Lead Stories

Week of Losses Is No Turn Off to German Bulls in Options Market
Roxana Zega – Bloomberg
Last week’s decline in German equities did little to quell the spirits of bulls in the options market.
They’re paying the most ever for options to buy the DAX Index, compared with the price of bearish contracts. Investors added more than $67 million to an exchange-traded fund tracking the gauge last week, even as the index dropped 2.8 percent.

Gold Near 5-Year Low as Investors Take First Net-Short Position
Eddie Van Der Walt and Debarati Roy – Bloomberg
Gold traded near a five-year low as speculators were net-short the metal for the first time ever.
Bullion for immediate delivery slipped 0.2 percent to $1,097.08 an ounce at 9:59 a.m. in New York, according to Bloomberg generic pricing. The shift in New York gold futures and options came as speculators increased their bearish wagers to the highest since the U.S. government data begins in 2006.

***DA: Gold has finally gotten low enough to sell.

Mini derivatives market shows brisk trading in first week
The Korea Observer
A mini-sized options and futures market got off to a brisk start in the first week of its launch, the bourse operator said Monday, raising hopes that it could revitalize the derivatives market that has been shackled by tight regulations.

Why Isn’t the VIX Higher?
Adam Warner – Schaeffer’s Investment Research
OK, seriously, I’m not a big fan of making observational judgements based on the absolute value of CBOE Volatility Index (VIX) and where I think it “should” print. But right here, right now? Yeah, why isn’t VIX higher?

CNNMoney’s Fear & Greed Index points to ‘Extreme Fear’
Just how bad is it? The index has a 100 point scale — with 0 indicating nightmare level fear and 100 signaling “buy everything in sight” greed. On Monday, the Fear & Greed Index fell as low as 7.
What’s especially alarming is that the index was reading 36 only a week ago. Investors were somewhat on edge last Monday, but certainly not like they are now.
The U.S. stock market is in the midst of its worst losing streak since January. Monday is the fifth straight day of losses.

Where Is The Floor? – Weekly Market Outlook
CBOE Options Hub
Once the bearish ball got rolling last week, it got rolling in spades. In retrospect, however, the pullback makes sense in terms of when, where, and why. The S&P 500 (SPX) (SPY) as well as the NASDAQ Composite (COMP) both bumped into major technical ceilings, and right on cue, began a retreat that likely isn’t over yet.

***DA: Where’s the floor? Look down; it’s that thing with blood all over it.

Watch out, volatility is set to spike: Trader
Stephanie Yang – CNBC
The CBOE Volatility Index has rallied this week after recently hitting a year low, rising about 5 percent on Friday. And according to options trader Andrew Keene, the rally in the VIX is just getting started.

***DA: Touched 16 this morning, up another 15 percent after Friday’s spike.

How Lethal are Financial Derivatives?
Daniyal Rehman – The Market Mogul
Since the development of the Black-Scholes model in 1973 and rapid improvements in technology, financial derivatives have become increasingly popular. Today, derivatives are seen as major attributes of financial markets around the globe. Derivatives are becoming more common amongst financial and non-financial institutions along for investors. As economies around the spectrum continue to emerge, financial derivatives are expected to grow, but what are the implications of this? This article uncovers as to why financial derivatives are useful, but how they are also lethal.


ICE delays Singapore platform launch to later this year
Manolo Serapio Jr – Reuters
Intercontinental Exchange will launch its Singapore platform later in the year, the bourse said on Monday, following delays after China opposed the inclusion of cotton and sugar futures that would use Chinese prices as references.
ICE earlier targeted to kick off the platform in March, but pushed it back to mid-2015 after China’s Zhengzhou Commodity Exchange complained against the use of its settlement prices as references for the cotton and white sugar futures contracts that ICE was looking to launch.

***DA: Respect for others’ intellectual property is a hallmark of capitalism.

The Hottest Bet for Exchanges Is Invading Currencies Market
John Detrixhe – Bloomberg
For exchanges that historically stuck to stocks and futures contracts, the hottest new bet is challenging banks’ dominance in currency trading.
Deutsche Boerse AG, which runs the Eurex futures exchange and Xetra stock market, joined the battle on Sunday with the 725 million euro ($793 million) purchase of currency market 360T. Its decision came six months after Bats Global Markets Inc., a stocks and options specialist, waded into the business by spending $365 million on Hotspot FX.

***DA: But invading others’ turf is fair game.

ASX plans Asian offices in derivatives push
Luke Jeffs – Futures & Options World
Australian exchange operator ASX Group plans to set up more offices in Asia to tap the expanding derivatives market in the region, according to the deputy chief executive of ASX.
Peter Hiom told FOW the exchange has invested in its derivatives offerings, including swap clearing and collateral management, and plans to push its services more aggressively across Asia under the leadership of Helen Lofthouse, who will become ASX’s new head of derivatives in September, as first reported by FOW.

Regulation & Enforcement

CME Punishes Trader for Spoofing Soybean Oil Futures Market
Brian Louis – Bloomberg
CME Group Inc. fined a trader, Peter DiStaulo, $20,000 and suspended him for 60 days for allegedly engaging in a form of market manipulation known as spoofing.
DiStaulo placed orders for soybean oil futures without intending to actually complete the transactions, according to a disciplinary action released Friday by Chicago-based CME, which runs the exchange where the contracts trade. The alleged misconduct occurred in August 2012 and also between Jan. 1 and April 1, 2014, CME said.


Options Strategy Reduces Volatility During Earnings Season CMG
Ken Shreve – Investor’s Business Daily
One of the most tempting things to do is buy a stock that’s in a good technical setup ahead of earnings. Top fundamentals? Check. Sound chart? Check. Signs of institutional buying in recent days and weeks? Check.
What’s not to like? The market seems to expect a solid report, so why not buy?
If you’ve tried this strategy, it may have worked some of the time, but plenty of other times, it didn’t.

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