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Off-hour Earnings and Options; Swedish Bank Bosses Escape Options Blow-up Blame; HFT Tales

Lead Stories

How Do Traders Respond to Off-Hour Earnings Announcements?
Based on the research of Matthew R. Lyle, Christopher Rigsby, Andrew Stephen and Teri Lombardi Yohn – Kellogg School of Management at Northwestern University
On Wall Street, “business hours” aren’t quite what they seem.
The opening bell of the New York Stock Exchange rings at 9:30 a.m. Eastern, and the closing bell sounds at 4 in the afternoon—yet 95 percent of publicly traded companies announce their quarterly earnings outside of those official hours.
jlne.ws/2qrxvSw

****SD: Basically, people are slow to react to earnings announcement the further they are from normal business hours. The study focuses on how options traders can then benefit. I’m sure plenty of people out there were quietly trading with this knowledge – just another example of academic research removing edge.

Bosses escape blame for options blow-up at Swedish bank
Luke Clancy – Risk.net
A Swedish bank that had its banking licence revoked in 2010 after risk management failures has lost its claim for damages against its former management and auditor. Last month the court said that, although the defendants had acted negligently, their actions were not sufficient to cause the damage.
HQ Bank was effectively shut down by Sweden’s financial supervisor Finansinspektionen after its trading business ran up losses of Skr1.17 billion ($175 million at 2010 exchange rates, or $143 million today) on German and Swedish equity options – exceeding the bank’s own Skr33 million estimate of the portfolio’s market risk, as well as initial margin required by Eurex Clearing.
jlne.ws/2EY6M3c

****SD: This appears unpaywalled.

HFT Is Dead. Long Live HFT.
Joe Saluzzi and Sal Arnuk, Themis Trading – TABB Forum
Many market observers may think that HFT is dead. But while it may be more expensive and more competitive today for high-frequency traders to pick off the slow traders, they have not gone away, argue Themis Trading’s Joe Saluzzi and Sal Arnuk.
jlne.ws/2qsGnXX

****SD: We had the initial post from Themis’ Blog in the morning newsletter, but I forgot it in this one.

Goldman Sachs says volatility will rise, makes trade recommendations
Joe Ciolli – Business Insider Prime (Soft Paywall)
Any investor will readily acknowledge that the market was starved of volatility last year. But fear not, says Goldman Sachs, which expects price swings to return with a vengeance in 2018, bringing with them plentiful money-making opportunities.
That’s welcome news for active managers who slogged through month after month of suppressed fluctuations. At a certain point, the CBOE Volatility Index, or VIX, became a poster child for market malaise as it sat near its lowest level on record. In Goldman’s mind, price swings can only get more pronounced from here.
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****SD: GS saying biggest areas for a vol uptick are: DJIA, high yield, consumer discretionary and tech. Fun charts.

Exchanges and Clearing

Cboe Global Markets sets several trading records in 2017
Hedgeweek
Average daily volume (ADV) in index options trading at Cboe Options Exchange (Cboe) and C2 Options Exchange (C2) reached a new all-time high for the fifth consecutive year in 2017, with 2.0 million contracts, up 15 per cent from 2016.
jlne.ws/2qtT1px

Moves

Bank by bank hiring (and firing) plans as we start 2018
Sarah Butcher – efinancialcareers
Where are banks likely to hire and fire in 2018? Here’s our round-up of the hiring intentions disclosed at the time of their third quarter results.
jlne.ws/2qvgpDd

****SD: Missed this at the start of the week.

Regulation & Enforcement

Who will pay? Binary options marketers clash with Court-appointed Receiver over admin expenses
Maria Nikolova – financefeeds
As the so-called “Millionaire Money Machine” case proceeds at the Florida Middle District Court, disagreements have emerged over who will have to cover the administrative expenses and costs for the general receivership.
jlne.ws/2qxHF3I

****SD: We don’t do a ton of binary coverage – the Israeli regulatory environment being a general exception – but when the phrase “Millionaire Money Machine” is involved…

Strategy

How To Use Volatility ETFs
Sumit Roy – ETF.com
2017 will go down in stock market history for its volatility. Not because there was a lot of it?quite the opposite. The year featured one of the least-volatile stock markets in history, including a maximum drawdown of 2.8% (the smallest in history) and an average absolute daily price change of 0.3% (also the smallest in history).
jlne.ws/2qrthdC

One of the biggest Dow dogs of 2017, Exxon, may be in for a turnaround
Rebecca Ungarino – CNBC
Some of the biggest Dow dogs are howling this year, and one market watcher sees further upside ahead for one name in particular: Exxon Mobil.
jlne.ws/2qv4161

****SD: Susquehanna’s Stacey Gilbert with the bullish energy argument.

Education

Nasdaq Market Intelligence Desk 2017 Review
Nasdaq
2017 Themes: Surprisingly strong equity returns for broad market indices; S&P rises for a record 14 straight months.
Heavily weighted Technology stocks were consistently strong throughout 2017 and gained 37% for the year.
Energy, and to a lesser extent, Real Estate and Utilities, underperformed.
Volatility as measured by the CBOE VIX recorded record lows
jlne.ws/2qxrVOg

****SD: Just a big ‘ol overview of everything.

Miscellaneous

Bomb cyclone’ hits U.S. East Coast energy, power supply
Scott DiSavino, Devika Krishna Kumar – Reuters
A severe winter storm froze pipes and disrupted services at refineries on the U.S. Atlantic coast on Thursday, sending fuel prices higher as heavy snowfall and high winds caused electricity outages for almost 80,000 homes and businesses.
/goo.gl/vqTyb3

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Graduate of University of Minnesota School of Journalism and Mass Communication