IBKR Quant Blog


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Macro

Briefing.com - Holding a Bullish Line


There was no mistaking the stock market's bias on Thursday.  It was bullish at the start and bullish at the close.  The highlight of it all was that the S&P 500 and Dow Jones Industrial Average set new record highs. 

It was an orderly rally on Thursday, which is to say there wasn't panic buying.  There was a steady bid, however, that conveyed confidence in the trend and a tacit feeling of not wanting to miss out on further gains.

The volume was heavier than average at the NYSE and Nasdaq, but it wasn't extremely heavy.  That will likely change today given that it is a quarterly options expiration day.

At the moment, the major indices look poised for a modestly higher start when the opening bell rings.

The S&P futures are up four points and are trading 0.2% above fair value.  The Nasdaq 100 futures are up 15 points and the Dow Jones Industrial Average futures are up 53 points.

The futures had been signalling an even stronger move to the upside, yet they started fading about 4:00 a.m. ET, which is when the eurozone released a disappointing preliminary manufacturing PMI report for September.

That PMI reading checked in at 53.3 versus a prior reading of 54.6.  That disappointing reading didn't derail the equity markets in Europe, though, as it was likely seen as a basis for the ECB to be very deliberate with policy actions that remove accommodation.

The euro is off a bit against the dollar, but the DAX, the CAC 40, and the FTSE 100 are up between 0.4% and 1.0%.  Those gains came on the heels of even better showings from markets in Asia.  The Nikkei added 0.8% while the Hang Seng and Shanghai Composite shot up 1.7% and 2.5%, respectively.

The strength in the Shanghai, which rose 4.3% this week, was attributed to the thinking that the government is going to provide support tools that will help offset any impact from the tariffs.  We'll see, but it was a strikingly good week for the stock market there, which has not acted well in 2018 amid the tariff action and a slowdown in economic activity.

There aren't any major economic releases of note out of the U.S. today, yet there are some corporate stories of note.

Walmart (WMT) has reportedly warned that it might have to raise prices because of the tariffs and Micron (MU), which posted better than expected fourth quarter earnings, issued disappointing guidance for its fiscal first quarter, citing in part gross margin pressures linked to the tariff actions.

Shares of WMT are down 0.5% while shares of MU are down 3.9%.  Conversely, shares of Texas Instruments (TXN) and Dow component McDonald's (MCD) are up 2.1% and 0.6%, respectively, after both blue chip companies announced sizable dividend increases.

There is some curve-flattening action early on in the Treasury market.  The 2-yr yield is up two basis points to 2.82% while the 10-yr yield is unchanged at 3.08%.  That could slow some of the upward momentum driving the financial sector, which is up 2.6% for the week entering today's trading.

The S&P 500 is up "only" 0.9% for the week, bringing its year-to-date gain to 9.6% (before dividends) and conveying a message that trade matters thus far have not derailed trading matters that appear to be rooted in the optimism over strong economic and earnings growth.

--Patrick J. O'Hare, Briefing.com

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Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Briefing.com and is being posted with Briefing.com's permission. The views expressed in this material are solely those of the author and/or Briefing.com and IBKR is not endorsing or recommending any investment or trading discussed in the material. 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 IBKR 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.


20498




Futures

Blue Line Futures - Midday Market Minute


Stocks continue to make new highs.

Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

Visit our website at www.bluelinefutures.com to open an account and stay up to date with our research.

Bill Baruch is President and founder of Blue Line Futures. Bill has more than a decade of trading experience. Working with clients he focuses on developing trading strategies that present a clear objective for both long and short-term trading approaches. He believes that in order to properly execute a trading strategy, there must be a well-balanced approach to risk and reward.

Prior to Blue Line, Bill was the Chief Market Strategist at iiTRADER which followed running a trade desk at Lind Waldock and MF Global.

Bill is a featured expert on CNBC, Bloomberg and the Wall Street Journal as well as other top tier publications. 

Blue Line Futures is a leading futures and commodities brokerage firm located at the Chicago Board of Trade. We work with clients that range from institutional to professional to novice and from self-directed to broker-assisted. No matter what type of trader you are, our mission is simple; to put the client first. This means bringing YOU strong customer service, consistent and reliable research and state of the art technology. 

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Blue Line Futures and is being posted with Blue Line Futures’ permission. The views expressed in this material are solely those of the author and/or Blue Line Futures and IBKR is not endorsing or recommending any investment or trading discussed in this material. 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 IBKR 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.


20504




Macro

Interactive Brokers - Webinar - GraniteShares - Breaking Down Commodities: Gold in Today's Market


Will Rhind, CEO and Founder of GraniteShares

Tue, Sep 25, 2018 12:00 PM - 1:00 PM EDT

Join Will Rhind, CEO and Founder of GraniteShares, for a timely discussion that:

• Navigates the current commodity landscape

• Explores the outlook for commodities in 2018 & beyond

• Discusses the pros and cons of gold in today’s market

Sponsored by GraniteShares Interactive Brokers LLC is a member of NYSE, FINRA, SIPC

Register Here

The analysis in this material 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 IBKR 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.


20500




opzioni

Interactive Brokers - Brief Market Commentary with Steve Sosnick - September 21, 2018


Steve Sosnick, Chief Options Strategist, gives brief market commentary for September 21.

The analysis in this material 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 IBKR 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.


20503




opzioni

Barron's - Think Marijuana Stocks Are Crazy? The Options Are Insane - By Gunjan Banerji


Options investors relish volatility. But they should think twice before betting on marijuana stocks, which have recorded explosive moves this week.

Traders flocked to medical-marijuana producer Tilray(TLRY)—and to options bets on the stock—after the company won approval from the Drug Enforcement Administration to import a cannabis product drug into the U.S. for a clinical trial.

Some analysts said it signaled the agency will stand by marijuana research—an encouraging sign for the future of cannabis industry in the U.S. as it grapples with regulatory headwinds. Though a few states have legalized recreational marijuana, it remains illegal at the federal level.

Other weed stocks like Aurora Cannabis(ACB.Canada), Cronos Group(CRON), and Canopy Growth(CGC) have also rallied this week. But Tilray’s move has been particularly jarring, with its shares more than quintupling since it went public in July.

Shares of the company were halted multiple times in trading on Wednesday as the stock swung at a mind-boggling pace. It skyrocketed 90% before entering negative territory, finally closing 38% higher.

Read moreMarijuana Stocks Just Keep Soaring Higher. But Even the Bulls See a Bubble

Options investors appeared to be chasing further gains. Some of the most active contracts were call options pegged to a strike price above Tilray’s current trading levels.

One popular bet Thursday was a call option pegged to the stock hitting $300, or 70% greater than its Thursday price of $176.35. Such options give an investor the right to buy stock at the designated price later in time, while put options give an investor the right to sell.

Expected volatility for Tilray is high, indicating traders expect wild swings ahead. It seems like a ripe environment for options traders to make money. But traders warn individuals to be careful.

“There’s a difference between volatility and insanity,” says Tom Sosnoff, founder of online brokerage tastyworks.

When a stock is darting around so quickly, options on it can be less liquid. In such an environment, the difference between buy and sell prices on options contracts widens—and that makes it more challenging for investors to slide in and out of positions. Additionally, the violent moves up and down make it more likely that your options will be exercised, Sosnoff says. If an investor sells an option and it is exercised, she would be on the hook to buy or sell the underlying shares.

Tastyworks stopped allowing investors to open options positions on Tilray through its platform this week because it got so risky to trade the contracts, he says. The firm allowed investors to close out positions.

Still looking to bet on pot stocks? Sosnoff recommends playing Cronos Group options instead, as the stock has been turbulent but not as extreme as Tilray. Toronto-based Cronos produces and sells cannabis in Canada and Germany.

Sosnoff recommends selling “strangles” on the stock, which entails selling both a put and a call at the strike prices of $11 and $17.50, respectively. As of Thursday, the investor would collect $220 for selling the two options, expiring in about a month. The stock closed at $13.75 on Thursday.

It’s a wager that the stock will continue to gyrate but won’t cross below $8.80 or above $19.70, the break-even points, he says. The trade capitalizes on the high options premium investors can collect because of the recent volatility.

JJ Kinahan, chief market strategist at TD Ameritrade, recommends covered calls on Cronos stock for investors looking to profit off the high volatility. The trade entails purchasing the stock and selling an out-of-the-money call option—one higher than where the stock is currently trading—that expires in about a month. But he warns that the shares are zipping around so quickly that the trade could rapidly move against investors.

“The prudent thing to do for most investors is to let things settle down a little bit,” says Kinahan. “It’s worse to lose money than to feel like you have to participate in something you don’t truly understand.”

Gunjan Banerji covers options for The Wall Street Journal.

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Originally Posted on Sept. 21, 2018

Gunjan Banerji covers options and market volatility for The Wall Street Journal.

Get investing analysis that moves stocks and markets—Subscribe to Barron’s

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Barron's and is being posted with Barron’s permission. The views expressed in this material are solely those of the author and/or Barron's and IBKR is not endorsing or recommending any investment or trading discussed in the material. 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 IBKR 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.


20501




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Informative

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Tutte le informazioni pubblicate dai dipendenti di IB o dalle società affiliate si basano su informazioni ritenute affidabili. Tuttavia, né IB né le sue affiliate ne garantiscono la completezza, accuratezza o adeguatezza. IB non offre alcuna garanzia né assicurazione delle performance passate o future di alcuno strumento finanziario. Tramite la pubblicazione di materiale su IB Quant Blog, IB non intende affermare che il particolare strumento finanziario o strategia di trading sia adatto a tutti.