Options Show Big Stocks Poised to Go Wild on `Critical’ Earnings
Luke Kawa – BloombergQuint
Investors are especially on edge this earnings season — and for good reason.
The tax-induced jolt to profits is waning. Waxing are global growth concerns, interest rates and input costs amid a prolonged trade dispute between the world’s two largest economies. All the while, cyclically significant sectors such as homebuilders and banks are trading like there’s something wrong with the U.S. economy.
****SD: It’s been a wild one today.
Wall Street volatility gauge jumps as global equities markets drop; ‘Fear gauge’ has shifted higher amid volatile few weeks for equities
Federica Cocco – Financial Times (SUBSCRIPTION)
A key gauge of expected volatility in US stocks jumped sharply on Tuesday amid a broad sell-off in global stock markets. The Cboe’s Vix index — nicknamed Wall Street’s “fear gauge” — rose by as much as 5 points during Tuesday’s trading session to a high of 24.66, the highest level in ten days. It has pushed back above its long-run average of roughly 20 from substantially lower levels during a turbulent few weeks for the US stock market.
****SD: From BloombergQuint – Goldilocks Has Abandoned Stock Markets
Bank of America Has Seen the Future: A U.S. Stock Roller Coaster
Samuel Potter – BloombergQuint
Yield curve cycle points to enduring era of higher volatility; Goldman echoes prediction for more price swings based on GDP
Forget fallout from the midterms, a murdered journalist, Brexit or the trade war. The biggest reason to brace for enduring stock volatility may be the simplest: It’s just time. Bank of America Merrill Lynch’s equity and quant team say market signals from the ever-flattening yield curve are clear as day: stock markets are due to begin a new era of elevated price swings.
There is a fight over data brewing on Wall Street
Brooke Masters yesterday – Financial Times (SUBSCRIPTION)
The big beasts of Wall Street are duking it out over data.
Last week, the US Securities and Exchange Commission issued a landmark decision in a decade-long fight over the cost of market data between the New York Stock Exchange and Nasdaq on the one hand, and the country’s biggest brokers on the other.
****SD: Brewing? I’d say this beer is ready for consumption.
U.S. trade policies cause pain for farmers but renew interest in agricultural derivatives
Jeff Reeves – MarketVoice
For the agricultural futures and options markets, the uncertainty caused by current U.S. trade policies is creating both the best of times and the worst of times, according to a panel of experts speaking at the FIA’s annual trade show..
The Dollar is the New Vix and the Bitcoin Connection
Brian Kelly – Forbes
Over the last few months I have been hammering on the idea that the US Dollar is a better gauge of risk in the global financial system than the so-called “Fear Gauge” – the CBOE Volatility Index (VIX). When on CNBC I have prefaced most of my equity market commentary with the view that as long the US Dollar remains stable then the financial markets should remain calm. But if the US Dollar rises, it creates risks to the global economy that are not captured by the VIX index.
Saxo Bank launches new range of CFD options
Online trading and multi-asset specialist Saxo Bank is to offer CFD Options on a range of option roots, covering puts and calls on 15 of the world’s largest stock indices.
Exchanges and Clearing
SEC Publishes Notice of MIAX Emerald Form 1 Application in Federal Register
SEC Publishes Notice of MIAX Emerald Form 1 Application in Federal Register
Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX Options and MIAX PEARL exchanges, today announced that a Notice of the Form 1 Application for its newest options exchange, MIAX Emerald, has been published in the Federal Register by the Securities and Exchange Commission (SEC) following MIH’s formal application submission. MIAX Emerald is expected to join the MIAX Exchange Group in Q1 2019, pending SEC approval.
Japan Exchange Group to start merger talks with Tokyo Commodity Exchange
Japan Exchange Group Inc (JPX) (8697.T), owner of Tokyo Stock Exchange, will start merger talks with smaller rival Tokyo Commodity Exchange Inc, the companies said on Tuesday, as Japan pushes to create an all-in-one bourse to attract global money.
****SD: Will we ever be able to stop talking about industry consolidation? With so many fintech firms opening, it seems like there will always be something to gobble up, even once the entrenched participants are all combined, turning into (multi)regional behemoths.
Global Exchange Revenues Up 15.5% To $16.9 Billion In H118; 17.2% Increase In Trading, Clearing & Settlement Revenues Drives Growth According To Latest Burton-Taylor Report
Global exchange revenues increased by 15.5% to $16.9 billion in H118, and are on pace to reach an annual record for 2018, according to a Burton-Taylor International Consulting (part of TP ICAP’s Data & Analytics division) report published today. Trading, Clearing and Settlement revenues jumped 17.2% in H118 to $10.7 billion, as rising financial market volatility supported sharp increases in global cash and related derivative markets.
BSE to introduce weekly F&O contracts on Sensex 50 from Friday
PTI via Economic Times
Leading stock exchange BSE will introduce weekly futures and options contracts on Sensex 50 index from Friday. The bourse will introduce 7 weekly futures and options contracts expiring on every Thursday of the week, excluding monthly expiry week, BSE — formerly known as Bombay Stock Exchange — said in a circular.
Regulation & Enforcement
Former Oystacher Partner’s Suit in Spoof-Trading Case Dismissed
Janan Hanna – BloombergQuint
A federal judge in Chicago on Monday dismissed a lawsuit claiming commodity trader Igor Oystacher illegally ousted a former business partner who accused him of engaging in corrupt practices.
Edwin Johnson, who started the high-volume trading business of 3Red Trading LLC with Oystacher, alleged that he was pushed out in 2013, deprived of his 10 percent stake in the firm and warned not to talk to regulators about Oystacher’s trading schemes, according to U.S. District Judge Andrea Wood’s ruling. Johnson accused Oystacher of violating federal racketeering laws.
****SD: One of the contracts Oystacher (allegedly) spoofed was VIX futures.
The operational benefits of infrastructure testing
Vaibhav Shukla – Itiviti
In earlier blog posts, we’ve discussed the challenges of implementing efficient trading infrastructure testing systems, and the intricate complexities of their adoption. But once all this hard work is completed, what are the potential rewards to be reaped?
IG introduces new options trading interface on HTML5 trading platform
Maria Nikolova – FinanceFeeds
The novelties have been released for all UK Spread Betting and Pro-CFD users, as well as in Australia, Dubai, Singapore and South Africa.
Itiviti Announces Connectivity to Hudson River Trading SI
Itiviti, the leading global provider of multi-asset trading technology and financial infrastructure, today announced the addition of the Hudson River Trading Systematic Internaliser (HRSI) venue to its expanding connectivity offering. The connection, which is now live, provides Itiviti clients with access to liquidity sourcing from Hudson River Trading, one of the largest Electronic Liquidity Provision (ELP) Systematic Internalisers, covering more than 1,000 European stocks. HRSI was previously operating as Sun Trading International SI (STSI) before its migration on October 1st, 2018.
****SD: Non-options story from two firms savvy in options.
Hedge funds quit oil as rally reverses
John Kemp – Reuters
Hedge fund managers accelerated their profit-taking in crude oil and refined fuels last week, as confidence in the previous price rally faltered and the market fell.
Watch out for ‘dead cat bounce’ in stocks because there’s more pain ahead: Morgan Stanley’s Wilson
Sue Chang – MarketWatch
October is living up to its infamous reputation as a volatile month for stocks with major indexes down sharply and there is likely more pain ahead for investors, according to one prominent Wall Street analyst.
The recent rebound “was a dead cat bounce,” said Michael Wilson, an equity strategist at Morgan Stanley, in a report. “We look for confirmation with a definitive break of the S&P 500 through its 200-day moving average.”
As Stocks Groan Under Pile of Worry, Junk Credit Barely Flinches
James Crombie and Sarah Wells – Bloomberg
If the violent swings in U.S. stocks are a harbinger of economic gloom and a change in the underpinnings for owning risky assets, someone forgot to tell junk credit investors.
The Bloomberg Barclays US Corporate High Yield Bond Index is down just 1.2 percent from its Oct. 2 peak, while the S&P 500 Index is mired in an 8 percent drop from September’s record high that’s deepening by the day.
****SD: The main high yield bond ETF – HYG – might barely be flinching but there has been substantial put trading in the instrument today.
Brace for Flight to Quality Stocks as Volatility Jumps, UBS Says
Gregor Stuart Hunter – Bloomberg
It’s time for investors to raise the quality bar for stocks to invest in, according to UBS Group AG.
Strategies that favor quality factors — including measures such as high gross margins, elevated cash flow-to-asset ratios and low accruals — should outperform in the year ahead, said Paul Winter, head of quantitative research for Asia-Pacific at UBS in Sydney.
Citron reverses opinion on Tesla. The story has become too compelling to ignore.
As much as you can’t believe you are reading this, we can’t believe we are writing this!
****SD: Surprisingly, it doesn’t seem like Elon has tweeted about burnt shorts yet.
Paul Volcker, at 91, Sees ‘a Hell of a Mess in Every Direction’
Andrew Ross Sorkin – NY Times
Paul Volcker, wearing a blue sweatsuit and black dress socks, stretched out on a recliner in the den of his Upper East Side apartment on a Sunday afternoon. His lanky 6-foot-7 frame extended beyond the end of the chair’s leg rest. He added an ottoman to rest his feet.
UK might need to seek a short extension to Brexit transition – May
British Prime Minister Theresa May said on Monday that London might ask for a short extension of a planned transition period to ease its exit from the European Union.
The Evolution of Institutional ETF Trading
Colby Jenkins – TABB Forum
The global institutional ETF market has grown into its own. Market participants are confident in the liquidity available across ETF asset classes, they are comfortable trading ETFs in increasing size, and they are willing to investigate new trading mechanisms. The next phase in the market’s evolution, however, will require a new set of tools and analytical innovations to support the trade workflow ecosystem, which will be accessible to firms outside the subset of today’s large, sophisticated ETF users. TABB Group’s latest research report examines the extent to which new technology and trading systems are transforming the institutional ETF trading landscape. Download a complimentary copy below.
****SD: This isn’t an options story. However, ETF adoption by institutions is correlated to the rise in ETF options volumes. One hand washes the other.