Sometimes it is best to just sit back and listen. Here’s what I’m hearing…
Barry Ritholtz: The New New Deal
MarketSci Blog: Shorting the Day-after Options Expiration (with a Twist)
Futures Mag: SEC Short Selling Ban May Have Dire Consequences for Market on Monday
Futures Mag: CBOE Chairman Comments on Short-Selling Ban
Michael Covel Blog: Bill Eckhardt Wisdom
Shedderman,
Nice list, and I especially enjoyed the CBOE Chair’s comments. I haven’t seen anything out there on the following, but maybe you have: the absence of some names from the list of 799, and the apparent inability of the SEC to confirm their absence – LM and FITB, for example, and half the Canadian banks trading in the NYSE (I guess you could also ask why the other half WERE included).
Is it a matter of don’t put them on the list, they’re already dead? Reuters says Legg Mason had to pump in $630 million to prevent shares of its money-market funds falling. They didn’t get that dough from selling AIG, FNM or FRE…
This is a gem. Hit the nail right on the head here…
Ianieri points out that the short sellers did not cause the problem. “All the short sellers did was see an opportunity because these guys were losing money and over leveraged in vehicles that never should have been created in the first place. They are trying to blame the guys who dug the grave for the murder.â€
Apt description of what just happened today. I do believe the grave diggers will have the last laugh.
Chris Cocks is a damn tool…
I’m sure this has been mentioned plenty in the past 24 hours, but very soon SKF will be upgraded from “buy” to “super strong, maximum overweight, ultra extravagant, this is an outrage buy.” Once people remember how fucked banks are and how fucked real estate is, these fin-op stocks will be pure piles of excrement.
This week has been just like the fall of 1998, complete with extreme lack of online broker bandwidth, random ISP outages, and rumors of computer malfunctions on the exchanges themselves.
Good articles, thanks for posting.
Thanks, Wood. Very helpful. I’m sending these articles to friends.
Thanks. Monday should be an interesting day.
Bill Eckhardt: “If you make a bad trade, you have money management, you have a whole bunch of things that will come to your aid, and you’re really not in so much trouble if you make a bad trade. But if you miss a good trade there’s really nowhere to turn. If you miss good trades with any regularity you’re finished, you’re doomed in this game.â€
That Bill Eckhardt Wisdom is hard wise or useful. Sure money management is key but good trades are missed, and missed often by the best of traders.
As Todd Harrison has often said: “Opportunities are made up easier than losses.”
The one great thing about the markets; opportunities are essentially infinite. Patience, waiting for ones setup is the hallmark of a successful trader.
SEC Considers Revising Shorting Ban in Options Market (Update2)
By Edgar Ortega and Michael Tsang
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Sept. 19 (Bloomberg) — The U.S. Securities and Exchange Commission may revise its ban on short sales to add financial companies and carve out an exemption for brokerages that pair off brokers in the $1.6 trillion U.S. options market.
The commission may add companies after firms such as M&T Bank Corp. were left off a list of 799 insurers, banks and securities institutions barred from short sales. The staff also will recommend that options market-makers be exempt from the ban, easing concern the rule would raise investor costs, the agency said in a statement today.
“If they don’t fix it, there just won’t be an options market on Monday,” Steve Claussen, chief investment strategist at OptionsHouse LLC, the Chicago-based online brokerage unit of options trading firm PEAK6 Investments LP. “If they have an exemption for market-makers that they’re allowed to sell stock short, then they can provide a market in the options.”
The SEC is prohibiting investors from betting against banks and brokerages to stem a sell-off that erased as much as $3.8 trillion from stocks globally after the collapse of Lehman Brothers Holdings Inc. and American International Group Inc. U.K regulators and attorneys general in New York, Texas and Connecticut, and the three largest U.S. pension funds are cracking down on short sellers.
Short sellers try to profit by betting stock prices will fall. In a short sale, traders borrow shares from their broker that they then sell. If the price drops, they buy back the stock, return it to their broker and pocket the difference.
`Disastrous’
Options market makers would have been prohibited from making short sales starting next week under the ban adopted today to keep speculators from driving down stock prices. The Options Clearing Corp., which guarantees all trades exchange- listed options, said a ban would have proved “disastrous.”
The list of companies for which short-selling is banned included Morgan Stanley, Wachovia Corp., Washington Mutual Inc., Goldman Sachs Group Inc. and Warren Buffett’s Berkshire Hathaway Inc. Banks including Capital One Financial Corp. and Commerce Bancshares Inc. also were omitted. General Electric Co., which got about half its profit from financial units last year, was left off the list.
“The commission is willing to consider adding comparable financial companies as appropriate,” SEC spokesman John Heine said in a statement today.
Interactive Brokers
Under rule announced today, market-makers such as Interactive Brokers Group Inc. and Susquehanna International Group LLP would be unable to short a stock to hedge their risks when clients buy or sell options on financial shares. Options give investors the right to buy or sell stocks at fixed prices in the future.
Market-makers, accounting for about 40 percent of trades, are obliged to quote prices at which they’ll buy and sell securities so investors are able to complete trades.
The SEC staff will recommend an exemption for the duration of the ban, scheduled to expire Oct. 2, the agency said in the statement. Stocks surged in the biggest two-day global rally in 38 years as the crackdown took effect for speculators who drove down shares of financial companies.
Roughly 23 million contracts were traded on the seven U.S. option exchanges today, down from a record 30 million yesterday, according to OCC statistics.
“Either you had to change the rules or you had to halt options trading,” said Henry Schwartz, president of Trade Alert LLC, a New York-based provider of options market analytics. “This is the better choice. You couldn’t have left it as it is because options market makers were refusing to quote without the ability to hedge.”
Option Prices
Prices for options today show that market-makers were already seeking to compensate for the added risk by widening the difference between their bids and offers, according to Peter Bottini, an executive vice president of Chicago-based online brokerage OptionsXpress Holdings Inc. The wider spreads make it more costly for investors to buy or sell options.
“For our retail customers, the costs of adjusting their portfolio has gone through the roof, because the bid-ask spreads have gone through the roof,” said Bottoni, a former market maker at the Chicago Board Options Exchange.
The SEC’s order comes in the midst of the biggest drop in financial-industry shares since at least 1962, according to data compiled by Birinyi Associates Inc., a Westport, Connecticut- based research and money-management firm. Goldman Sachs Group Inc. and Morgan Stanley, the remaining independent securities firms on Wall Street, plunged by the most ever this week, prompting Morgan Stanley Chief Executive Officer John Mack to say short sellers are using abusive tactics to attack companies.
great stuff. thanks, wood.
also, it looks like your tradeable bottom call was spot on. just a day early. 😛
Gunny, good find. Thanks for posting it here.
Aris, yeah, it was a good call. My emotions over-ran my technical indicators, unfortunately, and I issued my mea culpa. Had I not done that, well, I’d have some bragging rights.