Observations & Insight
David Silverman: Is Greed Good?
At MarketsWiki Education’s World of Opportunity event in Chicago, David Silverman, the CEO of Alpha Trading, talks about the natural tendency toward greed in the markets and the struggle against it. Is greed good, as Gordon Gekko opined in the movie “Wall Street,” or is it more likely to lead to the fate of the gluttonous Mr. Creosote in Monty Python’s “The Meaning of Life”?
Watch the video »
Wall Street Fears ‘Hard Rollover’ of Risks After September Calm
Joanna Ossinger – Bloomberg
In the end, September wasn’t so bad for markets. And that’s making Wall Street nervous.
The S&P 500 finished the month up 1.7% and the MSCI All-Country World Index gained 1.9%. Gauges of volatility for both U.S. stocks and Treasury futures settled lower even as the yield on America’s benchmark 10-year debt rose by 20 basis points.
How the Hedge Funds Are Really Playing Brexit
Lionel Laurent – The Washington Post
Philip Hammond is officially “outside the tent,” to use Lyndon Johnson’s phrase.
After losing his job as U.K. Chancellor of the Exchequer and then his badge as a Conservative MP by rebelling against Boris Johnson’s hardball Brexit strategy, Hammond has kicked up an almighty stink by accusing Johnson of being in thrall to wealthy financial “speculators” who would actively profit from a no-deal Brexit. Downing Street called it “an ugly smear,” Brexit-supporting hedge fund founder Crispin Odey called it “crap,” and Jeremy Corbyn’s opposition Labour Party seized on it it gleefully as supportive of its own view: that the more chaotic and painful Brexit is for the U.K. economy, the bigger the “goldmine” for hedge funds.
****JB: Also read the Financial Times’ story, Government rubbishes claims of links to Brexit short-selling. Also see the story under “Strategy” below to find out how they might pull it off.
How October got its reputation for volatile stock-market swings
William Watts – MarketWatch
The radio disc jockeys got it right — this month would more accurately be known as Rocktober, particularly for stock-market investors.
As shown in the chart below from Wells Fargo Investment Institute, which tracks the standard deviation of daily returns of the S&P 500 index SPX, -0.20% dating back to 1928, October has historically been the most volatile month for U.S. equity markets.
Stocks Rally, But Traders Can’t Shake that Uneasy Feeling
Robert Burgess – Bloomberg
U.S. and global stock-market benchmarks ended September on a high note by rallying to cap their best monthly performance since June. For the MSCI USA Index, the gain was about 1.63%, while its global counterpart jumped 1.91% for the period. Even so, it feels like all anyone on Wall Street wants to talk about is whether equities are poised for another end-of-year swoon like the one that occurred in 2018. One big difference from last year is that now, central banks are easing monetary policy, which should support risk assets. But a fresh development suggests caution is warranted nonetheless.
Hedge funds resume selling oil as focus turns back to economy
John Kemp – Reuters
Hedge funds resumed selling petroleum as Saudi Arabia ramped up output following attacks on its oil installations and the focus shifted back to the poor health of the global economy and oil consumption.
Hedge funds and other money managers sold 16 million barrels of futures and options in the six major petroleum contracts in the week to Sept. 24, after buying a total of 144 million in the previous two weeks.
Being Long Volatility Is a Winning Trade, Headwaters CIO Rowe Says
In this edition of “Options Insight,” Headwaters Volatility’s Matt Rowe examines the recent stock market volatility with Bloomberg’s Luke Kawa on “Bloomberg Markets: The Close.”
Farmer sentiment regarding current conditions slips in September
CME Group (press release)
Farmers became much more pessimistic about current conditions on their own farms and in the U.S. agricultural economy in late summer, according to the September Purdue University/CME Group Ag Economy Barometer. While the overall Ag Economy Barometer reading dipped slightly to a reading of 121, down three points from August; the Index of Current Conditions, a sub-index of the barometer, dropped 22 points to a reading of 100. The barometer is based on a mid-month survey of 400 agricultural producers across the U.S.
Exchanges and Clearing
Charles Schwab (SCHW) $0 Commissions Online Stock, ETF, Options
John Gittelsohn and Annie Massa – Bloomberg
Charles Schwab Corp., in an escalating price war with rivals, plans to eliminate online trade commissions for U.S. stocks, exchange traded funds and options. Shares of Schwab and its competitors in the online brokerage industry plunged.
Schwab clients using the web qualify for the zero commission, down from $4.95, which begins Oct. 7, according to a statement from the company Tuesday. Clients trading options will continue to pay 65 cents per contract.
Cboe Sees Slump in September FX Volumes, Reverses August Gains
Celeste Skinner – Finance Magnates
With September now behind us, exchanges, brokers and trading providers are now publishing their monthly trading volumes for last month. One firm to do just that is Cboe, which has today reported its spot monthly volume. In the month of September 2019, there were 21 trading days as compared to August, which has 22 trading days. This may have an influence on the trading volumes posted by the exchange.
Facebook Stock Has Soared. How to Play a Loss, or More Gains.
Steven M. Sears – Barron’s
One of our favorite trades has been selling puts on Facebook in anticipation of the federal government trying to break up the company. So far, Facebook remains intact and the federal government seems to be coming apart as President Donald Trump faces an impeachment inquiry. What may happen to the president remains unclear, but Facebook (ticker: FB) thus far remains one of the world’s true social-media monopolies. Investors who have sided with the company over the government’s antitrust investigation have been well rewarded for owning the stock and selling puts to potentially buy even more. So far this year, the stock is up 35%, trouncing the 19% return of the Standard & Poor’s 500 Index.
Short-selling: can hedge funds make a fortune from no-deal Brexit?
Patrick Collinson – The Guardian
Hedge fund millionaires backing Boris Johnson will make a killing from a no-deal Brexit, according to the former chancellor Philip Hammond. The claim is these “short sellers” are betting on big falls in share prices and the value of sterling in what critics say is a classic example of “disaster capitalism”. But how do they do it, who are they and are they all merchants of doom?
Don’t expect calm markets in October, historically a month for wild swings
Yun Li – CNBC Markets
October has historically been the most volatile month as the VIX, an index that measures investors’ fear, tends to peak during the month, according to Macro Risk Advisors. The market’s surprising resilience in September, which is typically the worst month for stocks, could also signal the rally is about to lose steam.
Now we know the stock market won’t care if Trump falls
Tim Mullaney – MarketWatch
“If they actually did this the markets would crash,” says the would-be president-for-life, cruelly limited by recent events to president-for-now. “Do you think it was luck that got us to the best Stock Market and Economy in our history. It wasn’t!”
Nice market you’ve got here, pity if something were to happen to it, Donald Trump says, in dulcet tones once reserved for Ukraine President Volodymyr Zelensky. And so, the idea goes: If Trump falls, so will your 401(k), meaning you have to put up with his act for two terms.
Market makers not responsible for US equity market volatility, says Citadel Securities
Hayley McDowell – The Trade
Recent bouts of volatility in the US equity market were not caused by technology-driven market makers, according to a thorough examination of depth-of-book data carried out by Citadel Securities.
The US-based liquidity provider published an analysis of aggregate order book data from direct data feeds of US exchange groups, revealing that several episodes of heightened volatility in the US equity market witnessed over the past 12 months had nothing to do with quantitative investment strategies and computer-driven trading activities.