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Options Market Says Buy the Dip; Issues With Volatility Short-Selling Guru

Lead Stories

Options Market to Investors: Buy the Dip; Options traders aren’t pricing in a correction during September and October, even as worries abound.
Steve Sears – Barron’s
The options market is sending a message to stock investors: Keep calm and buy the dip. Despite the recent turbulence in the market, Standard & Poor’s 500 index options, which are used to hedge stock portfolios, are priced as if investors have little to worry about over the next two months. This stands in sharp contrast to the recent eruption of market commentary that warns stocks could severely tumble for any number of reasons, including a nuclear standoff with North Korea, seasonal market volatility, central bank meetings, and the U.S. government’s debt-ceiling drama.

****SD: Nevertheless, it’s not like geopolitical risk and natural disasters aren’t bogies on folks’ radars.

Does The Math Add Up For The Famous Volatility Short-Selling Guru?
Mark Melin – ValueWalk
Seth Golden, the $12-million-dollar man who transformed from a mild mannered Target logistics manager to become a short volatility trading superhero recently featured in the New York Times, is a study in contrasts. On one hand, he appears an American entrepreneurial success story, raising $500,000 in new hedge fund investments using social media. On the other hand, Golden is a cautionary tale, with obvious warning signs such as his unregistered investment solicitation, working with a convicted felon business partner and outsized performance claims that all stretch credulity.

****SD: The short answer (no pun intended) is no. “While there is no definitive evidence that Seth Golden is engaged in any wrongdoing, red flags for further investigation exist.” Namely, that he’s soliciting investors but doesn’t appear to be registered with the necessary regulatory bodies, according to this piece.

Investor Who Lost Millions Finally Gives Up on His China Bet
Saijel Kishan – Bloomberg
Hedge fund manager Hart turns bullish on China and the yuan; The currency’s 2017 rally has defied bearish forecasters
Mark Hart spent seven years and $240 million waiting on a crash in China’s currency. He lost sleep. He lost clients. He damn near lost his sanity. And now he’s lost his conviction: Hart, who called for a more than 50 percent yuan devaluation last year, has turned bullish on China and its currency.

****SD: That’s a lot of yuan options.

Top banks’ H1 commodity revenue slides 41 percent to lowest since 2006
Reuters Staff
Commodities-related revenue at the 12 biggest investment banks tumbled 41 percent year-on-year in the first half of 2017 to its lowest since at least 2006, a consultancy said on Thursday.

****SD: Bloomberg has Major Banks’ Commodities Revenue Sinks to 11-Year Low and FXWeek has G10 FX revenues sink to lowest since 2006 – Coalition

LME copper options volatility hits four-month high; turnovers increase
Martin Hayes – MetalBulletin
The unexpected price surge in the London Metal Exchange base metals during the normally stagnant month of August has boosted interest in the underlying traded options markets, with volatility levels and turnovers both rising significantly.

Draghi Says Euro a Concern as ECB Targets October Decision on QE
Carolynn Look – Bloomberg
ECB cut its inflation outlook on surge in single currency; Governors considered scenarios for recalibrating QE in 2018

From sugar mills to hog farms, U.S. agriculture braces for Irma
P.J. Huffstutter, Renita D. Young – Reuters
Hurricane Irma sent farmers and food companies scrambling to protect processing facilities, farm fields and animal herds in the South and Southeastern parts of the United States on Wednesday.

****SD: Bloomberg – Hurricane Irma Threatens $1.2 Billion of Florida Crops

Exchanges and Clearing

Miami International Holdings, Inc. Reports August 2017 Trading Activity for MIAX Options and MIAX PEARL; MIAX PEARL Achieves Over 2% Market Share and Sets New Market Share and Contract Records
Miami International Holdings, Inc. today reported the August 2017 trading activity for its two fully electronic options exchanges – MIAX Options and MIAX PEARL (together, the MIAX Exchange Group). The MIAX Exchange Group collectively executed over 22.6 million contracts in August 2017 for a combined average daily volume (ADV) of 982,808 contracts, representing a total U.S. equity options market share of 6.87%.

****SD: 10 percent market share looks increasingly achievable, especially with all of these crypto products on the horizon at MIAX (not that there aren’t plenty of hurdles – see the recent Nasdaq lawsuit for an example).

OIC Celebrates 25th Anniversary as Leading Provider of Unbiased Options Education
The Options Industry Council (OIC) today announced the kick-off of a yearlong celebration commemorating 25 years as the leading educational resource for investors who use or want to learn how to trade U.S. listed options. OIC’s mission is to increase the awareness, knowledge and responsible use of exchange-listed equity options among a global audience of individual investors, financial advisors and institutional managers.

SGX Market Statistics for August 2017
Total Derivatives volume was 15.9 million, up 12% month-on-month (m-o-m) and up 15% year-on-year (y-o-y).

LME to upgrade electronic trading system after complaints
Peter Hobson – Reuters
The London Metal Exchange (LME) is set to upgrade and strengthen its electronic trading system after falling volumes and user complaints about outages and poor functionality.

Euronext announces volumes for August 2017
On a year-to-date basis, the overall average daily volume on Euronext derivatives stands at 554,243 contracts (+11.6% compared to end of August 2016) and the open interest was up at 17,095,836 contracts (+6.8% compared to end of August 2016).

LCH bilateral swap platform sees first trades
Helen Bartholomew – Reuters
Citigroup and Deutsche Bank have become the first dealers to execute over-the-counter derivatives trades through LCH’s SwapAgent, a new service for the uncleared swaps market.
The service aims to achieve capital and operational efficiencies for bank clients through simplified and standardised trade process for bilateral swaps. SwapAgent acts as an independent calculation agent, enabling customers to exchange bilateral margin and settlement payments without the need for a central counterparty.

UPDATED Nasdaq ISE Updates Technical Specification
Nasdaq ISE has updated the FIX 12.7 specification document to denote enhancements to the Execution Road Message for simple and complex orders to provide more consistency in the FIX messaging when reporting rejects. Beginning Monday, September 11, 2017 the Execution Report Message, in the event a complex order is rejected, will provide rejected messages for each leg of a complex order.

****SD: Hmm, reporting on rejects, eh? Reminds me of some of the stories I wrote on the A&E beat in my previous Minnesota life.


Wedbush Securities On-Boards William Barry and Steven Slovak; The pair will be based out of New York and report to the group’s managing director Scott Skyrm.
Aziz Abdel-Qader – Finance Magnates
Los Angeles-based Wedbush Securities, a provider of private and institutional brokerage services in the US, has secured the services of William Barry and Steven Slovak as managing directors at its Fixed Income Financing, Futures and Rates division.

Regulation & Enforcement

No Law Needed on Insider Trading, SEC Chief Says; Jay Clayton says agency doesn’t need Congress to specify what is illegal
Dave Michaels – WSJ
Securities regulators and prosecutors had reason to celebrate last month when a federal appeals court broadened the definition of insider trading. Now a key official has indicated he is in no rush for Congress to clarify the sometimes blurry line between lawful trading and cheating.

France wants right to veto euro clearing in UK after Brexit: sources
Huw Jones – Reuters
France wants European Union regulators to have a veto over how Britain supervises UK-based clearing houses of euro denominated transactions after Brexit, EU sources said.

FIA: Relocation not necessary for enhanced central counterparty oversight
FIA submitted comments to the European Commission (EC) today regarding Part 2 of the EMIR Review Proposal. The comments address the regulation and oversight of central counterparties and the EC’s proposals to enhance supervision of these entities.

Sebi to look into physical settlement for stock derivatives
PTI via India Today
As it gears up for an overhaul of equity derivative rules, market regulator Sebi today sought views from stakeholders on whether there is a need to make physical settlement mandatory for stock derivatives. In a consultation paper, Sebi also asked market participants to submit their views on whether physical settlement should be done in a phased manner starting with stock options followed by stock futures.

No Summer Vacation for Distributed Ledger Technology
Reed Smith – Lexology
As regulators across the globe turn their attention to distributed ledger technology (DLT), developments in this space have been in the news almost weekly this summer. In the past six weeks alone regulators in the United States, Canada, Singapore and China have paved the way to exercising jurisdiction over initial coin offerings, actively demonstrating a keen interest in the development of DLT. As the UK’s Financial Conduct Authority (FCA) predicted in its April 2017 discussion paper on the topic, it appears that DLT is transitioning from a proof-of-concept phase, to real-world deployment.


Intercontinental Exchange to Provide Wireless, Ultra-Low Latency Connectivity Between Chicago and Tokyo With Go West Network
Intercontinental Exchange
Intercontinental Exchange, a leading operator of global exchanges and clearing houses and provider of data and listings services, and Go West, a consortium of leading global trading firms collaborating to create efficient access to global financial markets, will offer ultra-low latency wireless connectivity between markets in Chicago and Tokyo. When the Go West service is launched in the fourth quarter of 2017, ICE’s Secure Financial Transaction Infrastructure (SFTI) wireless networks will offer the most extensive ultra-low latency network connectivity solutions among the New York, Chicago, Toronto and Tokyo metro areas.


Rising Tech Volatility
Rupert Hargreaves – ValueWalk
Tech volatility is growing, but Bank of America has tips to help investors. According to Canaccord Genuity’s Monthly Internet Dashboard, the FANG stocks, Facebook, Amazon, Netflix, and Google are up ~48%, ~29%, ~41%, and ~19%, respectively year-to-date, while the S&P 500 is up ~10%. Even though these companies are reporting some of the fastest revenue growth rates in the S&P 500, Canaccord’s analysts note that it will be “very tough” for this kind of outperformance to continue.

****SD: Business Insider has this story too, but with a Business Insider-y headline – BANK OF AMERICA: Here’s how to make a killing from the next tech boom with ‘limited risk’

How to get returns out of this high-valuation market according to Goldman Sachs
Anneken Tappe – MarketWatch
With a little under four months left in the year, investors grappling with high valuations, low volatility, geopolitical risks and domestic uncertainties are struggling to figure out where to get the best returns.
Goldman Sachs’s chief U.S. equity strategist, David Kostin, offered up some ideas in a Wednesday note.

How Investors Are Preparing for the Worst on North Korea
Lananh Nguyen and Brian Chappatta
Market resilience threatened anew with havens in demand; Hurricanes, geopolitics, Washington drama unnerve markets

****SD: Brian Jacobsen, multi-asset strategist at Wells Fargo Asset Management, is the only one who simply says “do nothing.”


CBOE Holdings to Present at Barclays Global Financial Services Conference September 12
CBOE Holdings, Inc. today announced that CBOE Holdings Chairman and Chief Executive Officer Edward Tilly will speak at the Barclays Global Financial Services Conference in New York on Tuesday, September 12, at 2:45 p.m. ET.


Barchart Announces University Exchange – A FinTech Hackathon Event for Students
Markets Insider
Today, Barchart, a leading provider of financial market data and technology has announced University Exchange, a full-day Hackathon event. The inaugural event is open to graduate and undergraduate students at Illinois Institute of Technology. The event takes place on October 27 at FinTank and will feature teams of 3-4 students who will be challenged to develop an automated news publishing solution using Barchart’s financial content and Barchart OnDemand APIs. The solutions will be judged by a group of industry professionals who will award cash prizes to the top 3 teams. Winning teams will also receive a featured spot at FinTech Exchange 2018 which takes place on April 25.

Exchange-rate shifts have helped the global economy
The Economist
The euro’s strength and the dollar’s weakness have had benign effects

Pound Shakes Off Economic Woes as Traders Set High Shock Bar
Charlotte Ryan
Would take ‘disastrous news’ to push sterling lower: Santander; Currency is up 6% this year despite underwhelming data

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Graduate of University of Minnesota School of Journalism and Mass Communication