| August 04, 2017 | | | |  | Spencer Doar
Associate Editor
John Lothian News | |
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| | | | Observations & Insight | | | 
Making Sense of Options Order Flow - Henry Schwartz
Education.MarketsWiki.com
"There are four primary reasons people use options, and they tend to attract the smartest, the most well capitalized and most informed traders out there. Basically, dumb people lose their money trading options so quickly, they're not really out there anymore."
In this video from MarketsWiki Education's World of Opportunity event in New York, Henry Schwartz, president of Trade Alert LLC, breaks down the four primary reasons people trade options: leverage, defined risk, flexibility and liquidity. Schwartz then delves into a wealth of data to show what kind of information can be gleaned from the 1.1 million options trades happening every day.
Read the rest and watch the video »
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BOXing: Let the Bodies Hit the (Options) Floor
Spencer Doar - JLN
... After the JLN Options newsletter came out on Wednesday, BOX received SEC approval to open a new open outcry options floor. Woof. This is huge.
The proposal garnered 10 comment letters: three from Nasdaq, three from Chicago Trading Company (CTC), two from CBOE, one from NYSE and one from Group One Trading. Nasdaq "neither supports nor opposes the BOX proposal," but did express concerns. The rest of the companies explicitly opposed the idea.
jlne.ws/2vmqvrh
****SD: In case you missed the blog from yesterday.
| | | | | | Lead Stories | | | U.S. stock options hedging picks up in the midst of record calm
Saqib Iqbal Ahmed - Reuters
Even as U.S. stocks remain near highs and daily gyrations for stock prices are the most subdued in more than half a century, some options-based measures point to investors positioning for increased volatility.
jlne.ws/2vzIfji
****SD: VIX calls outpacing puts four to one.
Bloomberg testing use of image recognition in volatility trading
Sebastian Day - Risk.net
Researchers at Bloomberg are exploring ways to apply an image-recognition technique used by firms such as Facebook and Google to options and volatility trading.
The approach - employing machine-learning technology known as convolutional neural networks - could help traders identify arbitrage opportunities more efficiently, the firm thinks.
jlne.ws/2wsCj7Y
****SD: Cool stuff! A friend of mine has a general idea to make a mechanical vol surface powered by a bunch of small motors (like, 100+) attached to dowels which would be tied into a data feed as a sort of really nerdy trader's modern art project. The dowels would raise or lower accordingly, affecting the sheet/canvas/fabric stretched above them. Lots of kinks to be worked out still. If it ever gets made, I'll provide pics.
Why Investors Shouldn't Trust Low Volatility
Peter Coy - Bloomberg
You can speculate on stocks going up or stocks going down, but you can also wager on how extreme the ups and downs will be. Investors who bet on calm have done stupendously well lately. As in a 180 percent return over the past year on the VelocityShares Daily Inverse VIX Short-Term exchange-traded note, which is one of the most popular vehicles for bettors on low volatility.
jlne.ws/2wsGVv2
****SD: In the immortal words of Indiana Jones nemesis Walter Donovan: "Don't trust anybody."
What the stock market surge is hiding
Jeff Spross - The Week
On Wednesday, the Dow Jones Industrial Average reached 22,000 points for the first time ever. Unfortunately, this bright spot might not be quite as bright as it appears.
Across multiple indexes, the stock market has been doing quite well as of late. But the good fortune isn't uniformly spread across the economy. It's actually relatively concentrated  mainly in Silicon Valley and the tech sector.
jlne.ws/2vzNEHe
****SD: Peekaboo!
Oil bulls aren't out of the woods yet
Amanda Cooper - Reuters
Oil investors seem to buy the idea that recovery is finally underway after three years of gluts, but a price boom seems unlikely as the options market shows that at least until OPEC's supply deal expires, producers will pounce on any rallies.
jlne.ws/2wsr3sA
****SD: Case in point - The Oil Trader Known as 'God' Is Closing Down His Main Hedge Fund
Trouble Comes in Threes for Germany's DAX Losing European Crown
Sofia Horta E Costa - Bloomberg
The woes keep piling up for German stocks.
The benchmark DAX Index, which as recently as June was outpacing the Stoxx Europe 600 Index by the most in three decades, has since turned into one of the biggest laggards among global peers. Investors are also betting on more volatility, with the cost of options trading in the gauge rising to the highest in 15 months relative to those on European stocks.
jlne.ws/2wstSda
****SD: Random Germany story from Financial Times yesterday - Cracks appear in Germany's cash-starved infrastructure
CBOE's Rhoads On How Low VIX Can Go
Sumit Roy - ETF.com
ETF.com recently caught up with Rhoads to discuss the lack of volatility in the stock market and the record-low VIX, an index that measures implied volatility on S&P 500 options (also known as Wall Street's "fear gauge").
jlne.ws/2wsiD4g
****SD: The record holder for the limbo managed to fit under the height of a beer bottle. Anything is possible.
Payroll Gain of 209,000, Wage Rise Show U.S. Labor Strength
Michelle Jamrisko - Bloomberg
The U.S. labor market hit its stride in July, as employers added workers at a solid clip, the jobless rate matched a 16-year low and monthly wage growth picked up.
jlne.ws/2wslESb
****SD: WSJ - Analysis: Labor-Market Strength Should Keep Fed Plans on Track
| | | | | | Exchanges and Clearing | | | LSE's New Brexit Plan to Protect London Financial-Hub Status
Joe Easton and Will Hadfield - Bloomberg
London Stock Exchange Group Plc has set up a Brexit strategy to advise policy makers on how to protect London as a financial hub and prevent the divorce shattering financial-market infrastructure.
jlne.ws/2vzEAlw
CBOE's quarterly profit narrowly beats estimates
Diptendu Lahiri - Reuters
CBOE Holdings Inc CBOE.O, the operator of the largest U.S. options exchange, reported a quarterly profit that narrowly beat analysts' estimates as its acquisition of Bats Global Markets helped drive transaction fees.
Transaction fees surged more than threefold to $453.9 million in the second quarter ended June 30, with Bats contributing 25 percent.
jlne.ws/2vzREY2
****SD: Press release here and Financial Times here
Exchanges butt heads over closing auction alternative
Hayley McDowell - The Trade
Bats Global Markets has hit back at rival exchange operators in the US after they attacked its plans to launch an alternative to closing auctions.
The New York Stock Exchange (NYSE) and Nasdaq wrote to the Securities and Exchange Commission (SEC) claiming Bats' proposal could impair price discovery performed by both at closing auctions, fragment the market at close and increase risk.
jlne.ws/2vztNIi
OCC Congratulates New CFTC Chairman and Commissioners
OCC
Craig Donohue, executive chairman and CEO of OCC, the world's largest equity derivatives clearing organization, today congratulated Christopher Giancarlo on being confirmed by the U.S. Senate as chairman of the U.S. Commodity Futures Trading Commission (CFTC). He also congratulated Brian Quintenz and Rostin Benham on their confirmation as CFTC commissioners.
jlne.ws/2vzDSVu
TMX Group Consolidated Trading Statistics
TMX
TMX Group Limited today announced July 2017 trading statistics for its marketplaces - Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange (Alpha), Montréal Exchange (MX) and NGX.
jlne.ws/2vA60Ym
Euronext Volumes Suffer Decline MoM in July 2017
Aziz Abdel-Qader - Finance Magnates
Euronext, the first pan-European exchange, today announced its trading volumes and metrics for July 2017, which incurred a month-over-month decline, but managed to secure a sizable growth over last year's metrics.
jlne.ws/2vA3rWx
| | | | | | Moves | | | Virtu Financial closes KCG's European prop trading business; US group plans to keep London office following its $1.4bn takeover of its rival
Philip Stafford in London and Nicole Bullock in New York - FT
Virtu Financial is closing the London proprietary trading businesses of KCG Holdings following its $1.4bn takeover of its rival, but will retain a team in the City to build more customer business.
/goo.gl/ssEJNW
****SD: Slicing and dicing.
CME head of digitisation Ro leaves firm
Global Investor Group
Sandra Ro had been with the Chicago-based exchange in New York for almost six years
jlne.ws/2wsMQjK
| | | | | | Regulation & Enforcement | | | Senate votes to confirm slate of three CFTC commissioners
Sarah N. Lynch - Reuters
The U.S. Senate voted on Thursday to confirm two Republicans and one Democrat to serve on the Commodity Futures Trading Commission, the top U.S derivatives regulator.
jlne.ws/2wskMgb
****SD: You mean to tell me that the Commodity Futures Trading Commission is actually going to have COMMISSIONERS?! Crazy.
This CEO Says Many Traders Aren't Ready for Europe's Huge Regulatory Overhaul
Annie Massa - Bloomberg
ICE's Sprecher says industry not prepared for Europe's rules; Rule change has implications for traders around the world
With only five months to go before Europe's MiFID II overhaul of financial markets, the head of one of the world's biggest exchanges says many firms aren't ready.
jlne.ws/2vzSvYI
Deadline for Filing Commodity Position Aggregation Exemption Notices Fast Approaching
Richard Casciani, Cordium - TABB Forum
The deadline for filing position aggregation exemption notices with the US Commodity Futures Trading Commission (CFTC) or relevant commodity exchanges is fast approaching. The notices, which had been postponed earlier in the year, are now due on August 14, 2017.
jlne.ws/2vA14Tk
| | | | | | Technology | | | TradeHawk Launches A New Innovative Stock And Options Trading Platform That Includes An Unlimited, Commission-Free Trading Model From Tradier Brokerage
Benzinga
TradeHawk (mytradehawk.com powered by OptionEyes LLC.), built by a combination of deep-rooted industry and technology experts is pleased to announce the launch of its next generation trading platform. TradeHawk greatly simplifies trading experiences and removes all friction points for users by enabling unlimited commission-free trading from its platform through its partnership with Tradier Brokerage. TradeHawk offers thoughtful trading and risk management tools that will provide traders a rapid and consistent edge in the market.
jlne.ws/2vzY7SM
| | | | | | Strategy | | | Betting on market volatility? Here's what you need to know
Spriha Srivastava - CNBC
Historic low market volatility is spurring investors to find returns in new places, with some rushing their money into what is sometimes referred to as "the most dangerous trade in the world."
In a research note to clients, David Lafferty, chief market strategist at Natixis Asset Management, explained that super-low volatility has spurred a new sub-industry - "shorting" volatility with a number of exchange-traded funds and derivative products that have a "V" in their tickers.
jlne.ws/2vzIkUb
Hedge funds set to lose hundreds of millions on wrong-way bet against Tesla
Thomas Franck - CNBC
Hedge fund managers lost more than half a billion dollars Thursday because of their bet against Tesla, according to estimates from financial technology firm S3 Partners.
With Tesla up 6 percent at the open of trading Thursday, investors who sold the stock short are down a collective $607 million in a single day, estimates S3.
jlne.ws/2vzpb4L
****JB: Tesla lost $336 million in the 2nd quarter but beat analyst predictions that were expecting a $450 million loss.
Buy Weak Stocks Ahead of Earnings
Steven M. Sears - Barron's
When stocks weaken ahead of earnings reports, most investors would think that is a bearish sign. But the opposite is often true.
So far this quarter, buying calls on stocks that have underperformed ahead of earnings has produced a 17% gain, according to Goldman Sachs research.
jlne.ws/2vznjJh
Know Your Portfolio: ETF Edition
Sage Anderson - tastytrade blog
As is often highlighted at tastytrade, it's absolutely critical that traders have the best possible understanding of the risks they are taking.
jlne.ws/2wsfbqt
After the VIX Record Low, What's Next?
Bernie Schaeffer - Schaeffer's Research
Clues on the next VIX move can be gathered from analyzing XIV charts, volatility fund flows, and CoT data
jlne.ws/2vzZIYM
2 Options Strategies for Earnings Season
Patrick Martin - Schaeffer's Research
We are in the thick of earnings season, and recent options activity on the ultra-low CBOE Volatility Index (VIX) indicates traders are expecting a volatility pop. Against this backdrop, we decided to outline two ways options traders can profit from a big stock move in either direction: the long straddle and the long strangle. Below, we will discuss the basics of a long straddle and strangle, their advantages and disadvantages, and highlight their usefulness during earnings season.
jlne.ws/2wsjUID
| | | | | | Miscellaneous | | | The Secret Life of the Urban Banana
Annie Correal - NY Times
On a hot day in June, the Hermann Hesse slipped into New York Harbor and headed for the Red Hook Container Terminal in Brooklyn. The 550-foot container ship, flying the Liberian flag, had come some 3,000 miles from Ecuador. It had gone through the Panama Canal, picked up cargo in the Caribbean and weathered a few squalls.
jlne.ws/2wsAI1Y
Kids Are Making More Money In This Market Than You
George Schneider - Seeking Alpha
Investors under the age of 30 have no trading memory of the financial crisis which ended just eight years ago. When I use the term "kids" to refer to them, I use it loosely of course. It's a relative term, but coming from an old geezer like me, an accurate one. After all, my own children fall into that millennial category.
jlne.ws/2vzZIIf
****SD: Very much related from The Irrelevant Investor - https://goo.gl/pmykNh
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