Traders Flock to Tech Options as Stocks Soar; Options traders have gone full bull — here’s why they might regret it

Feb 21, 2020

Observations & Insight

Tom Zagara – Part 2 – Open Outcry Traders History Project

Tom Zagara has lots of great stories to tell from his time as a trader at the Chicago Board Options Exchange. There were so many, we broke his interview into two parts. In Part 2 of his interview for the Open Outcry Traders History Project, Zagara tells the tale of the drug bust on the CBOE trading floor and how the runners and clerks on the floor dumped their drugs into the garbage cans and then dove in to retrieve them when the FBI had left. He talks about how he and other traders would protect brokers and eat bad trades when necessary to be on the brokers’ good side when orders came to the trading pit. Zagara almost went bankrupt twice, but learned his lesson. Sometimes he learned it the hard way. This is part two of a two part interview Tom did with John Lothian News for the Open Outcry Traders History Project.

Watch the video »

Lead Stories

Traders Flock to Tech Options as Stocks Soar
Gunjan Banerji – WSJ
A surge in technology shares has propelled U.S. stocks to new heights this year. Options traders are betting that the record run in tech will continue.
Traders have turned to derivatives to bet on the continued rise of some tech highfliers, wagering that there are even bigger gains ahead for the group.

Options traders have gone full bull — here’s why they might regret it
Shawn Langlois – MarketWatch
So much for that “wall of worry.”
According to data cited by Dana Lyons of J. Lyons Fund Management, fears that have kept a contrarian tailwind blowing on stocks for weeks have gone completely still. Now, it looks as if traders are going all in on this market.

New Study Finds Index Strategies Using Cboe Russell 2000 Options Offer Income Generation and Downside Protection
Press Release
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, and Wilshire Analytics, the investment technology group of Wilshire Associates Incorporated (Wilshire), a leading global financial services firm, today released new research designed for financial professionals examining the effectiveness of options-selling index strategies. Options-selling index strategies are designed to provide investors with income from premiums and a potential downside cushion in the event of a market turn.

Asian Traders Bracing for Further Volatility as Virus Spreads
Joanna Ossinger and Ishika Mookerjee – Bloomberg
A tentative recovery in Asian risk assets came to an abrupt end this week as the coronavirus spread outside China, and option markets suggest traders are bracing for more downside ahead. Expected price swings in Korean stocks and the won jumped to five-month highs as new cases surged in the country. The yen slumped to its weakest in 10-months against the dollar, yet Japan’s currency-sensitive stocks finished the week lower.

Exchanges and Clearing

Cboe Global Markets to Present at the Credit Suisse 2020 Financial Services Forum on Thursday, February 27
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, announced today that Ed Tilly, Chairman, President and Chief Executive Officer, and Brian Schell, Executive Vice President, Chief Financial Officer and Treasurer, will present at the Credit Suisse 2020 Financial Services Forum on Thursday, February 27, at 12:00 p.m. (Eastern Time).

Regulation & Enforcement

SR-NASDAQ-2020-007 Notice
Proposal to assume operational responsibility for certain enforcement functions currently performed by FINRA under the Exchanges authority and supervision.


Coronavirus may be worse than Wall Street is wagering
Megan Greene – Financial Times
I recently asked some investment managers how they might immunise their portfolios against fallout from China’s coronavirus. “I wouldn’t,” one scoffed, “the virus is temporary.” Another rattled off some ideas but added “no one is actually positioning their portfolio that way”.
Investors have been conditioned to believe that disturbances such as mad cow disease, Sars, and now the coronavirus are temporary blips. Even if that proves to be correct, interruptions to global supply chains may cause greater problems for growth and markets than investors are expecting.


Trader’s Transition Program
Matt Hensley – YouCanTrade
Becoming a successful trader requires both well-tested strategy setups and having the mindset of a trader. Most new traders will seek out as many trading strategies as they can without learning the way to trade them, or they’ll seek out the mental edge they need without a reliable process for entering and exiting trades.


Why These Online Brokers Are the Best—and What They Could Do Better
Matt Miller – Barron’s
In the course of the past year, the brokerage industry has undergone a transformation in which free trading is now the standard. The trend started in October when Interactive Brokers Group (ticker: IBKR), Thomas Peterffy’s pioneering Greenwich, Conn., brokerage, said it would cut commissions on equity trades to nothing. Charles Schwab (SCHW) made that same offer days later. Rival brokers E*Trade Financial (ETFC), TD Ameritrade (AMTD), Fidelity, Ally Invest, Merrill Edge, and Vanguard soon followed.

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Past Options Newsletters

Seeing red: tricky times in the markets

Seeing red: tricky times in the markets

$34,126/$300,000 (11.4%) ++++ Lead Stories Seeing red: tricky times in the markets Stefan Wagstyl - Financial Times As investors we like to think we're acting rationally, even though there are mountains of evidence to show that, all too often, we're not. A successful...

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