Observations and Insights
A Breakthrough for Institutional Investors Trading SPY Options
Sarah Rudolph – John Lothian News
Institutional investors such as pension funds and mutual funds are a crucial step closer to being able to take large positions on SPY options, which overlie the SPDR S&P 500 ETF Trust. The Financial Industry Regulatory Authority (FINRA) has just received approval to eliminate position limits on the options, which were previously set at 900,000 contracts.
NYSE Amex Options was the first exchange to file for and receive approval to eliminate position and exercise limits for the SPY options, in August 2012. The other options exchanges followed and received approval as well. However, FINRA still had position limits on their books for the SPY options, and most options firms and broker-dealers are FINRA members, or if they were not, they cleared through a FINRA member.
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Was the VIX Too Low in 2013? No…
Bill Luby – CBOE
There was a time when investors would generally fret about the VIX being “too high” and the resulting possibility that there was some sort of unseen threat to the financial markets that was not showing up on their radar. In the last few years, the situation has reversed and now I find investors expressing more concern about a low VIX more often than a high VIX.
With the Dow Down in 2014, Where’s the Fear?
Dan Caplinger – The Motley Fool
Even with today’s rise of 86 points for the Dow Jones Industrials as of 12:30 p.m. EST, the well-known market benchmark is still down in early 2014. Yet even as calls for a possible correction get louder, one important gauge of fear in the market remains at historically low levels, suggesting continued complacency among most investors.
Investors exit hedge funds at fastest rate in four years
Tommy Wilkes – Reuters
Investors pulled out money from hedge funds at the fastest rate for more than four years in December, following a year in which many managers’ performance disappointed, new data showed on Monday.
Time to Worry?
Steven Russolillo – The Wall Street Journal
The memory of last year’s record-breaking rally is fading fast.
Stocks have kicked off 2014 on a sour note, with the Dow Jones Industrial Average falling in six of the first eight trading days of the year. Monday’s triple-digit-point drop pushed the blue-chip average down 1.9% in 2014, the first time stocks have started a year in the red since 2009.
Saxo Bank launches Mini Hang Seng Options
Carl Beck – TradingFloor.com
Saxo Bank has launched Mini Hang Seng Options allowing clients enhanced access to Hong Kong’s Hang Seng Index.
The European style and cash settled options, which opened January 9, have a contract multiplier of 10 times the index and four contract months tradable. Trading hours are 9:45 a.m. to 12:30 pm (morning session) and 2:30 p.m. to 4:15 p.m. (afternoon session).
Traders eye retail sales data, earnings as volatility jumps
Patti Domm – CNBC
Traders are eyeing Tuesday’s retail sales data and earnings from JP Morgan Chase and Wells Fargo as possible catalysts after stocks were rocked in volatile trading Monday.
Jared Woodard – The Street
Is it better to believe some things that are false, or to disbelieve some things that are true? These days, every market watcher has an indicator to show you, some chart pattern or statistical threshold that predicted four of the last five market turns and just so happens to be flashing a warning sign right now.
CHART OF THE DAY: Here’s A Very Compelling Sign That We Are Not In A Stock Market Bubble
Sam Ro – Business Insider
Everyone’s jumping into the stock market bubble debate lately. Goldman Sachs and Nuveen’s Bob Doll both argue confidently that we’re not in a bubble.
Stock market veteran Rich Bernstein would agree.
Among other things, Bernstein noted that high-beta stocks are actually trading below their historical valuations.
WTI Set for Worst Start to Year Since 2009 Before Supply Data
Grant Smith – Bloomberg
West Texas Intermediate crude traded little changed in its worst start to any year since 2009 amid estimates U.S. fuel stockpiles increased for a third week, signaling slowing demand in the world’s biggest oil consumer.
What Market Correlation Means to the Stock Picker
Adam Warner – Schaeffer’s Investment Research
You know how at the end of the year the pundits always get on the airwaves and tell you that, “next year will be a stock picker’s market”? You can’t really fault them … often it’s someone whose income depends on his ability to out-pick the market. The problem is — as the numbers above suggest — it hasn’t really come true in the last decade. That is, until last year.
The Next Big Thing You Missed: There’s a Sure-Fire Way to Control the Price of Bitcoin
Cade Metz – Wired
Founders Brian Armstrong and Fred Ehrsam say the company runs complex software that monitors price fluctuations and responds almost instantly in an effort to avoid serious losses. But they also say Coinbase could benefit from something else, something that businesses so often use to protect themselves when they handle foreign currencies like euros and yen. They could use a derivatives market.
**Options on bitcoin…I know a few people who will pop a blood vessel just thinking about that. -JB
Videocast: Calm returns to VIX pits
Regulation and Enforcement
Europeans Struggle to Set Derivatives Rules
Danny Hakim – The New York Times
Faced with intense lobbying from the oil and commodity industries, the European Union plans what could be a last-ditch effort on Tuesday to reach agreement on one of the biggest issues to come out of the 2008 financial crisis: how to rein in trading of derivatives and other complex instruments.
Push to Combat Insider Trading May Go Too Far
Peter J. Henning – Dealbook
Last week, BlackRock, the asset management giant, agreed to a settlement with New York State to stop conducting surveys of investment analysts.
The state’s attorney general, Eric T. Schneiderman, cited the settlement as a wider effort to crack down on what he called “insider trading 2.0.”
Exclusive: Nasdaq pushes to speed up talks over market fixes
John McCrank – Reuters
Nasdaq OMX Group is prepared to walk away from running the data processor that was at the center of a three-hour trading halt in August, in a sign of its frustration with the pace of talks over implementing fixes for the system, according to documents seen by Reuters.
ICE to Sell Parts of NYSE Technology – And Why Not?
Becca Lipman – Wall Street & Technology
IntercontinentalExchange Group CEO Jeff Sprecher has hired Evercore Partners Inc. to sell off parts of the NYSE technology businesses acquired in the takeover of NYSE Euronext. Deals are expected to be presented to potential buyers in the latter half of January.
Where Is the Vol?
Mark Sebastian – The Options Insider
The SPX tanked yesterday. This was big news everywhere…or was it? Ask anyone in the Pit of the SPX and they will likely tell a different story. One where put options were offered all day.