Breaking News

Oil Signals to Watch in 2018; 2018, the year of the active fund manager?; Chicago firms gear up for MiFID

Observations & Insight

Editor’s Note
There will not be an edition of JLN Options tomorrow – we will be back January 2, 2018. So, this marks our last email (on a pretty thin options news day) of an extremely eventful year, yet one historically devoid of volatility.

Here’s to 2018! Maybe the VIX will hit 30, the short vol trade will get busted up, market makers will proliferate, fees will decrease, capital rules will make sense, roses will smell better and a whole bunch of other stuff.

See you then.

Lead Stories

Five Oil Signals to Watch in 2018
Alex Longley – Bloomberg
JPMorgan favors Brent Dec.-Dec. spread as stockpiles shrink; OPEC, non-OPEC supply curbs compete with record shale output
Oil traders are going to have their work cut out for them in 2018. OPEC and its allies are heading into the second year of supply cuts to wipe out the global oil glut, while rising U.S. output is threatening those efforts. Geopolitical tensions also add a wild card to the market mix.
/goo.gl/jAJRDs

****SD: Also, Reuters has this recap of 2017 with a look to 2018 – Financial oil trading booms, especially in the United States

Column: 2018, the year of the active fund manager?
Jamie McGeever – Reuters
After years of struggling to beat the index, 2018 should be the year active fund managers earn their spurs. Market volatility will finally pick up from record low levels, U.S. economic uncertainty will deepen as the expansion becomes the longest in history and the Fed shrinks its balance sheet, and the prospect of at least a 10 percent drawdown finally hitting stocks will increase. If that’s how 2018 plays out – not an unreasonable scenario – macro and market conditions should favor stock-picking “active” management over index-tracking “passive” investment.
/goo.gl/uWcX5k

****SD: A return of volatility would benefit quite a few folks…

Chicago trading firms gear up for European rules
Lynne Marek – Crain’s Chicago Business
Trading firms in Chicago and elsewhere have been scrambling for months to prepare for new European regulations that take effect Jan. 3.
/goo.gl/gCKRQR

****SD: JLN will be back the day before implementation to keep you posted.

European exchanges clash with customers over fees rise
Philip Stafford – Financial Times
Europe’s largest stock exchanges have antagonised some of their biggest customers with price rises for vital trading information only days before the arrival of rules that monitor market data costs. Banks, high-frequency traders and alternative trading venues have been angered that BME, Nasdaq, Euronext and Deutsche Bˆrse are collectively raising their prices from January 1.
/goo.gl/nE47RT

****SD: In other news, water is wet.

What the Fear Index’s Low Level Means
B Scott Sadler – Investopedia
The Volatility Index of the S&P 500, also known as the VIX and referred to as the “fear index,” can be thought of as gauging investor expectations of price changes in large-cap stocks. When volatility is high, (for example, during the VIX spike in 2008-2009) investors are essentially showing their concerns through their actions, usually trading out of the market.
In contrast, persistent low volatility this year and a steady uptrend show that investors have sufficient confidence in the future to “buy the dips.” The presently low VIX level is in fact the lowest level ever recorded since the birth of the index in the early 1990s. Nearly every tiny dip attracts buyers.
bit.ly/2lm2N7n

Exchanges and Clearing

ICE’s 2017 In Review
Trefis
Intercontinental Exchange has had a fairly strong 2017, as the exchange managed to grow its revenue by 4% in the first 9 months of the year, and its stock price has gained nearly 23% since the beginning of the year. This performance is primarily attributable to the growth in the company’s Data Services segment. Additionally, the growth in revenue from derivative trading has been able to offset the losses from equity trading.
/goo.gl/PLFudm

Bitcoin Drops as South Korea Says Exchange Closures Are Possible
Kyungji Cho and Eric Lam – Bloomberg
Bitcoin resumed its slide Thursday, dipping below $14,000 as the cryptocurrency’s dizzying drop from a record set 10 days ago intensified.
The latest blow to the world’s biggest cryptocurrency came from South Korea, where the government said it was eyeing options for stamping out a frenzy of speculation, including a potential shutdown of at least some exchanges.
/bloom.bg/2lmJomH

****SD: In related news from a random source – Most Bitcoin Exchanges Start Refusing New Investors

Israeli Broker: ‘Definitely Room’ For Bitcoin Options On Stock Exchange
Wilma Woo – Bitcoinist
In comments to local media outlet Globes, Julien Assous said there is “definitely room” for listing Bitcoin futures on the Tel Aviv Stock Exchange (TASE).
Assous is CEO of IBI Brokerage, as well as chairman of an association made up of non-banking TASE members.
In stark contrast to Israel Securities Authority chairman Shmuel Hauser, who this week said he would “not allow” cryptocurrency companies to list on TASE, Assous sees a major advantage for Israel in doing so.
bit.ly/2lkBPNB

SGX exchange clears coking coal put options for Jan 2018
Platts
The Singapore Exchange (SGX) cleared a 50,000 mt coking coal options trade Wednesday, as volumes held on the exchange grew following a launch of the contracts in September.
The January 2018 put option was said to have traded on December 22, basis $210/mt strike and a $3.70/mt premium, and put up for clearing on Wednesday.
/goo.gl/uPXrk7

Regulation & Enforcement

Stocks, commodities to trade on single exchange from October 2018
MoneyControl
In a major step towards a simpler securities market trading infrastructure, regulator Securities and Exchange Board of India (SEBI) on Thursday announced much-awaited integration of stocks and commodities trading on a single exchange from October next year. A two-phase integration of trading in commodity derivatives market with other segments of securities market at the exchange level was discussed and approved by Sebi’s board at a meeting here today, a move that would help leading stock exchanges, BSE and NSE, to launch their commodity trading platforms.
/goo.gl/zamrWq

NSE to introduce guidelines on derivatives trading
Nkiruka Nnorom – Vanguard
The Nigerian Stock Exchange, NSE, said it would soon introduce guidelines for creation, listing and trading of derivative products on its platform.
/goo.gl/wdeevb

****SD: Another nascent options market?

Strategy

Wearing a Collar? Here’s How and When You Might Adjust It
The Ticker Tape Editors
The stock market has made a number of new highs. So protective puts and other option strategies designed to defend against downside moves may not be foremost in every investor’s mind. But corrections happen in every market; it’s only natural.
/goo.gl/D1Aqp5

The Power of Sector ETFs
Sage Anderson – tastytrade blog
If you’re searching for new trading ideas, a recent episode of tasty Bites might be a good place to start. This installment of the popular series focuses on sector ETFs, and serves as an important reminder that this niche of the financial market is rich with opportunity.
/goo.gl/wCHv8p

Miscellaneous

Italy Risks New Turmoil as President Paves Way for Election
John Follain, Lorenzo Totaro and Chiara Albanese – Bloomberg
President Mattarella meets premier Gentiloni to discuss vote; General election seen likely on March 4, official says
/goo.gl/rrXeMC

****SD: Another hedging event boon for Borsa Italiana.

No, Trump’s Tax Windfall Won’t All Be Blown on S&P 500 Buybacks
Elena Popina – Bloomberg
Analysts have boosted their capex forecasts to a two-year high; High capex stocks have beat those focusing on buybacks in 2017
One drama ends and another begins. Now that companies have all that money coming from Donald Trump’s tax overhaul, what are they going to do with it?
/goo.gl/VEmQeg

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Graduate of University of Minnesota School of Journalism and Mass Communication