Resurgence in Gold Volatility Spurs Huge Jump in Gold Options Liquidity; Big banks beat profit expectations but warning signs grow

Jul 16, 2019

Lead Stories

Resurgence in Gold Volatility Spurs Huge Jump in Gold Options Liquidity
Russell Rhoads – Tabb Forum’s Options Liquidity Matrix
The high-low price range for gold topped 9% in June, the first time it has been this wide since late 2016 and more than double the monthly high-low range for the first five months of 2019. The daily chart, below, shows the price action for the August gold contract from late May to early July. Gold volatility returned for the first time in years and the result was unprecedented interest in options on gold futures.

****SD: Tabb has video with Rhoads – Russell Rhoads’ Derivatives Look Forward: Equity Options Dominate and Gold Wakes From Its Slumber.

Big banks beat profit expectations but warning signs grow
Elizabeth Dilts, Imani Moise, Matt Scuffham – Reuters
Three big U.S. banks reported strong earnings on Tuesday even as warning signs emerged that the playing field is beginning to tilt against the financial industry.

Bullish U.S. Stock Buyers Are Positioning for a Giant Windfall
Luke Kawa – Bloomberg (SUBSCRIPTION)
Equity options strategy could deliver a 13-fold return… If the S&P 500 gains another 11% by the end of this year
U.S. stock investors are homing in on a strategy that promises a gigantic windfall if stocks can extend their bull run through the second half of the year. After Maxwell Grinacoff, a derivatives and quantitative strategist at Macro Risk Advisors, observed a $1.6-million wager in the options market last week that pays off if the S&P 500 Index climbs another 8% to 10% by year-end, he recommended an even more bullish position in a recent note.

Speaker Nancy Pelolsi’s Husband Bought Up Salesforce Stock Options
Ed Lin – Barron’s
Speaker of the House Nancy Pelosi recently disclosed that her husband, Paul Pelosi, bought stock options in June. Paul Pelosi, a businessman and investor, paid $150,002 to $350,000 in June for a total of 100 Salesforce (ticker: CRM) call options, according to a regulatory form Speaker Pelosi filed. Specific figures aren’t required for disclosure, only ranges. He bought 20 options on June 14 for $50,001 to $100,000, and bought another 80 options in June 20 for $100,001 to $250,000.

How Great Shifts in Oil Market Calmed 2020 Ship Fuel Panic
Jack Wittels – Bloomberg (SUBSCRIPTION)
As recently as a year ago, the oil market was in a panic about changes to the kind of fuel that ships must burn.
A senior executive called the switch the biggest change to the oil industry ever. Traders were anticipating a bonanza. The shipping industry was warning about potential accidents. Volatility in air-fuel, trucking and other costs were being touted.

Outsourced trading: The future of the buy-side desk?
Hayley McDowell – The Trade
With an increasing number of buy-side firms turning to outsourced trading providers in recent years, Hayley McDowell finds out how providers really operate and differ from agency brokers, and examines what benefits opting for outsourced execution can offer to the asset management industry.

Brexit: Pound Set For Volatile Fall after Calm Summer?
Erik Norland – CME Group
On July 23, the UK’s Conservative Party will announce it new leader, who will also become the country’s next Prime Minister, succeeding Theresa May. That will almost certainly be Boris Johnson, leader of the 2016 official “leave” campaign (the unofficial campaign was spearheaded by the newly formed Brexit Party chief Nigel Farage). Oddsmakers favor Johnson 95% to 5% over former “remain” supporter Jeremy Hunt, the current Foreign Secretary. In Johnson’s words, Brexit by October 31, 2019, is a “do or die” issue for the Tories. If they fail to achieve the UK’s departure from the European Union, the rising Brexit Party will assure that the Conservative Party’s goose is cooked in time for Christmas.

****JB: From Reuters – Pound sinks below $1.24 engulfed by ‘perfect storm’ and “Do or die” Brexit condemns sterling to new lows.

Investors are more worried than ever that a major recession or market crash is right around the corner
Carmen Reinicke – Markets Insider
Investors are more worried than ever that market volatility means a downturn is on the horizon and are looking for ways to protect their money, Allianz Life’s most recent quarterly market-perceptions survey found.
Nearly half of those surveyed said they feared a major recession, marking a troublesome uptick in worried responses from both the first quarter of 2019 and last year. Investors also said they were less comfortable with market conditions as volatility has risen and were looking for ways to hedge against risk.

Exchanges and Clearing

SGX looking to curb big price swings during auction windows
Marissa Lee – Business Times
It’s seeking feedback on price collars, time extensions to prevent price volatility during pre-open, mid-day and closing auctions

Through My Eyes: The Floor of the New York Stock Exchange
Stacey Cunningham via LinkedIn
Not long ago, I gave a lecture at my alma mater and received a question about the relevance and future of a floor-based trading model in this day and age. At a time when discussions about innovation tend to focus on increased automation, it is not an uncommon question, especially given the limited viewpoint many have when they visit or see the New York Stock Exchange on TV.



Regulation & Enforcement

Tarbert Begins Term as 14th CFTC Chairman; Chairman Tarbert: “Now Is the Time to Act.”
Dr. Heath P. Tarbert officially began his term today as the 14th Chairman of the U.S. Commodity Futures Trading Commission (CFTC), succeeding J. Christopher Giancarlo.


Bloomberg supports Itiviti with SSEOMS client transition; Itiviti is looking to transition clients from SSEOMS to its own multi-asset OMS after Bloomberg said it will exit the market.
Hayley McDowell – The Trade
Bloomberg is working alongside Itiviti to transition clients from its sell-side execution and order management solutions (SSEOMS) platform, after announcing plans to withdraw the system from the market.

Bloomberg Terminals to Get Broad Access to Dow Jones News; Content now available alongside Bloomberg stories, articles from other news sources
Kimberly Chin and Michael Dabaie – WSJ (SUBSCRIPTION)
Bloomberg terminal subscribers gained broad access to Dow Jones & Co. news content on Monday, according to the companies.

HSBC lifts ban on personal mobile phones for traders; Regulators have been pushing banks to ensure they have appropriate controls in place around the use of personal devices
Samuel Agini – Financial Times
HSBC has relaxed its restrictions on mobile phones on its trading floors in a bid to allow employees to respond swiftly to emergency situations outside the workplace.


By this measure, trading in retail sector hasn’t been this cheap in years, says market watcher
Lizzy Gurdus – CNBC
Amazon isn’t the only one dishing out discounts on Prime Day. As consumers flocked to the e-commerce giant’s website to take advantage of the 48-hour sales holiday, traders were making moves in the SPDR S&P Retail ETF, the XRT. In fact, “put volume outpaced call volume by about 5 to 1 ” in the XRT on Monday, the first day of Amazon’s buying promotion, said Mike Khouw, co-founder and chief strategist at Optimize Advisors and a resident options expert on CNBC’s “Fast Money.”

Don’t Bail on Stocks Says $357 Billion Manager Eyeing Inflation
Jackie Edwards and Adam Haigh – Bloomberg (SUBSCRIPTION)
A staunch supporter of the bull run in equities says his chief concern at present is that investors don’t stay the course and miss out on the rewards as stocks keep grinding higher.
“The risk today in our opinion is not the risk of a meltdown, it’s more of a risk that equity markets continue to go up and people don’t participate,” said Ash Alankar, head of global asset allocation at Janus Henderson Investors, which oversees about $357 billion. “Central banks are giving you a gift, so take it,” he said in an interview via video conference from Melbourne.


Bank of Canada to Take Over Administration of Key Risk-Free Rate
Paula Sambo – Bloomberg (SUBSCRIPTION)
The Bank of Canada is taking over a new risk-free overnight rate that could become the dominant benchmark for the country’s C$12 trillion ($9.2 trillion) market for loans and derivatives.
The Ottawa-based central bank said Tuesday it will become the administrator of the Canadian Overnight Repo Rate Average when enhancements take effect in the second quarter next year. It will provide the rate at no cost and for the “public good.”

Corzine Accepts Prop Trading Ban in His Wall Street Resurrection
Miles Weiss and Hema Parmar – Bloomberg (SUBSCRIPTION)
SEC restrictions stem from collapse of Corzine’s MF Global; Limits come as part of his firm’s bid for SEC registration
Jon Corzine’s commodities firm blew up the last time he was trading on Wall Street. Now regulators want to make sure his new hedge fund doesn’t suffer the same fate.

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