Trump’s Year of Low Volatility; Derivatives add value – study; Cboe’s sector options

Nov 8, 2017

Lead Stories

A year after Trump’s election, market volatility has eluded everyone
It’s been a year since consensus opinion was punctured by a Donald Trump electoral win and a market rally that deflated Wall Street oddsmakers’ view that a Clinton loss would slam stocks.
Yet even the small minority expecting a Trump victory and positive market response mostly thought heightened market volatility would be a feature of an establishment-deriding president set on raising the economic metabolism and waging trade wars.

****SD: The FT has an array of charts encapsulating Trump’s year in office thus far here.

Derivatives add real value for investors says new study
FTSE Global Markets
Some 60% of institutional investors use derivatives. Good news then that derivatives-based investment strategies add value in terms of both optimising returns and minimizing risk according to a new study carried out by Union Investment in cooperation with Professor Alexander Szimayer of the University of Hamburg.

****SD: “One striking fact is that 31% of derivatives users trade volatility as a separate risk factor in order to generate additional returns.”

Tech Sector Index is Top Performer in 2017, as Cboe Plans Launch of Options on Ten Select Sector Indexes
Matt Moran – Cboe
One of the most frequent types of questions I receive from investors involves the topic of year-to-date performance. Many investors are very interested in tracking how indexes have performed in the current year.

Copper Traders Are Making High-Flying Bets About the Future of the Metal
Mark Burton – Bloomberg
The frenzy in the copper market is luring traders to take high-flying bets that prices are headed back toward a record.
Call options wagering on copper climbing above $10,000 a metric ton by December 2018 have started trading during the past two weeks, London Metal Exchange data show. In total, traders have spent about $4.5 million on the contracts.

US brokerage Charles Schwab opens Singapore office, Companies & Markets News & Top Stories
Angela Tan – Straits Times
NYSE-listed brokerage powerhouse Charles Schwab announced on Wednesday (Nov 8) the launch of its Singapore office aimed at providing Singapore and Asian investors greater access to the US market, which has been hindered by high transaction fees and unfamiliarity.

****SD: Schwab trying to add options to the international exposure toolset of Singaporean investors (plus the optionsXpress integration is complete).

Exchanges and Clearing

Cboe Readies Bitcoin Futures
Rob Daly – MarketsMedia
Wall Street analysts had bitcoin on their mind during Cboe Global Market’s third-quarter earnings call as they peppered chairman and CEO Edward Tilly for updates on the exchange’s plans to launch trading bitcoin futures.
The CBOE Futures Exchange on which the contract would trade is operationally ready, according to Tilly.
However, the exchange operator is waiting for the US Commodity Futures Trading Commission to grant its final approval.

CME Group Posts Contract Specifications for Bitcoin Futures
Finance Magnates
CME Group has detailed the specifications of the Bitcoin futures contract. The contract unit amounts to 5 bitcoins, as defined by the CME CF Bitcoin Reference Rate (BRR). The minimum price fluctuation will be $5 per bitcoin or $25 per contract.

Fangs futures debut as tech stocks boom inspires a new market
Gregory Meyer – Financial Times
A leading exchange operator is getting in on investor enthusiasm for Fangs, a small basket of highly valuable technology stocks, with the launch of a futures contract branded with the catchy acronym.

HKEX 2017 Third Quarter Results
Profit attributable to shareholders for YTD Q3 20174 was 22 per cent higher than the prior period reflecting the combined effect of revenue growth and continuing cost discipline.

****SD: Check this out – “Key highlights for the period include… A one-off receipt of $55 million post-liquidation interest from the liquidators of Lehman Brothers Securities Asia Limited.”

Euronext publishes third quarter 2017 results
Strong revenue growth in Q3 2017, up +14.1%[1] compared to Q3 2016, to EUR128.7m… Improved competitive landscape for Dutch derivatives with equity derivatives ADV up +20.8%

Regulation & Enforcement

Euronext details plans to meet new transparency rules in commodities
Euronext gave details on Wednesday of weekly commodities reports it will publish from next year to meet new European rules aimed at improving transparency in financial markets.
The trading exchange, whose derivative markets mainly include agricultural products, will from Jan. 3 publish weekly “commitments of traders “(CoT) reports that will set out positions held by investors, in a similar way to those published by the U.S. Commodity Futures Trading Commission (CFTC).

Virginia man charged with Fitbit stock hoax pleads guilty
A Virginia man accused by U.S. prosecutors of driving up the price of Fitbit Inc stock by orchestrating a hoax takeover bid, making about $3,000 in profit, pleaded guilty to securities fraud on Tuesday.

****SD: Burned on a $3k profit.


Don’t Mindlessly Sell Volatility At The End Of The Day
Mark Melin – ValueWalk
When looking at volatility selling strategies, Barclays has a unique take. While the consensus most often eschews volatility selling the blanket statement that “short volatility will eventually blow up,” the November 6 report treats the strategy seriously as one of several derivatives plays. But from their perspective, volatility sellers on the VIX might do well to better time their trades.

Are markets at a crossroads?
Kathleen Brooks – FXStreet
As we reach the middle of the week, there are a few signs that stocks could have a harder climb from here. After reaching record highs earlier on Tuesday, the S&P 500 closed the day lower. Advancers vs. decliners were pretty even on the day, with 243 advancers compared with 255 declining stocks, the biggest loser was Tripadvisor, which sunk on the back of growth concerns. The most striking thing about the US stock market today is not the individual movers, but instead the lead indicators and the bond market.


CME Group to Host 10th Annual Global Financial Leadership Conference
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it will host the 10th annual Global Financial Leadership Conference (GFLC) Nov. 13-15, at the Ritz-Carlton Beach Resort in Naples, Fla. The GFLC is an exclusive, invitation-only event that brings together decision-makers from the world’s leading financial institutions to discuss the global investment climate and outlook, debate critical economic issues and share insights and analysis of geopolitical trends and the global financial landscape.


French Trading Results Return to Earth After Beating Wall Street
Fabio Benedetti Valentini – Bloomberg
After outshining some of Wall Street’s biggest and best this year, trading results at France’s largest banks are crashing back to earth.
Leading the declines were Credit Agricole SA and Societe Generale SA, which both posted a revenue slump of about 25 percent, while BNP Paribas SA’s earnings from all trading activities — including bonds, equities and currencies — fell 15 percent. Only Natixis posted better results than Wall Street peers, registering a 9 percent fall compared with the U.S. average of 15 percent.

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