Traders Pile On Long Positions As Nifty Hits Lifetime High
Agam Vakil – Bloomberg
The Nifty 50 index advanced 1.7 percent on Tuesday hitting a new lifetime high of 9,122 on an intraday basis and even managed to close above the 9,000-mark for the first time on record. The index, which was trading in a tight range for the last couple of weeks, soared to record highs after Prime Minister Narendra Modi’s party secured an impressive mandate in the country’s largest state.
China to Allow Onshore Bond Buying via Hong Kong This Year
China will allow investors to buy mainland bonds in Hong Kong this year, Premier Li Keqiang said at a briefing Wednesday, adding to recent moves to ease access to the nation’s debt market…
The comments signal the latest push by mainland authorities to make China’s bonds more accessible to offshore investors. Foreign institutions that invest in the interbank debt market can trade products including forwards, swaps, cross-currency swaps and options with domestic settlement agents, the State Administration of Foreign Exchange said in a statement posted on its website on Feb. 27.
Oil at $40 No Problem as U.S. Drillers Snub OPEC With Hedges
Joe Carroll and David Wethe – Bloomberg
OPEC’s worst enemy isn’t U.S. shale drillers. It’s the hedges propping them up.
American oil explorers who survived the worst of the 2014-2016 market rout are shrugging off the 14 percent slide in prices this year from a high of $55.24 to less than $48 a barrel Tuesday. The price would have to drop to the $30s or lower to dent the bottom line of many drillers now working U.S. shale fields, said Katherine Richard, the CEO of Warwick Energy Investment Group, which own stakes in more than 5,000 oil and natural gas wells.
How Slipping Oil Prices Are Hurting the Global Reflation Rally
Sid Verma – Bloomberg
The global market rally is facing a familiar nemesis: feeble oil prices.
In the latest blow, Saudi Arabia announced Tuesday that it raised output back above 10 million barrels a day in February — reversing about a third of the cuts made the previous month — sending crude to the lowest level since late November. That pushed stocks and commodity-linked currencies, such as the ruble and the Norwegian krone, lower, while fueling demand for the relative safety of Treasuries.
First Quarter VIX Range and Average Near Record Lows, But Will It Last?
Russell Rhoads – CBOE Options Hub
As we come to the end of the first quarter of 2017 all the talk about VIX has been how quiet VIX has been. I ran some numbers today and discovered that the high to low range for VIX during the current quarter, using closing prices, is 2.34. This is by far the narrowest quarterly range for VIX on record. The current narrowest quarter occurred in the third quarter of 1995 with a range of 2.68. VIX either needs to close over 13.26 or under 10.24 (or a combination of widening the range by 0.34) to avoid the being the quietest quarter on record.
Hidden Pothole For Stock Market May Lie In Republican Tax Reform Plan
Rich Miller – Bloomberg
Tax reform may not be the unalloyed good that stock market investors seem to think it is.
Or so say tax policy wonks in Washington. In a complicated argument, they contend that a provision in the Republican tax plan that’s designed to speed up economic growth paradoxically could put downward pressure on equity prices.
Markets brace for an explosively volatile week
Lukman Otunuga – Futures Magazine
A strong sense of caution has gripped the financial markets on Tuesday with investors on standby ahead of an explosively volatile data-packed week. Asian shares were mostly mixed today amid the anxiety with the cautious trading mood exposing European markets to downside losses. With risk aversion set to heighten as uncertainty and political risk weigh on sentiment, the financial market could be vulnerable to further losses this evening. The unnatural calm ahead of a string of major central bank policy meetings, imminent U.S. rate increase, and Dutch elections continues to send ominous warnings of the storm that has yet to come this trading week.
Trader Talk: Are you ready for a 2,000 point drop in the Dow?
Bob Pisani – CNBC
Are you ready for a 2,000 point drop in the Dow? That’s what a “normal” correction would look like now.
Normal corrections look kind of scary when markets are at these highs.
The Dow hit a new high on March 1 at 21,115.
That means a 10 percent drop — what would be considered a “correction” — would be a decline of 2,111 points. Sounds pretty steep, no?
Investors Tune Out “Noise” Focus on Economic Growth
Paul Ebeling – Live Trading News
So far during The Trump Era, the global markets are showing a low level of volatility, that despite the chaos and uncertainty that analysts warned his Presidential win would bring.
Notably, the global economy’s growth is at its most steady and predictable for decades, since recovering from the Y 2008 financial crisis, and that is Trumping any short-term political issue.
The Continuing Evolution Of Volatility Trading
The short history of volatility trading in the CTA space goes something like this: In the beginning, there were simple option selling strategies that sold out of the money calls or puts once a month until something bad happened. Then strategies got a little more dynamic, doing covered options, iron condors, protecting the wings, and so forth. Then the CME came out with weekly options, opening up a new game board for traders who could collect premium without the extended time risk. And somewhere in there came the VIX futures traders, capturing the option decay via the structure of that futures market versus being short options, while also putting on hedges and even going long volatility from time to time.
Exchanges and Clearing
CME Group to Serve as Administrator for Market Agreed Coupon Swaps Contract
Press Release – CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that it will serve as the administrator for SIFMA Asset Management Group’s (AMG) Market Agreed Coupon (MAC) swap contract, which was previously administered by SIFMA. MAC swaps are interest rate swap (IRS) contracts with pre-defined, market-agreed terms developed by SIFMA AMG and ISDA in 2013.
SGX pledges to ramp-up investment in OTC platform
Luke Jeffs – Futures & Options World
The Singapore Exchange has pledged to ramp up its investment in its over-the-counter derivatives platform and said it sees this market as an opportunity for the Asian exchange giant.
Regulation & Enforcement
Trump Picks a Regulator Who Could Help Reshape Dodd-Frank Act
Ben Protess – NY Times
President Trump rounded out his financial regulatory team on Tuesday, announcing plans to select J. Christopher Giancarlo to oversee a lucrative corner of Wall Street that helped unleash the financial crisis.
In appointing Mr. Giancarlo to run the Commodity Futures Trading Commission, which regulates the sort of derivatives trading that spread panic on Wall Street in 2008, the president took another step toward challenging the Obama administration’s legacy on financial regulation. As a Republican commissioner at the agency since 2014, and more recently as its interim chairman, Mr. Giancarlo has embraced the broad goals of new derivatives regulations under the Dodd-Frank Act while criticizing crucial portions of the fine print.
ETF Options: ‘Get Icarus a Parachute’
Crystal Kim – Barron’s
Call it the “democratization of financial markets” or just good sense: exchange-traded funds have made it simpler for the average Joe investor to make complicated macroeconomic calls. ETF share volumes have risen 50% in the past five years, while liquidity in single stocks have languished.
Bank of America Merrill Lynch launched ETF Options Watch, so that investors can make big-picture bets and “follow Icarus to the sun” as chief investment strategist Michael Hartnett says, but also have a ripcord handy just in case the market turns ugly.