Observations & Insight
Back to the (Broker) Dealer’s Table
It was back at the turn of the century that Tony Saliba founded LiquidPoint, the broker-dealer known for its options execution management technology that at one point executed a fifth of daily options volumes. LiquidPoint would eventually be sold to ConvergEx Group in 2007, which in turn would spin off LiquidPoint to Dash in 2017, forming Dash Financial Technologies. Saliba remained with LiquidPoint through 2014.
Saliba said he swore he’d never get back into the broker dealer space, but in 2018 it was announced he was launching Matrix Executions, a multi-asset broker dealer serving both the buy and sell-side. It’s a new endeavor, but Saliba is bringing back together veterans from his LiquidPoint days to help the firm through its nascent stages.
In this video, Saliba talks about why he got back into the execution and routing space, bringing the team together and the firm’s approach.
The Real Risk Is Believing That Volatility Is Risk
James Mackintosh – WSJ
Which risk should you be more scared by: American cities being vaporized by North Korean nuclear missiles, or the VIX spiking above 20? Judging by recent market reactions, investors are much more worried about volatility than they are by the prospect of nuclear armageddon.
Does the VIX Need Fixing? Sure Looks That Way
John M. Griffin – Bloomberg
Last week, the Chicago Board Options Exchange (CBOE) responded to a research report into manipulation of the monthly settlement of the VIX, sometimes referred to as the stock market’s fear index, and attempted to assure participants that the process was not rigged. “The academic paper’s analysis and conclusions are based upon a fundamental misunderstanding about how VIX derivatives are traded and settled,” the CBOE wrote. I was an author of the research paper. The CBOE’s most recent response has left my “fundamental misunderstanding” still very much unresolved.
February volatility ‘hurricane’ upended VIX-linked trading
Saqib Iqbal Ahmed – Reuters
The February volatility shock may be receding in the U.S. stock markets’ rear-view mirror, but it has dramatically altered VIX-land – the market where traders place bets on volatility via products linked to the VIX, the stock market’s so-called “fear gauge.”
Wall Street’s ‘fear index’ posts biggest monthly drop since Trump’s election
Ryan Vlastelica – MarketWatch
The Cboe Volatility index rose on Monday, but closed out its biggest monthly decline in more than a year.
Higher rates and inflation and rougher time for stocks: CNBC Fed Survey
Steve Liesman – CNBC
The outlook for inflation — and for Fed rate hikes to counter the threat — continues to push higher.
The CNBC Fed Survey sees little chance for a hike at May’s two-day meeting, which begins Tuesday, but an 86 percent chance that the Fed will hike in June.
Fed Unwinding Bernanke Experiments: Progress Report
Bluford Putnam and Erik Norland – CME Group
Raising rates and shrinking its balance sheet, the Federal Reserve (Fed) is now part way into the process of unwinding the Bernanke emergency policies following the Great Recession. So far, the well-telegraphed approach to unwinding quantitative easing and raising rates has had no discernible impact on the pattern of real GDP, inflation or the labor markets. While Fed actions are only a part of the cause, US Treasury yields have risen and equities have become more volatile.
In this research report, we will examine the evolution of Fed policy as the Federal Open Market Committee (FOMC) seeks to create a sustainable approach to managing an economy no longer requiring emergency measures.
As Dairy Goes Global, More Farmers Turn to Futures and Options
Shruti Singh and Lydia Mulvany – Bloomberg
Doug Block, a dairy farmer for 45 years, says he grew up in an era when the price of corn feed for cows fluctuated by just 6¢ a bushel. The U.S. didn’t ship much cheese and butter overseas, and the government often bought cheese to buoy the market when prices sagged. Those days are gone. Block’s business depends on pasture conditions in New Zealand, Europe’s inventories, and China’s milk consumption. He also has to deal with wild swings in the market after the U.S. government scaled back support over the last decade.
Cboe Expands Market Data Sales Team With Key Hires
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, today announced the expansion of its Market Data Services team with two key appointments in its London office.
Richard Barden has been appointed as Director, Market Data Sales and Stephen Dorrian has been appointed Director, European Market Data. Mr. Barden is responsible for the expansion and distribution of Cboe’s Market Data offerings throughout Europe and the Middle East. Mr. Dorrian is responsible for the commercial management of Cboe’s European Equities market data business globally, including sales and policy. Cboe offers a global suite of market data products, ranging from products based on U.S. and European Equities, U.S. options, Indices, Futures and FX.
Russell 2000 Has Congestion Formation Area Developing Pre-FOMC
Gail Mercer – Nadex
Both the daily and weekly Russell 2000 are showing congestion areas prior to the FOMC announcements, which are scheduled for Wednesday, May 2, 2018 at 2pm New York time. Currently, the Fed Rate Monitor tool is showing a 93.8% expectation that the Feds will leave interest rates at 1.50-1.75 on Wednesday, May 2nd and the June expectation for a rate hike has decreased from 96.9% to 93.8%. Is the congestion area on the Russell 2000 indicative of a downward spiral in June?
Safely Juicing Your Returns With Options — AAPL — Investing Daily
Robert Rapier – Investing Daily
In a recent column, I discussed one way to profit from market volatility. An example I used was Apple (NASDAQ: AAPL), which I had recently picked up on a dip and sold on a spike using limit orders.
In a nutshell, I always have some cash in reserve, devoted to limit orders on quality companies at deep discounts.
But today I want to talk about a slightly different strategy — one that actually pays you as you await the execution of those discounted limit orders.
Why Traders Love Volatility Except When It Bites Back: QuickTake
Joanna Ossinger and Cecile Vannucci – Bloomberg
Mom and pop investors fear it. Traders by and large love it, and normally miss it when it’s gone. Volatility was absent from the financial markets for an unusually long time before rushing back. It’s now on everyone’s radar screen, and likely to stay that way in the months ahead. Volatility not only affects investments; investing in volatility has become something of a cottage industry.