Showing posts with label Morgan Stanley. Show all posts
Showing posts with label Morgan Stanley. Show all posts

Thursday, September 30, 2010

High Frequency Trading in Options Explained | Trade Options Like a DPM Webinars #4

High Frequency Trading in Options Explained | Trade Options Like a DPM Webinars #4SocialTwist Tell-a-Friend
As former CBOE Designated Primary Market Maker (DPM), The Admiral, explains what High Frequency Trading (HFT) is. Specifically, the admiral explains what the purpose of high frequency trading and how big firms like Goldman Sachs, JP Morgan, and Morgan Stanley take advantage of technology placed near the exchanges

This an excerpt from the "Trade Options like a DPM Webinar #4: Synthetics & Equalities -


A financial instrument that is created artificially by simulating another instrument with the combined features of a collection of other assets. 


The featured speaker, whom we affectionately call "The Admiral," was a Designated Primary Market Maker (DPM) on the floor of the CBOE for five years. Although we're not using his real name (so don't ask!) suffice it to say that we consider him to be one of the most knowledgeable option traders on the planet. As a floor trader in the '80s and '90s he did the opening options rotation for 5-25 stocks the old-fashioned open outcry way—meaning he opened each option strike price for each of these stocks within the first 30 minutes of trading, both calls and puts.

That meant he had to price more than 500 option strikes, plus as a market maker he traded and kept the markets current. As a DPM, technology brought forth auto-quoting of option series, but pricing of those quotes remained his responsibility. Trading 1 million shares of stocks and 50,000 options contracts was a normal day for him. In 27 years at CBOE, he has traded through the crash of '87, the smaller crash of '90 and the tech bubble in 2000. He has traded three-digit volatility and seen every possible market environment imaginable. So, if you're going to learn options, it might as well be from the very best.

Monday, July 16, 2007

Takeover Mania, Uncle Ben and Earnings Season

Takeover Mania, Uncle Ben and Earnings SeasonSocialTwist Tell-a-Friend
Sally Limantour

Another strong week on Wall Street and the focus continues to be on takeover activity and stock buyback news. Vodaphone is considering a $160 bn takeover bid for Verizon which would rival AOL’s takeover of Time Warner and Vodaphone’s earlier acquisition of Mannesmann.
The FT this morning is quoting Stephen Jen, Morgan Stanley’s currency strategist on major emerging market economies. He is saying that while cheap credit may be drying up the emerging market economies are flush with cash and their growing interest in establishing sovereign wealth funds could well drive equity and other capital markets around the world to new heights. ”Major emerging market economies currently have a collective $1,500bn worth of excess reserves, - defining “excess” as official foreign reserves exceeding the amount needed for liquidity purposes, based on their “conservative rule-of-thumb”.

Dr. Bernanke is to appear before the House and the Senate this week. Those appearances which occur Wednesday before the Senate and Thursday before the House will dominate the discussions for the week. The market will be listening for any mention of inflation concerns as well as thoughts on the economy and housing.

The news is of better-than-expected earnings reports thus far, and 2nd quarter reporting is in full swing. Expectations for further upbeat earnings will support the market, but at what point does high energy prices, weak consumer spending, subprime problems and higher interest rates come into the picture? I am still looking at mid August for this market to correct, but blow off phases can be much longer and stronger than we can imagine.

Commodity prices are strong lead by the metals and crude oil. The gold ETF (GLD) rose 60% over the past two years while stocks such as Barrick has risen 30% and Newmont +14%. Perhaps it is time for the gold mining stocks to play catch-up. Attention will be paid to future earnings from gold mining operations.

Energy is on a tear as I pointed out the spreads weeks ago were starting to show the tightness. The market is showing demand is so strong that crude oil is not being moved into storage, but brought to market. That is bullish and should keep prices firm.

Good Trading to All

Wednesday, February 7, 2007

Fed, Bonds and Gold

Fed, Bonds and GoldSocialTwist Tell-a-Friend
Sally Limantour
February 7, 2007

Treasury Bonds:

“Fed Ease Unlikely Until 2008,” said Richard Berner, from Morgan Stanley. So now we have gone from an expected easing in early 2007, to easing late in the year to a possible easing in 2008. The reason: “We think future inflation risks are slightly higher than a month ago.”

The Fed speakers were out in force yesterday with San Francisco Fed President Janet Yellen saying “inflation is a little higher than I would like it to be; I would like inflation to come down.” The bond market had a short covering rally and stops above the 110 15/32 area were triggered. Strong demand for the 3 year and the “slowing” rate of growth predictions by a number of Wall Street economists contributed to this. Certainly $60 oil is also on everyone’s radar.

Bottom-line: Resistance above the 111-00 will keep the bears in control.


The media is focused on the gold rally inspired by the energy price inflation theme. I am more interested in the fact that gold sales by legacy central banks of Europe are low. In order to meet the Washington Agreement’s annual gold sales total they need to sell 9.6 tonnes each and every week. We are now in the 7th consecutive week that the legacy central banks have sold less than 3 tonnes of gold. This is bullish and an important item to monitor.

In other news:

Goldman sells top commodities index. GS has agreed to sell its GSCI commodity index to Standard & Poor’s for an undisclosed amount, according to the FT today. Note this: “the move will give the S&P a potentially powerful influence on commodity markets as any changes to the index composition can have wide ramifications for underlying commodity prices. The GSCI, the world’s leading commodity index, has about $60 bn tracking it. Most of these funds are managed by GS, which is the largest commodities trader among investment banks.”

Regarding the grain and soybean market there is much talk of expected planting and how much will be shifted to corn, given the high prices. While bullish on this sector, I have stepped to the sidelines as I am seeing a dis-connect between the futures and the cash market.

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