JPMorgan’s You Invest robo is adding options trading, planning tools; Shrinking Stock-Market Moves Mask Investor Anxiety

Sep 24, 2019

Lead Stories

JPMorgan’s You Invest robo is adding options trading, planning tools
Rebecca Ungarino – Business Insider
JPMorgan Chase’s one-year-old You Invest retail investing service has now gone live with options trading for at least some customers, and is also planning on lowering the minimum investment size for its automated portfolios later this year.
Those moves mark the next steps of JPMorgan’s expansion into cut-throat businesses dominated by low-cost brokers as well as startup stock-trading and robo-advice apps.

Shrinking Stock-Market Moves Mask Investor Anxiety
Amrith Ramkumar – WSJ
Stocks are barely moving, leaving major indexes hovering just below all-time highs and investors waiting for a catalyst that could push the indexes out of a narrow trading range.
The S&P 500 averaged a daily move of 0.2% last week, the smallest in five months, according to Dow Jones Market Data, and inched down less than 0.1% Monday. Despite sizable disruptions in the oil and money markets, faith in consumer spending and hopes for a trade deal with China have held stocks steady.

For Pound Traders, Court Ruling Will Be Tremor Not Earthquake
Michael Hunter and Anooja Debnath – Bloomberg
Pound strategists see limited currency impact from the U.K. Supreme Court’s landmark ruling Tuesday on whether Prime Minister Boris Johnson broke the law by suspending Parliament.
That’s because the verdict, whatever it is, will do little to alter the biggest unknown on the horizon for U.K. markets — the uncertainty over whether Britain will exit the European Union with or without a deal on Oct. 31. Or if the nation will leave by that date at all, with another extension still remaining a possibility.

The Fear Fund: Nancy Davis’ ETF Aims To Protect Investors From Scary Stuff, Like Recession And Inflation
William Baldwin – Forbes
Stocks have recovered from last fall’s crash, low interest rates stretch out to the horizon and the VIX volatility index is half what it was at Christmas. Sit back and coast to a comfortable retirement.
No, don’t, says Nancy Davis. This veteran derivatives trader runs Quadratic Capital Management, where her somewhat contrarian view is that investors, all too complacent, are in particular need of insurance against financial trouble.

Exchanges and Clearing

Cboe Global Markets Announces Date of Third-Quarter 2019 Earnings Release and Conference Call
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today said it will announce its financial results for the third quarter of 2019 before the market opens on Friday, November 1, 2019. A conference call with remarks by the company’s senior management will begin at 7:30 a.m. Central Time (CT), 8:30 a.m. Eastern Time (ET).

10 years of political support for regulated trading and clearing
Eurex Exchange
Ten years ago today, on 24 September 2009, the G20 met in Pittsburgh. Another city, another summit, you may think. This particular summit came not long after the financial crisis and finished with a leader’s statement that has had significant impact on the financial industry and for us at Deutsche Börse Goup and Eurex in particular.
We spoke to Niels Tomm, Representative of the Board, on what the G20 Summit achieved and how important it was for the industry.

Regulation & Enforcement

NY Fed president Williams urges shift away from Libor
Colby Smith, Joe Rennison and Philip Stafford – Financial Times
New York Federal Reserve President John Williams warned financial firms against “sticking their metaphorical heads in the sand”, as a deadline to replace the scandal-tainted Libor benchmark approaches.
Regulators have frequently urged markets to move off the London Interbank Offered Rate, or Libor, by the end of 2021 and to instead price loans and other financial instruments with reference to rates that better reflect market conditions. Mr Williams said he was concerned that some institutions were not moving fast enough to reduce their reliance on Libor.

Opening Remarks of FIA President and CEO Walt Lukken at FIA Forum: Frankfurt 2019
Guten Morgen and welcome to FIA’s Frankfurt Forum.
This city is the perfect gathering place for our industry, given its unique position in global finance. To begin with, Frankfurt is one of the more international cities in Europe with one-quarter of its residents coming from outside Germany. It is the largest financial center in continental Europe with several important FIA members located here, including Deutsche Boerse, Deutsche Bank and Commerzbank.
Frankfurt is also home to several influential government authorities near and dear to our industry, such as Bafin, Bundesbank, and the European Central Bank. If our industry wants to get business done in Europe, Frankfurt is a good place to start.


Alibaba Stock May Be About to Rise. How to Play It With Options
Steve M. Sears – Barron’s
Investors just don’t seem to get Alibaba Group Holding ‘s story. Now is a great time to profit from the confusion.
Misunderstanding about the potential effects of the U.S.-China trade war, and even the retirement of Jack Ma—the e-commerce giant’s founder, has weighed on Alibaba stock (ticker: BABA). Yet it is still up some 32% this year, almost double the return of the S&P 500 index. If not for those concerns, the shares would likely be even higher, rather than some 7% below the 52-week high.

The Inverted VIX Curve: Why It’s Important
Gaurav Sinha – Seeking Alpha
Besides the yield curve that our fixed income team likes to talk about, there is another curve that inverted recently, and that warrants attention from asset allocators in Q4 2019. Typically, the Chicago Board of Options Exchange (Cboe) Volatility Index (VIX) is an upward sloping curve – VIX contracts further out trade higher than the nearer contracts. This means there is more uncertainty as you go further out in the future.

A Short-Volatility Bet Just Lit Up a New Corner of the ETF World
Yakob Peterseil – Bloomberg
A five-month-old credit ETF became one of the largest short-volatility instruments in the world thanks to one big inflow last week, in a sign traders are finding fresh ways to bet on market gyrations.
The instrument from Tabula Investment Management, which gains when prices in global high-yield debt swing less than expected, took in a net 62 million euros ($68 million) in the week ended Sept. 20.

TVIX: Don’t Bank On The October Effect This Year
Seeking Alpha
In the volatility ETP family, TVIX shines as one of the most popular investment vehicles. The primary reason for its popularity largely centers on the fact that it offers leverage in a space that is already quite volatile. This leverage when applied to the negative roll yield of VIX futures means that over long periods of time, TVIX has simply annihilated wealth. But we’re getting ahead of ourselves. Let’s have a brief talk about what exactly is TVIX to understand the basic idea behind the instrument.


Managing Short Strangles: Rolling The Untested Side
Seeking Alpha
After we enter a short strangle, we go into position management mode. But first things first, what exactly can happen to our short strangle position if the price of the underlying starts to whipsaw? Let’s review the profit-and-loss graph first and then I’ll give you a real-life example of what we can expect to make with short strangles. As with every profit-and-loss-graph in options trading, the one highlighting the profit and loss potential of short strangles is way too unnuanced and scares many retail investors off.


The biggest mistake investors make is being too influenced by the latest headlines, according to a new study from Charles Schwab
Markets Insider
A new study of advisers found that recency bias — or the tendency to be easily influenced by the latest news, events, or experiences — was the top mistake that they saw clients making when deciding how to invest.
The study, conducted by Charles Schwab Investment Management and Cerulli Associates, took a dive into behavioral biases that all investors grapple with when making decisions about their money.

****JB: You should still keep reading this newsletter though.

DE Shaw: hedge fund caught up in a talent war
Lindsay Fortado and Robin Wigglesworth – Financial Times
The legal war between one of the world’s biggest and most secretive hedge funds and one of its former star money managers saw an unlikely new front open up this year: the exclusive Hudson National Golf Club in Westchester.
Daniel Michalow’s membership was initially terminated last year for what he describes as a series of minor infractions spread over a decade. These included one occasion when his golf partner Larry Summers, the former US Treasury secretary, answered an e-mail on a green from then president Barack Obama. On another occasion, Mr Michalow missed a cocktail party that was being held in honour of his father joining as a member.

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