Breaking News

Traders snap up $80 Brent calls; EM volatility; Quad witching

Observations & Insight

Carolyn Leonard – Women In Finance

” I had brokers with very large decks telling me to my face that they’ve never traded with a woman, they weren’t going to trade with me and that I shouldn’t take it personally… A lot of those same guys became awesome friends, but we had a real rocky start.”

In this profile video from John Lothian News, Carolyn Leonard recalls her journey through the volatile world of trading at the Chicago Board Options Exchange beginning in the late ’70s. Leonard started trading after a divorce, with two young children in tow and in need of a fresh start. She had a friend at the CBOE, and after seeing the chaos of the trading floor firsthand she was hooked. Leonard took out a $250,000 loan to secure a seat at the exchange, where she was one of the few independent female traders to own a seat.

Leonard recalls some of her best trades, along with some of her losers. She says the hardest thing to overcome is the out of pocket education and watching money disappear. Leonard had a set of rules she lived by and maintains there’s no room for ego in trading. And if she was struggling she would reduce her trade size until she regained her confidence. Leonard liked trading volatile markets because she could sell more premium, which translates to more cushion.

Leonard’s latest endeavor, DyMynd, helps women in finance build trusting relationships with financial advisers so high net-worth women can safely invest their money. DyMynd has launched the 1920 campaign, which is a fundraiser for female-led startups in the Chicago area and surrounding Midwest. Leonard is spearheading the fight for equality for women in finance and shows no signs of slowing down any time soon.

Watch the video here »

Lead Stories

Oil Traders Snap Up Bullish Options for $80 Brent Next Year
Alex Longley and Michael Roschnotti – Bloomberg
Equivalent of 32 million barrels traded since last Friday; Spate of similar bullish bets seen over the last two months
Oil traders are increasingly betting that Brent crude will climb to $80 a barrel from the middle of next year, as OPEC and its allies prepare for a second year of output cuts amid simmering geopolitical tensions

****SD: A goodie – “…the most-held December 2018 contract was the $100 call.”

Volatility Back With a Vengeance for Emerging-Market Stocks
Samuel Potter – Bloomberg
Realized price swings climb to highest in almost 12 months; Investors caught between booking gains and prospects for more
As the best year for emerging-market stocks since 2012 draws to a close, investors are experiencing more than just a 30 percent return — volatility has staged a comeback.

****SD: Pretty weak vengeance.

Ready for a Wild Day? Quadruple Witching, Index Rebalance Coming
Lu Wang – Bloomberg
Equity investors already buffeted in a week full of U.S. tax debates and central bank updates from around the world may have another wild day to deal with.

****SD: I’m leaning towards “fat chance.”

Volatility Based Indicator Discussion at RMC Asia
Russell Rhoads – Cboe Blog
The second presentation on day one at Cboe RMC Asia paired John Hiatt, Director, Research/Quantitative Market Support at Cboe Global Markets with Tim Edwards, Senior Director of Index Investment Strategy at S&P Dow Jones Indices. Their discussion focused on Interpreting and Navigating Volatility Based Benchmarks and Indicators.

****SD: Charts! Quiz – Which vol ETP has the most assets as of end of November? It’s XIV, Credit Suisse’s inverse short-term VIX futures ETN, with some $1.2 billion. (Now up to $1.3 billion.)

Stocks and Bonds Are Sending the Correct Signals
Lena Komileva – Bloomberg
What does a post-crash, post-austerity, post-globalization global economy look like? As close to perfect as possible, based on how investors are pricing financial volatility, credit spreads and equity risk premiums. Or, a time for caution based on the flattening of the yield curve, when the spread between two- and 10-year U.S. Treasury note yields is the lowest in a decade.

One Chart from the 2017 Bull Market In Stocks Should Terrify You
Brian Sozzi – TheStreet
Investors seem ridiculously complacent heading into 2018.
The average one-month volatility in the S&P 500 this year has been lower than in any other year since 1070, according to S&P Global. Investors have also seemed pretty relaxed about the prospect for negative news walloping winning positions. S&P Global notes that 47 of the lowest 56 closing VIX levels since 1990 have been observed in 2017, as well as two new all-time low closing levels.

****SD: I guess TheStreet didn’t get the memo that Halloween is over and it’s time for predictions and recaps.

Stock market on the verge of making history, but are things too calm?
Paul R. La Monica – CNN
The U.S. stock market is up ever so slightly this month. And if the benchmark S&P 500 is able to eke out a gain for December, it will make history. This would be the first time ever that the blue-chip index had a gain for all 12 months of a calendar year.


Exchanges and Clearing

Turnover of derivatives market gains 9% in H1
Yonhap – Korea Herald
The trading volume of South Korea’s derivatives market expanded nearly 9 percent in the first half of the year on the back of a bullish stock market, the financial regulator said Friday.
The combined turnover of derivatives, such as stock options and futures, reached 20,047 trillion won ($18.4 trillion) in the January-June period, up 8.6 percent from a year earlier, according to the Financial Supervisory Service.

Young CEO Reshapes 140-Year-Old Metals Exchange
Amrith Ramkumar – WSJ (SUBSCRIPTION)
Eight months ago, Matthew Chamberlain became the youngest chief executive in the 140-year history of the London Metal Exchange.
The appointment placed the 35-year-old former UBS Group AG banker at the center of the global trade in copper, tin and aluminum, atop an institution that plays a powerful role in setting metals prices—yet is lagging behind more modern rivals in electronic trading at a time of stagnant trading volumes.

Cboe DataShop Plans to Add FX Offerings, Spot and Futures Bitcoin Data
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE) today announced Cboe DataShop will add historical spot foreign exchange data from Cboe FX to its range of offerings beginning tomorrow, December 15. Cboe FX, Cboe’s foreign exchange market, has set several new market-share records, and volume and activity on the global platform has grown.

****SD: More BTC in miscellaneous.


Citadel taps top SEC enforcer for chief compliance officer role
Paul Clarke – efinancialcareers
Citadel has hired a top enforcer from the Securities and Exchange Commission (SEC) as its new chief compliance officer as it continues to build one of the biggest legal and compliance teams in the hedge fund sector.

Regulation & Enforcement

How Brexit could trigger the advent of Mifid III
Ben Pott – Financial News
The financial crisis exposed weaknesses in the functioning and transparency of the financial markets.
As a result, the European Union updated the 2004 Markets in Financial Instruments Directive to create Mifid II — due to be implemented on January 3, 2018 — with the central aims of improving transparency in financial markets, mitigating systemic risk and protecting against market abuse.

****SD: @#&$*?!!


Reuters Enhances MiFID II Compliance Offering for FX Derivatives Execution
Aziz Abdel-Qader – Finance Magnates
Thomson Reuters has enhanced its MiFID II compliance offering for FX derivatives trading, adding into production system improvements to its Multilateral Trading Facility (MTF).


Selecting an Index Option Expiration
Highly Evolved Vol
A few weeks ago, I wrote about what option strikes were best to sell when harvesting the variance premium. This is part of an ongoing project to find optimal option strategies for volatility trading, hedging and directional trading. As the next step, today I’m going to look at what expiration to trade when selling index volatility.

JPMorgan’s Marko Kolanovic says tax reform will boost stocks in 2018
Joe Ciolli – Business Insider
Despite already sitting close to record levels, US stocks are a sleeping giant, waiting to be awakened so they can unleash more gains upon the market.
So says the JPMorgan quant guru Marko Kolanovic, who predicts that a successful Republican tax overhaul will give equities a huge shot in the arm in 2018. In his mind, the institutional investors that control a huge chunk of the market are still in wait-and-see mode when it comes to tax reform, patiently biding time before putting more capital to work.


Church of England pulls money from big hedge fund managers
Tabby Kinder – Financial News
The Church of England, one of the UK’s largest single investors in hedge funds, is pulling money from large long/short equity managers following a run of lacklustre returns, according to people with knowledge of the matter.

****SD: This is a stretch: the “50 Cent” options trades are believed to originate from Ruffer, a London based investment fund, whose clients include the Church of England. The Church of England is pulling money from unnamed funds. Is the Church of England pulling from Ruffer? Not pleased with Ruffer’s losing VIX positions?

Race to launch bitcoin futures stirs anger
Gregory Meyer and Philip Stafford – Financial Times (SUBSCRIPTION)
Get Exposure to Bitcoin Price Moves without Holding Bitcoins,” the website of Cboe Global Markets says about the exchange’s new bitcoin futures, which began trading this week.
Why someone would voluntarily seek out bitcoin’s gyrations might not be obvious. When it suddenly fell 10 per cent on Wednesday morning, investors might have felt safer getting exposure to skydiving.

****SD: All BTC below.

Goldman Wants a 100% Margin on Some Bitcoin Futures Trades
Sonali Basak and Dakin Campbell – Bloomberg
Goldman Sachs Group Inc. demanded some clients set aside funds equal to the full value of their bitcoin futures trade as a condition for clearing the transaction, according to people familiar with the investments.

The Huge Price Gap Between Bitcoin Futures and Bitcoin Is Shrinking
Annie Massa – Bloomberg
The exorbitant price gap between bitcoin futures and the underlying digital currency is beginning to dwindle.
The spread between the two has narrowed by more than half, in a sign that the bitcoin futures market may be getting more efficient less than a week after the futures’ debut on Cboe Global Markets Inc. It cost about $414 more to buy the contract than to buy bitcoin on the spot market, a premium of 2.5 percent as of 11:54 a.m., according to Bloomberg data.




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Graduate of University of Minnesota School of Journalism and Mass Communication