Breaking News

Duelling bitcoin futures go head-to-head as CME launches contract; Big Clampdown on Derivatives Has a Bitcoin-Shaped Hole

Observations & Insight

The Spread – Week of 12/11 – 12/15

Our second installation of The Spread! The Spread is a brief recap of some of the notable activity in the options world.

The following stories are referenced in this week’s installment:






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Lead Stories

Duelling bitcoin futures go head-to-head as CME launches contract
Gregory Meyer and Philip Stafford – Financial Times
The bitcoin futures race began in earnest as exchange operator CME Group challenged a Chicago competitor that had launched the first digital currency futures a week before.

Big Clampdown on Derivatives Has a Bitcoin-Shaped Hole: Gadfly (Correct)
Lionel Laurent – Washington Post
The regulatory backlash against risky financial spread-betting is mounting. European regulators unveiled harsher-than-expected plans to restrict the speculative financial products late on Friday, sending shares of stock derivatives brokers tumbling on Monday.

Dutch high-frequency trader drifts in becalmed markets
Alasdair Pal – Reuters
This year’s unusually quiet markets may have soothed the nerves of many investors, but for Dutch market-maker Flow Traders (FLOW.AS) the lack of volatility spells bad news.

Charts of the Year: Wake up at the back
Katie Martin – Financial Times
How quiet? This quiet.
Simon Hinrichsen from the multi-asset team at First State Investments is one of several correspondents in our Charts of the Year series to highlight the crushingly low volatility of 2017. For anyone bored at the back, sadly the spell may not break soon.

The Bull Market Lives! Long Live the Bull Market…
Russell Rhoads – Cboe
VIX worked its way lower Friday as the stock market rallied. We have grown accustomed to VIX below 10.00 and settlements below 10.00 as well. However, for the first time I can recall, we had a VIX futures contract close below 10.00 with the December future that expires next week settling at 9.925.

****JB: Also see, Weekend Review of Volatility Indexes and ETPs – 12/11/2017 and Weekend Review of Russell 2000 Options and Volatility – 12/11/2017

Exchanges and Clearing

Cboe Global Markets’ Exchanges Trading Schedule for Christmas and New Year’s Holidays
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, today announced the following trading schedule for company’s options, futures, equities and FX trading venues in observance of the Christmas and New Year’s holidays.

Regulation & Enforcement

CFTC launches virtual currency resource web page
Automated Trader
The Commodity Futures Trading Commission (CFTC) has launched a virtual currency resource Web page, The dedicated page is a central repository for Commission-produced resources about virtual currency, and aims to educate and inform the public about these commodities, including the possible risks associated with investing or speculating in virtual currencies or recently launched Bitcoin futures and options.

Germany Joins French-led Moves to Regulate Bitcoin at G-20 Level
Rainer Buergin , Birgit Jennen , and John Follain – Bloomberg
Germany joined European governments pushing for global bitcoin regulation amid mounting alarm that the world’s most popular digital currency is being used by money-launderers, drug traffickers and terrorists.

‘It’s going crazy’: Canadian watchdogs on high alert over Initial Coin Offering ‘mania’
Barbara Shecter – Financial Post
Canadian regulators are on high alert over a “mania” surrounding ICOs, technology-based coin or crypto-currency offerings that are being snapped up by investors around the world to the tune of nearly US$3.8 billion.
“You can see what’s happening in the marketplace — it’s going crazy,” Maureen Jensen, chair of the Ontario Securities Commission, said in an interview with the Financial Post.

CFTC adds 21 unregulated Forex and Binary Options brokers to RED list that illegally target US traders
Valentina Kirilova – LeapRate
The Commodity Futures Trading Commission (CFTC) informed that it has added 21 new names to the Registration Deficient List (RED List). These 21 new additions bring the total number of foreign entities on the RED List to 125.

Watchdog looks to ban sale of binary options
Damian Fantato – FTAdviser
The European financial services regulator is considering a ban on the marketing, distribution and sale of binary options to retail clients.
The European Securities and Markets Authority is also considering whether to restrict the marketing, distribution and sale of contracts for difference.


Goldman Sachs: How to make a killing in a low-volatility stock market
Joe Ciolli – Business Insider
Sometimes, when the market isn’t moving enough to whip up returns, you have to take matters into your own hands.
That’s the crux of a recent recommendation made by Goldman Sachs, which has been strategizing ways to profit from a stock market that has been stuck at a standstill for most of 2017, with the CBOE Volatility Index, or VIX, sitting close to the lowest levels on record.

How to Short Bitcoin
Mark Kosierowski – FX Empire
The incredible rise in the price of Bitcoin has led to innumerable predictions of its impending collapse. If accurate, this decline may create as much wealth as the rise did. Savvy investors who understand the mechanics of a short sale can profit from a decline as easily as buyers profited from the increase.

A Cool Stock Market Indicator Has Just Hit ‘Euphoria’
Helene Meisler – TheStreet
It was an oversold rally and it was led by the small-caps, but even so breadth was not nearly as good as I would have thought it would be. Oh sure, maybe it was due to the last options expiration of the year, but let’s take a closer look.

EQDerivatives: VSTOXX Futures Eyed Ahead of Italian Election Risk
VSTOXX futures are predicted to gain significantly as they react to Italian election risk, based on previous political events such as Brexit and the French presidential elections, according to traders and strategists.


Bitcoin Has a Future and You Can Go Long or Short: QuickTake Q&A
Annie Massa – Bloomberg
Trading in bitcoin futures began a week ago on Cboe Global Markets Inc. Its bigger rival, CME Group Inc., began offering a competing product on Dec. 17. The trading is a milestone in the acceptance of the digital currency by the world of mainstream investing, spurred in part by bitcoin’s meteoric rise this year. Skeptics still abound, however, including executives at some of the world’s largest banks. For the doubters, at least there’s this silver lining: Futures trading may add an opportunity to burst what they see as a bubble.


Bitcoin: It’s the TULIP thing all over!
Brad Alexander – FXStreet
When I was a kid, it seemed that the price of gold was always hovering around $40 per ounce (yes. I know. That was the 60’s. Please don’t do the math) Over the years the price crept up, slowly, to the point where it became an interesting vehicle for investment and a possible hedge against inflation.

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About Author

Bergstrom is chief information officer of John J. Lothian & Co. He edits MarketsWiki and JLN Options.