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Options

Volatility 411


CBOETV - Joe Tigay, Equity Armor Investments, discusses traders anticipating high vol. environment with Trump presidency.

 

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies are available from your broker, or at www.theocc.com. The information in this program is provided solely for general education and information purposes. No statement within the program should be construed as a recommendation to buy or sell a security or to provide investment advice. The opinions expressed in this program are solely the opinions of the participants, and do not necessarily reflect the opinions of CBOE or any of its subsidiaries or affiliates. You agree that under no circumstances will CBOE or its affiliates, or their respective directors, officers, trading permit holders, employees, and agents, be liable for any loss or damage caused by your reliance on information obtained from the program.

Copyright © 2016 Chicago Board Options Exchange, Incorporated.   All rights reserved.
 

This video is from CBOE and is being posted with CBOE’s permission. The views expressed in this article are solely those of the author and/or CBOE and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Stocks

3 telltale signs the Japan rally may not be over


With U.S. stocks rallying, investors may be tempted to stick with a home country bias. Russ discusses why Japan is still worth a look.

Last year, the markets were distinguished by a lack of persistence. In many respects, investor behavior in the second half of the year was the mirror image of the first six months. However, one element remained consistent, at least among U.S. investors: a preference for domestic over international equities.

With U.S. stocks having a strong start to 2017, many are likely to remain committed to a big home country bias. I think this is a mistake. As I discussed last fall, relative performance is starting to shift. Since last summer’s lows, Japanese equites are up roughly 25% in local currency terms. Europe is up over 20% (gains are lower in dollar terms). Going forward, I still believe that Japanese stocks in particular merit a larger allocation.

Japan still the cheapest developed market

While Japanese stocks bottomed in 2012, Japan remains reasonably priced in contrast to the U.S., just about every other developed market and even many of the emerging markets in Asia (see the accompanying chart). Other markets, notably the United States, have seen prices driven primarily by multiple expansion, i.e. paying more for a dollar of earnings, though Japan has benefited from rising earnings.

Supportive monetary policy and rising inflation

Headline inflation (measured by the Consumer Price Index) in Japan is rising at the fastest pace since early 2015. Not only is this good news for a country long mired in deflation, it is particularly important in the context of the Bank of Japan’s commitment to keeping interest rates close to zero. To the extent inflation continues to rise, real interest rates (the interest rate after inflation) move deeper into negative territory, suggesting ultra-accommodative monetary conditions and a weaker yen. The latter is key for an economy geared toward global trade.

An improving corporate sector

Historically, one of the many challenges facing Japan was a relatively unprofitable corporate sector. That is in the process of changing. Improving corporate governance coupled with Japan’s own buyback trend has pushed the notoriously low return-on-equity (ROE) up to around 7%. While still low by U.S. standards—partly a reflection of a multi-decade deleveraging by Japanese corporations—this is well above the 20-year average of 4%.

For U.S. investors, it is instructive to compare the bull market gains in the United States to those in Japan. Here in the U.S., the price-to-earnings (P/E) ratio on the S&P 500 Index has risen by roughly 75% since market bottomed in 2009. In contrast, since bottoming in 2012 Japanese equity valuations are relatively flat. As a result, Japan remains a value play in an increasingly expensive world.

To be sure, there are risks. First and foremost, a thriving Japanese stock market is most likely predicated on a weaker yen. This suggests that dollar-based investors will want to at least partially hedge their foreign currency exposure.

Still, investing outside the U.S. may not seem obvious in the midst of a still strong U.S. bull market; perhaps that is exactly the time when investors should seek more diversification.

Russ Koesterich, CFA, is Portfolio Manager for BlackRock’s Global Allocation team and is a regular contributor to The Blog.

Investing involves risks, including possible loss of principal. Past performance is no guarantee of future results. International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets or in concentrations of single countries.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of January 2017 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader. Past performance is no guarantee of future results.

©2017 BlackRock, Inc. All rights reserved. BLACKROCK is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

USR-11370

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Securities Lending

SLB Update: Largest Short Value per Sector


The following table shows the securities with the largest short value per sector on 1/16/2017.


 
The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
 

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Securities Lending

SLB Update: Hardest to Borrow Per Sector


The following table shows the hardest to borrow securities per sector during the week of 1/11/17 - 1/17/17.

 

The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Stocks

Nasdaq Market Intelligence Desk - Equity Market Insight January 18, 2017


Market Update: As of 11:30AM EST

NASDAQ Composite +0.12% Dow -0.07% S&P 500 +0.08% Russell 2000 +0.1%
NASDAQ Advancers: 1141 / Decliners: 966
Today’s Volume (100day avg):  +2%

The US Markets are waffling this morning, with large cap Financial attempting to support the major indices. The Russell 2000 (+0.15%) is seeing a slight bounce back this morning, as the small-cap focused index experienced its sharpest decline since 10/11 during yesterday’s session. The US Dollar Index (DXY)hovers around lowest level in over month, 2 days ahead of president-Trump’s inauguration.  

  • The last two major US banks reported their quarterly results this morning, as Goldman Sachs (-0.54%) and Citi (-1.2%) both announced profits that exceeded expectations. During the 4th quarter, GS and C added 48% and 26%, respectively, to their stock’s price and were amongst the best performers in the S&P 500.
  • On the energy front, OPEC announced that its output dropped for the first time in 7 months, as the cartel attempts to eat into the global oil over-supply. It’s anticipated that Russia (non-OPEC member), which also plays a huge role in the efforts, will reduce their output by 245k barrels/day. The MLK holiday delayed the Weekly US DOE Oil Inventory report by a day, and is expected to show a slight reduction from the previous week’s report (4097k barrels).

Technical Take:

Since making fresh all-time highs over a month ago, most US equity indices have run into a brick wall. The Dow Jones Industrial Average peaked on 12/20 at 19,987.  A week earlier on 12/13 the S&P 500 made all-time highs at 2,277 and it has not closed above that level since.  Meanwhile last year’s top performer the Russell 2000 peaked on 12/9 at 1,373 and yesterday made its lowest close since December 5th.  During this period of consolidation, safe haven plays have performed well with gold +5.8% YTD, the USDJPY pair +3.12% YTD, and long yields down 34bps from their recent December highs.  Amidst these signs of caution, positive developments can be found in the performance of the major equity sectors where the cyclical consumer discretionary and the technology sectors are leading all groups with YTD gains of 3.4% and 2.9%.  Healthcare is also up a solid 2.37% driven by services and biotech.  These groups have driven the outperformance of the Nasdaq Composite which is +3% YTD and closed last week at fresh all-time highs.  In what can be viewed as a positive, the laggard this year has been financials which are down 1.24% YTD.  The KBW Bank Index is down 2% YTD but this likely can be attributed to short term profit taking after record 4th quarter where the index gained 29.6%.  Another short term headwind for banks has been the pullback in rates.  Yesterday the UST 10-year yield closed below its 50-day simple moving average (sma), now 2.35%, for the first time since late September.  Over the last three sessions the long yield has made intraday lows at 2.30% which now appears to be an important short term support line.  Below it and the long yield could see a sharper pullback towards the 2.15% level where there is support from the gap that formed during the week of the election.  This lower rates scenario would likely cause additional headwinds for banks and could lead to continued consolidation for the major indices.  Conversely the important resistance level is just above at the 20-day sma, 2.45%, whose importance is reinforced by the declining trend line from the December highs.  Thus the direction of rates outside of the 20-day and 50-day sma’s may just be the determining factor in whether or not the major equity indices, outside of the Composite, are ready to resume their 2016 uptrends or due for a deeper correction  in price.                

Nasdaq's Market Intelligence Desk (MID) Team includes:  

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

This article is from Nasdaq and is being posted with Nasdaq’s permission. The views expressed in this article are solely those of the author and/or Nasdaq and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Disclosures

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