Lead Stories

Sterling Options Signal More Turmoil
David Goodman and Masaki Kondo – Bloomberg
Pound slides toward 31-year low after ‘hard Brexit’ report; Supreme court ruling could trigger ‘violent’ rally, BTMU says
A measure of anticipated swings for the pound climbed to the highest in three months before U.K. Prime Minister Theresa May’s speech on Brexit plans Tuesday and a court ruling this month on whether the British leader or Parliament carries the power to invoke the exit.

****SD: I found this quote from Mark Carney (link to Reuters article) over the weekend hilarious – “The best I can say is that the value of the pound will go up and down.”

Another Year of Positive Momentum for OCC
OCC News January 2017
Craig Donohue reflects on 2016 and offers some comments on regulation of centralized clearing, and there is an introduction to OCC’s new CFO, Amy Shelly.

****SD: Once some of the personnel churn slows a bit, the positive momentum will really accelerate.

Will Donald Trump Break the VIX?
Adam Warner – Schaeffer’s Research
Greetings! I haven’t chimed in for a while, but you have all done a great job keeping the CBOE Volatility Index (VIX) in check in my writing absence. But with an imminent cosmic Trump sea change on the horizon, we all have questions. Such as this: “Since the guy’s a bit of a wildcard, can we expect to see a steady volatility ramp (or endless spikes)? Or does the likelihood of a 3 a.m. Twitter rant against Pyongyang just get priced in during one big fell swoop, and it’s smooth sailing from there?”

****SD: Warner is baaaaack!

Trump Era, Brexit May Spur Year of Greater Currency Volatility
Vassilis Karamanis – Bloomberg
Donald Trump is making volatility great again. If the reaction to the U.S. President-elect’s first press conference is anything to go by, we are in for big swings in currency markets this year.

****SD: See the non-options related story in ‘Miscellaneous’ – CME Group Clears Daily Record 1 Trillion in Mexican Peso Interest Rate Swaps.

Can the ‘Trump put’ hold?
James Saft – Reuters
Equity markets have moved from depending for support on the “Fed put” to banking on a “Trump put” of assumed fiscal stimulus, deregulation and tax cuts. Only one of these two “puts” has a multi-decade track record of dependability, and it is not the policies or person of the incoming U.S. chief executive.

Gold Caught Between Rates and Inflation Crushes Volatility
Eddie Van Der Walt – Bloomberg
Wagers on gold-futures volatility are near a two-year trough; Holdings in exchange-traded funds hit lowest since May
For all the talk of faster inflation, gold traders are pricing in a relatively calm market.

Exchanges and Clearing

Bats Global Markets Reports Record 2016 U.S. Options Market Share, Maintains Strength Across All Other Markets
Bats Global Markets, Inc. (Bats: BATS) today reported 2016 highlights, including the April initial public offering, the September CBOE transaction announcement and continued strength across all of its markets, led by record full-year U.S. Options market share and U.S. ETF listings growth.

Moscow Exchange Launches Weekly Options
On 26 January 2017, Moscow Exchange will launch trading in weekly options on the RTS Index. The new instrument will complement MOEX`s monthly and quarterly options offering.

What does Euronext-LCH deal mean for clearing?
Sylvia Smit, head of equity markets delivery at Delta Capita – Futures & Options World
From an initial breakdown in talks with Sweden’s OM Gruppen, to further failed attempts from Macquarie and Nasdaq throughout the mid-2000s, the story of the London Stock Exchange’s ownership structure seemed destined to never end. However, after 15 years of constant rumour and rejection, the LSE’s agreement to sell its French clearing arm to Euronext could finally pave the way for its merger with German counterpart Deutsche Boerse.

ICE applies to extend incentive schemes
Julie Aelbrecht – Futures & Options World
The Merc extended a total of 20 incentive programs at the end of 2016
The Intercontinental Exchange has applied to the US futures regulator to expand two existing incentive schemes and launch a new scheme to support its new MSCI options at the end of January. The Atlanta-based exchange wants to open up its liquidity provider program for five Henry Hub natural gas futures on screen trades. The market-maker program is set to increase the number of eligible participants from six to twelve.

Deutsche Boerse-LSE merger make markets healthier: Blackrock
Blackrock (BLK.N), the second-largest shareholder in both Deutsche Boerse (DB1Gn.DE) and London Stock Exchange Group (LSE.L), publicly voiced its support for the $28 billion merger of the two European exchanges as key regulatory decisions on the tie-up loom.

Shenzhen exchange reviews rules to push innovation
The Shenzhen Stock Exchange said it would study plans to change the rules on its ChiNext market for small companies, as the startup venue heads for its lowest level since 2015.

****SD: From the article – “Among other key tasks for the year, the exchange said it will push ahead with a trial for options on exchange-traded funds”

BME Overhauls Its Activities Linked To Technology, Regulation And Innovation
BME today announced it will overhaul the resources, departments and companies within the Business Areas of Market Data and IT&Consulting by bringing together – based on their nature – the different activities of the company linked to value-added services in the areas of technology, regulation and innovation. The aims of these changes are to improve efficiency and push forward with the diversification of the Group.

Dalian Commodity Exchange New Year’s Message
On Behalf of Dalian Commodity Exchange (DCE), I would like to extend the New Year’s greetings to the member units and market participants, and express our heartfelt thanks to all our friends for their support.

****SD: Relevant bit – “We are about to launch the soybean meal options on futures.” Much more on China and OOFs in this FT story from Jan 5, “New China options to pave way for open commodities trading”


Societe Generale Onboards Tom Gillie to Bolster FX Team
Victor Golovtchenko – Finance Magnates
French bank Société Générale has just appointed Tom Gillie as Head of FX Options and FX Spot Trading.

Regulation & Enforcement

Major Shakeups in the Binary Options Industry – Best of the Week
Avi Mizrahi – Finance Magnates
During the passing week the top news in the international online trading industry all seemed to be involved with the fast changing environment that binary options brokers are operating in.


This robot could use voice analysis to spot fishy trades
Lucy Burton – MarketWatch
Investors with something to hide, be warned; technology consultancy Synechron is building an artificial intelligence system to help traders spot odd behavior. The system, internally nicknamed project Morton (but called Synechron’s Trading Assistant to external ears), operates on the basis of voice recognition.

****SD: Would inhaling helium stymie Morton?


Why SPY Open Interest Won’t Matter This Expiration Week
Todd Salamone – Schaeffer’s Research
As we cautioned in mid-December, increasing post-election optimism among traders, combined with round-number resistance overhead, suggested equities were vulnerable to trading range behavior at best, and, at worst, a short-term pullback. Fortunately for bulls, amid the increasing optimism, price action since mid-December can be characterized as a trading range environment.

Rev’s Forum: The Stage Is Set for a Dramatic Week
The stage is set for some market moves this week. Earnings season picks up steam, but the big psychological event will be the inauguration of Donald Trump on Friday. There has been chatter for quite a while now about a “buy the election, sell the inauguration” trade.

The Dogs of the Dow Are Poised to Pay Dividends
Steven M. Sears – Barron’s
At a time when investing in the wake of President-elect Donald J. Trump’s victory is seemingly all that’s needed to make money in the stock market, the Dogs of the Dow investment strategy seems as antiquated as a presidential sentence stripped of adjectives.

Block Trade Analysis – XLI Bull Put Spreads from Friday
Russell Rhoads – CBOE Options Hub
Since the election of Donald Trump the stock market has been on a bullish run. One sector that may benefit from the new administration is the industrial sector, whether that is due to an increase in infrastructure spending or through an increase in domestic manufacturing. On Friday, last week there were a couple of bullish option trades that came into the Industrial Selector Sector SPDR Fund (XLI) ETF option market worth taking a look at.

Breaking Down the $36M Hedge Fund Trade on T-Mobile US Inc (TMUS)
Celeste Taylor – Schaeffer’s Research
T-Mobile US Inc (NASDAQ:TMUS) has been steadily climbing higher since bottoming out in early February. The shares are up an impressive 71% over this time frame, and are currently trading at $56.88. And today, one hedge fund cashed in on a bullish options trade that reaped major rewards from the gains in TMUS.


Jesse Livermore: Lessons From the Greatest Trader
Bob Lang – CBOE Options Hub
From the Mind of the Greatest Trader – Jesse Livermore Starting the new year is a great time to reflect on what happened on the past but also to look ahead of what’s to come. My reflection is about my trading history and analyzing where I can become better. I also look to others to see where I can pick up ideas to improve. One of my favorite trading books of all time is Reminiscence of a Stock Operator by Edwin Lefevre.

Contrasting SPX and VIX – MLK Weekend 2016 and 2017
Russell Rhoads – CBOE Options Hub
2016 was a year lots of people would like to forget for a variety of reasons. Personally, I had a great year and didn’t know any celebrities who will be celebrated posthumously at the various spring award shows. If we go back 52 weeks to MLK weekend in 2016 the markets were about as opposite as they could be relative to where we are today.

Weekend Review – VIX Options and Futures – 1/15/2017
VIX Views
Last week VIX managed to finish the day below the 2016 closing low (11.27) twice. If it were only Friday’s close I’d throw an asterisk in there for the three-day weekend effect, but there’s no holiday excuse for the Wednesday close of 11.26.

Weekend Review – Volatility Indexes and ETPs – 1/15/2017
VIX Views
There are two lines below although it may appear that there is only a purple line for parts of the VXST – VIX – VXV – VXMT curve. In a round about way I’m saying not a lot happened in the world of S&P 500 option volatility last week.


5 Questions with Angie Setzer
Brian Mehta, CMO – Trading Technologies’ Trade Talk Blog
Angie Setzer has been working in the grain industry for over 11 years. After beginning her career as a cash grain broker, she transitioned into a position as Vice President of Grain for Citizens Elevator in Charlotte, MI. At Citizens, she manages five elevator locations as well as a state-of-the-art on-farm program bringing the company’s overall yearly handling to over 12 mbu. She writes the “Cash is King” column for Pro Farmer and she has been seen on AgDay, U.S. Farm Report, Market to Market and the Weather Channel. She also makes regular appearances on Market Rally Radio, Benzinga’s Pre-Market Prep show and Agritalk.

Serbia wants to annex part of Kosovo using ‘Crimea model’: president
Fatos Bytyci – Reuters
Serbia plans to seize a slice of northern Kosovo just as Russia annexed Ukraine’s Crimea region in 2014, Kosovo’s president told Reuters on Monday, as the two Balkan neighbors trade accusations of wanting to ignite a new regional war.

****SD: Jeebus. Just what the world needs now.

CME Group Clears Daily Record 1 Trillion in Mexican Peso Interest Rate Swaps
CME Group, the world’s leading and most diverse derivatives marketplace, announced today that it cleared a record 1 trillion in Mexican peso (MXN) interest rate swaps in a single day, January 12, 2017, an equivalent of more than $47 billion in notional value. January 12 cleared notional surpassed the previous record of MXN 659 billion ($32 billion) set on December 16, 2016.

****SD: I wonder why…

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