Observations & Insight

Cubs Win World Series
By John J. Lothian

The Chicago Cubs won the World Series. It is a big deal in Chicago and the U.S. For the rest of the world, maybe not so much.

I returned home last night from the UK about the 7th inning, just in time to see the Cubs blow a 3-run lead and have the game go into extra innings. It was a terrific game with incredible drama, but I missed the early innings while on a flight from London to Chicago.

The Cubs won 3 games in row, something they did 21 times now during the 2016 season, in order to win the World Championship. But it seems more likely we will see an NFL team in London sooner than an MLB team. There were plenty of Redskins and Patriots jerseys on people roaming around London last weekend, and hardly any Cubs or Indians ones.

We had a great week in London, putting on our MarketsWiki Education World of Opportunity program on Monday at the Woolgate Exchange facility of the University of Chicago Booth School of Business. Besides having to adjust to the jet lag, we also had to adjust to staying up from 1 AM to 3 AM and watching the Cubs games. We did not miss one while in London, but it took watching online via the MLB.com offering rather than local London coverage of the World Series.

If you love baseball, you loved last night’s game. It had everything. A big hat tip to the Cleveland Indians for their gritty performance. They took the Cubs to extra innings in the 7th game of a 7 game series. I am glad I made it home to share the end of the game with my wife and youngest son.

For the record, one-time Milwaukee Brewer fan Jim Kharouf watched the final out of the game with Chip Dempsey and a couple of Irishman at a closed Colombian ice cream shop in Cartagena, Colombia, where he is there for a World Federation of Exchanges conference.

Maybe it is the World Series after all.

Lead Stories

Options Trader Nabs ‘Lottery Ticket’ With Explosive Upside
Chris Dieterich and Ben Eisen and Gunjan Banerji- WSJ
Protection against a stock market crash is so pricey right now that a trader willing to wager on a year-end rally bought a bullish lottery ticket for almost nothing.
The relatively small, unusual options trade on the S&P 500 index that hit the tape on Wednesday highlights how much uncertainty is baked into financial markets ahead of the U.S. presidential election and a key December meeting of Federal Reserve policy makers.

Options trading jangles S&P 500 investors nerves
Jamie Chisholm – Financial Times
We postulated last week that the S&P 500 looked poised to break through the top of its tight four-month range amid an expected bout of traditional seasonal bullishness.
So much for that! By close of play on Wednesday, it had fallen for seven sessions in a row, its longest losing streak in five years as US presidential election jitters rattled global markets.

It’s Scary Out There! VIX Surges For Seventh Straight Day
Johanna Bennett – Barron’s
The Halloween costumes have been packed away for another year. Still, Wall Street’s fear gauge is rising for a seventh straight day, climbing more

Volatility and the Election Update
Russell Rhoads – CBOE Options Hub
Usually by this time in the election season we have a pretty good idea of who is going to win the election. However, like everything associated with this election, it is different this time. Things changed on a dime late last week and I’m having a hard time figuring out what to highlight with respect to the volatility markets. So forgive me if I miss a thing or two here…

Open Interest Rises to 9 Million for SPX Puts and 4.7 Million for VIX Calls, while Implied Vol is Higher for the Nov. 9 Index Option Expirations
Matt Moran – CBOE Options Hub
Several recent news stories have covered this topic – how can investors protect their portfolios in the event of stock market moves during and after the U.S. election on November 8?
For investors who are concerned that stock indexes could decline and volatility indexes could soar in future weeks, two of the simpler index option strategies to consider are (1) buying S&P 500 (SPX) protective put options, and (2) buying call options on the CBOE volatility Index (VIX). In the charts below, not that the recent open interest was 9 million for SPX puts and 4.7 million for VIX calls.

The S&P May Do Something It’s Only Done During Financial Crises
Julie Verhage – Bloomberg
Over the last 20 years the S&P 500 index has only recorded a seven-day losing streak on three separate occasions. The first was in 2008 after Lehman Brothers collapsed, while the other two were during Europe’s 2011 debt crisis. If the index ends the day lower on Wednesday, it’ll chalk up a fourth.

Lenexa-based Bats Global Markets boosts earnings ahead of buyout
Mark Davis- The Kansas City Star
Lenexa-based Bats Global Markets Inc. earned $28.5 million in the third quarter, a 12.6 percent increase from a year ago.
The operator of the nation’s second-largest stock exchange had earned $25.3 million in July, August and September of 2015. Its recent profit equaled 29 cents a share, compared with 27 cents a share a year ago.


Exchanges report mixed results for October
Julie Aelbrecht – Futures & Options World
The world’s major derivatives hubs, including the CBOE, the Australian exchange and the Moscow exchange, have reported mixed results for October.
The Chicago Board Options Exchange (CBOE) reported on Thursday that the total volume traded on its exchanges dropped 21% to a total of 77.7 million lots last month.
The CBOE’s futures exchange CFE performed better than the other segments, with a 22% growth in volumes to 4.9 million lots. Listed options trading on the exchange grew 50% to 57 million lots, while trading in index options dropped 18% to 30.2 million contracts.

CME Group Reports Mixed Volumes in October 2016, FX Contracts Slightly Up
Aziz Abdel-Qader – Finance Magnates
CME Group (NASDAQ: CME), one of the world’s largest derivatives marketplace, has reported its October 2016 volumes, which were largely better when weighed against its 2015 equivalent, according to a CME statement.

CBOE Holdings Reports October 2016 Trading Volume
Press Release – CBOE
CBOE Holdings, Inc. (NASDAQ: CBOE) reported today October monthly trading volume and average revenue per contract (RPC) data on its website under the Quotes & Data section.
The data sheet, with a complete overview of October trading volume for CBOE Holdings, including Chicago Board Options Exchange (CBOE), C2 Options Exchange (C2) and CBOE Futures Exchange (CFE), can be found at www.cboe.com/monthlyvolrpc.

CBOE’s October Volumes Reflect MoM Decline Amid Falling Revenues
Rosemary Barnes – Finance Magnates
The Chicago Board Options Exchange Holdings (CBOE, NASDAQ: CBOE), one of the largest operators in the US equity options market, has reported its trading volumes for the month ending October 2016, which saw numbers fall to the lower levels last seen in April. The figures were in line with its Q3 2016 earnings, which showed a stumble across key areas, including revenues that were lower by -16.5 percent YoY.

Bats sees earnings rise in first report since CBOE deal announcement
John Bakie – The Trade
Global exchange operator Bats has reported a 13% increase in net income in Q3 as its recent acquisition spree comes to fruition.
The Kansas City-based firm reported net income of $28.5 million in the third quarter and adjusted earnings of $35.3 million, an increase of 13% and 17% respectively over the same period of 2015.

Bats Reports Third Quarter Net Income Growth of 13%
Press Release – Bats
Bats Global Markets, Inc. (Bats: BATS), a leading global exchange operator and
provider of market data and other financial markets services, today reported net income of $28.5 million and adjusted earnings of $35.3 million for the third quarter ended September 30, 2016. Net income increased 13% and adjusted earnings rose 17% compared to the same period in 2015 driven by continued growth in non-transaction revenue.
/goo.gl/SiQ2b1 (PDF)

Intercontinental Exchange Reports ICE & NYSE October 2016 Statistics
Press Release – Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported October 2016 trading volume and related revenue statistics, which can be viewed on the company’s investor relations website at http://ir.theice.com/ir-resources/supplemental-information in the Monthly Statistics Tracking spreadsheet.

Regulation & Enforcement

SEC Delays Ruling on Chicago Stock Exchange’s Speed Bump
Dan DeFrancesco – WatersTechnology
The Securities and Exchange Commission (SEC) has extended its deadline for ruling on the Chicago Stock Exchange’s (CHX’s) Liquidity Taking Access Delay (LTAD) proposed rule change.


Inside Futures: Relevant trading-focused information authored by key players in the futures, options and forex industries
Inside Futures
The uncertainty of the US Presidential Election has the metals up today. There may be a continued uptrend due to the Fed’s meeting today keeping the potential Fed hike on hold for the moment. The US Dollar has been trading lower giving Gold and Silver leeway to move higher. The inverse relationship keeps the safe-havens allocations organized by the event. Physical Silver has seen high sales this last month. The indexes have been trading lower with the risk-off environment.


Options Insight: How to Trade S&P 500 ETF
Bloomberg (Video)
Mark Sebastian, managing partner at Option Pit, discusses the U.S. markets and his options play for the SPDR S&P 500 ETF Trust. He speaks with Bloomberg’s Julie Hyman on “Bloomberg Markets.” (Source: Bloomberg)

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