is the Fed’s reluctance to raise rates that scares me.

Citigroup Closes Foreign-Exchange Program for Select Clients
Dakin Campbell and Ambereen Choudhury – Bloomberg
Citigroup Inc., the world’s largest currency dealer, closed a program that provided leverage to some foreign-exchange clients without putting them through an extensive credit check.
jlne.ws/1QMFTyS

U.K. Election Angst Turns to Pound Euphoria as Rally Beats All
Eshe Nelson and Rachel Evans – Bloomberg
It didn’t take long for the pound to recover from angst over the U.K. election. Sterling has more than regained its losses against the dollar in the week leading up to the May 7 vote and options traders are slashing bearish bets at the fastest pace since September. A measure of anticipated volatility tumbled back below its five-year average, after surging on speculation the vote would fail to produce a clear winner and lead to weeks of political horse-trading.
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***DA: Great. Just in time for the IDX conference in London.

Exchanges

Hotspot Cuts Trading Fees with “Hot List” Pricing for More than 30 Currency Pairs; Pricing Effective 1st June and Will Continue at Least Until Year-End
BATS
Hotspot, a leading institutional foreign exchange (FX) market owned and operated by BATS Global Markets (BATS), today announced plans to eliminate liquidity removal fees for customers in more than 30 select currency pairs, beginning 1st June 2015
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FXCM posts $427 million net loss
Josh Beckerman – Wall Street Journal
FXCM posted a $426.8 million net loss for the first quarter, hurt by several items stemming from surge in the Swiss franc after the Swiss National Bank in January removed the cap on the currency’s value.
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Moscow Exchange Announces 1Q 2015 Results
MondoVisione
Moscow Exchange (MOEX) today announces its financial results for the first quarter (1Q) 2015 according to International Financial Reporting Standards (IFRS). Strong earnings growth was driven by fees and commissions generated by Money Market and Depository and Settlement Services, as well as higher net interest income.
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The Essence of VIX: What You Really Need to Know
Reid Steadman – VIX Views
What is the essence of VIX? This may seem like an abstract, philosophical question, but I can assure you it is not. It is a practical one, and if you can understand what makes VIX unique, you will know why this index matters so much.
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Regulation & Enforcement

UK forex inquiry comes under US pressure
Caroline Binham and Lindsay Fortado in London and Gina Chon in Washington – Financial Times
The integrity of a Bank of England inquiry is in question as prosecutors in the US probe what the central bank knew about traders’ behaviour in the foreign-exchange market.
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Task force chief: Forex probes caused by isolated traders’ misbehaviour
By Chiara Albanese, The Wall Street Journal
A few traders are responsible for the foreign exchange scandal that is costing banks billions in fines, said the central banker assigned to help restore confidence in the market.
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Missing in Financial Rules Debate: Hard Numbers; Without studying the economics of new regulations, the rewards and risks remain an unknown
By GREG IP, WSJ
The controversy around the Dodd-Frank law refuses to die as the financial-regulatory overhaul approaches its fifth anniversary. Senate Republicans unveiled a proposal this week to weaken some of its provisions, while some Democrats would like to impose even tougher rules.
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***DA: How does one study the economics of rules that have yet to be implemented? For global capital and margin rules and other rules requiring cross-border harmony, the metrics are still largely theoretical.

SEC Has Over 80 Agreements With Cooperating Witnesses; Enforcement director says such deals crucial to building insider trading and other cases
Aruna Viswanatha – Wall Street Journal
U.S. securities regulators have signed more than 80 agreements with cooperating witnesses who helped build insider trading and other cases since a formal cooperation program began at the Securities and Exchange Commission in 2010, the agency’s enforcement director said Wednesday.
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***JB: Getting the low level guys to snitch on the next guy up the ladder is cop show 101.

Technology

OptionMetrics adds VIX and VSTOXX to Global Indices Database
Financial Industry & Algorithmic Trading News, Automated Trader
OptionMetrics, a provider of historical option price data, tools and analytics, has announced that VIX and VSTOXX indices, already included in its IvyDB US and IvyDB Europe products, have now also been added to its IvyDB Global Indices database.
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Wolverine Now Offers Options on Futures Trading
John D’Antona Jr. – Traders Magazine Online News
Wolverine Execution Services (WEX) is now offering traders the opportunity to execute options on futures contracts.
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Strategy

What’s The Best Way To Short Options?
Adam Warner – Schaeffer’s Investment Research
If there’s one thing that defines 2015 so far, it’s that at the end of the day/week/month, nothing much tends to happen. Like the prices on the board better last week? Not to worry, you’ll probably see them again next week. And so on. Churn, churn, churn.
So, it sure seems like good times for option-shorting strategies. The Chicago Board Options Exchange (CBOE) indexes several, including the CBOE S&P 500 PutWrite Index (PUT):
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Goldman’s odd reason to bet against housing stocks
Alex Rosenberg – CNBC
It could be a long, hot summer for housing stocks. The homebuilders tend to lag in the summer months, Goldman Sachs’ options team said Wednesday. Goldman showed that the SPDR Homebuilders ETF (XHB), which contains a bevy of housing-exposed stocks, has traded “consistently lower” in the May-to-August period, dropping in seven of the past nine years, for a median decline of 7.5 percent.
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Overnight Trading Opportunity For Swiss PPI
Darrell Martin – Benzinga
The beauty of trading news events is that you know when the market is going to move, you can look back to see the market’s past average moves in reaction to the news and then plan a strategy.
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