Sep 22, 2016

9/11 Bill Veto and Market Volatility

I just left a panel discussion event organized by Sigma Analysis and Management and wanted to share one thing with the readers. The star of the panel was Nancy Davis of Quadratic Capital, a veteran volatility manager. She was head above other panelists on volatility trading, and provided no fluff technical answers - a rare thing for discussion panels.

When asked on upcoming events Ms Davis suggested the following potential catalyst: recently passed hot-button issue of 9/11 bill that strips sovereign immunity off Saudi Arabia and would allow victims of terrorism to sue the country. President Obama promised to veto the bill, which he must do within  ten days. The bill was passed 9 days ago, and the deadline is tomorrow, the 23rd. Congress also is poised to override the veto.

While on the surface it is a mostly political event, it can have very serious financial consequences. Saudi Arabia, through various investment vehicles is a major! investor in US equities, debt, hedge funds, real estate, etc. If the president does not veto the bill, or Congress overrides the veto we could see a significant selloff due to outflow of investment funds from US across assets, potentially a few forced liquidations, and it could also jeopardize Saudi Aramco IPO.

Aug 25, 2016

CME Adding ES Wednesday Weeklys

It was only a matter of time, and is no surprise to anyone. Link Given half-year delay I predict CME Monday weeklys Q1 2017.

Aug 19, 2016

In Case You Missed It - SPX Monday Weeklys

Somehow I missed the press-release or other news sources, but earlier this week CBOE listed Monday-expiring weekly options. Right now 3 expirations are listed: Monday August 22nd, 29th, and Tuesday September 6th.

Volume, open interest, and bid-ask spreads look reasonable for just-launched series, and I believe this product is already a success.

Now, with 3 regular expirations per week, it is only a question of time when CBOE will have options expiring every day of the week. The challenge is not in the product itself, but rather in technological barriers - market making software, increased network traffic, etc. I expect that we will not see another weekly expiration for another year.

I would also speculate that perhaps the next launch will be in the VIX series, maybe Friday PM settled VIX options?

Aug 13, 2016

Regulators Getting It Right: Belgium Bans Binary Options, Leveraged CFDs

Top Belgian securities regulator, the Financial Services and Markets Authority announced in a recent communique, that distribution of binary options, leveraged CFDs, and ultra-short (<1 hour) derivatives contracts. Apparently there is some question regarding the exact translation (link), and since I don't know french or dutch I cannot comment on that.

Everyone in the industry knows that binary options is a festering pool of fraud, and responsible for much of spam marketing on the internet. I applaud actions of FSMA, and hope that more regulators around the word will follow suit.