Observations & Insight
Due to the Christmas holiday, there will not be a JLN Options Newsletter Friday, Monday and Tuesday (December 22, 25 and 26). Have a good time – bust out the apparel that hides in the back of a drawer for 11 months, have some nog, make jokes about coal and try to not to fight with the fam. See you all in a bit.
Seed CX Swaps Hemp For Cryptocurrencies
Spencer Doar – JLN
Bitcoin hit the derivatives mainstream, but what about its other crypto cohorts?
On Tuesday, it was announced that Bittrex, a U.S.-based cryptocurrency exchange handling some $3 billion notional of transactions daily, took a majority stake in two-year-old Chicago fintech startup Seed CX for an undisclosed amount. Seed CX was originally launched with plans to trade industrial hemp derivatives on its CFTC-approved swap execution facility (SEF).
Now, Seed will apply its technology to spot and derivative crypto trading alongside corresponding settlement services for an institutional crowd…
Read the rest HERE.
A Million-Dollar Bet That Bitcoin Will Hit $50,000; Trader or traders used bitcoin call options expiring next December to make the bullish bets
Alexander Osipovich and Gunjan Banerji – WSJ (Subscription)
Someone out there just made a bet that bitcoin will surge above $50,000 next year, trading data show—about triple its current price. Daily trading records released Wednesday by LedgerX, a startup electronic market for bitcoin derivatives, show that an unidentified trader or traders entered the bullish bets using bitcoin call options that expire next December.
****SD: CNBC on the trade here. There is so much nicknaming fun to be had in the crypto space. VIX trading has 50 Cent – what should we call some of these big bitcoin bettors? I think Crypt Keeper is definitely a go. Email firstname.lastname@example.org any time about anything like that – the more inane the better, though I’ll also talk industry and ask you random questions if you really want… Who else wants to put me deeper in email prison? ‘Cause 871(m) tax treatment, capital rules for big bank clearers of market makers, auctions, data costs, etc. are all important.
2017: A Year for the History Books
The Financial Times recently analyzed volatility and determined that the last low volatility environment similar to the one we are in now was following the Kennedy assassination in 1963. That was 10 years before the introduction of options trading in 1973!
****SD: I am very happy that a portion of this blog uses Mattel as an example of investors being lulled to sleep by a low volatility environment.
Forget the VIX… And Check Out the VIX on Tech Stocks
Chris Dieterich – WSJ (Subscription)
U.S. stocks continue to loll along but a few under-the-radar readings reveal simmering uncertainty about some of the market’s best-performing sector groups.
It’s no secret that 2017 is poised to go down as one of the calmest in history. The S&P 500 is riding its third-longest streak ever without a decline of at least 5%, a level typically associated with a pullback, as we noted in our Morning MoneyBeat newsletter Thursday.
Crypto, Taxes & Volatility: A Hedge Fund Watch List For 2018
Hema Parmar and Suzy White – Bloomberg
Even a new U.S. president and rising geopolitical tensions couldn’t stop stock markets from marching higher. But that’s about to change, money managers say.
Exchanges and Clearing
Miami International Holdings, Inc. Receives Over $7.5 Million in Non-Dilutive Funding Through New Jersey Technology Business Tax Certificate Transfer Program
Miami International Holdings, Inc. (MIH), a New Jersey-based technology company and exchange holding company of two U.S. options exchanges, MIAX Options and MIAX PEARL, today announced that it received over $7.5 million in funding as a result of its participation in the New Jersey Economic Development Authority’s (NJEDA) Technology Business Tax Certificate Transfer Program (the Program).
Japan’s new rules on high-frequency trade set for April
Nikkei Asian Review
The Japan Exchange Group will impose new rules on high-frequency trading in April to make the market more transparent, as well as to reduce price volatility and prevent market manipulation.
HFT companies use computer algorithms to automatically place thousands of orders a second. They set up their trading computers near an exchange’s servers in a practice called co-location to minimize any lags in transactions.
Cboe Global Markets Announces Date of Fourth-Quarter 2017 Earnings Release and Conference Call
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, will announce its financial results for the fourth quarter of 2017 before the market opens on Friday, February 9, 2018. A conference call with remarks by the company’s senior management will begin at 7:30 a.m. Central Time (CT), 8:30 a.m. Eastern Time (ET).
A Chicago trading firm is hiring for a new cryptocurrency team
Frank Chaparro – Business Insider Prime (Subscription)
XR Trading, a Chicago-based proprietary trading firm, is looking for talent to fill a new cryptocurrency team.
Regulation & Enforcement
ESMA delays LEI requirements under MiFID II
Hayley McDowell – The Trade
Investment firms have been handed a temporary six-month grace period from MiFID II’s legal entity identifier (LEI) reporting requirements, less than two weeks before the regulation is to be implemented across Europe.
****SD: Ever string together a couple of all-nighters to get a big paper done in school? And then after getting it done, the teacher gives the whole class a week extension? That’s how this sounds.
Banks Are Worried Tech Systems Could Crash After Introduction of New EU Rules
Lukanyo Mnyanda, Felice Maranz and William Canny- Bloomberg
Banks are said to be worried that tech systems will crash; Asset owners who faced being unable to trade get grace period
Accuracy of Theta Expectations
Sage Anderson – tastytrade blog
A long, drawn-out, melt-up in equity prices is generally “just what the doctor ordered” for a short volatility approach, and the 2017 trading year has certainly rewarded premium sellers.
Goldman Sachs says how to make a killing on stocks in early 2018
Joe Ciolli – Business Insider Prime (Soft Paywall)
Stock traders would be best advised to avoid a holiday hangover, because there have historically been huge money-making opportunities in January, when fourth quarter earnings season kicks off.
That’s according to Goldman Sachs, which also notes that the options market isn’t adequately priced for the stock fluctuations that are likely to come, despite the huge number of earnings preannouncements made during the first month of the year.
****SD: Every Goldman Sachs options strategy story on BI must have “make a killing” in the title.
Stock market story of 2017: a lack of volatility
Myles Udland – Yahoo Finance
2017 will go down as one of the strongest years for global stocks in the last decade.
And while these returns can be attributed to the synchronized upswing in global economic growth and strong corporate profitability, hanging in the background of markets all year were a series of risks.
Bitcoin Billionaires May Have Found a Way to Cash Out
Aaron Brown – Bloomberg
Bitcoin did a lot of growing up in 2017, but there was one trade this week that could go a long way toward stabilizing the market for the cryptocurrency and further establish its credibility in mainstream finance.
Sure, the meteoric rise in bitcoin prices has everyone debating whether it’s one of history biggest bubbles, but just look at all the accomplishments that have put it on the cusp of joining the global financial system. LedgerX opened the first U.S. Commodity Futures Trading Commission-approved clearinghouse for cryptocurrencies in October, and began trading in swaps and options. Cboe Global Markets and CME Group have started trading in bitcoin futures. The New York Stock Exchange, Intercontinental Exchange — and no doubt others — plan to offer exchange-traded funds based on bitcoin futures.