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Strategies & Market Trends : John Pitera's Market Laboratory

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To: The Ox who wrote (18983)	4/7/2017 1:53:56 PM
From: John Pitera	4 Recommendations Recommended By 3bar Hawkmoon roguedolphin The Ox Read Replies (2) of 33421

HI Ox, I thought that Thomas Peterffy's interview on cnbc late on fast money was very enlightening. He is the founder, chairman and CEO of Interactive brokers.... He is Hungarian and was born in 1944. He commented that IB had opened a record amount of accounts in the past 3 money and equity in IB accounts is 96.5 billion. Thomas Peterffy is a Hungarian-born American entrepreneur. He is the founder, chairman, and CEO of Interactive Brokers Group, Inc. and played a key role in founding the Boston Options Exchange. Wikipedia He confirmed that yes there had been a lot of margin used... He had a very easy to understand explanation for why the VIX volatility has been so consistently low and why the is market trading as it has been. Peterffy said that it has been proving to be a very profitable trade to buy some stocks but largely ETF's on margin and right covered calls on the margined ETF's. The Professional Institutional option sellers are simply selling the calls and shorting the ETF's so that they are delta neutral and are indifferent to if the ETF's go up or down... the call option sellers are *collecting premium.* As stocks move up and the calls they have written go into the money they then sell that stock that they own and do not want the risk exposure on and as prices decline from that selling we have the dip buyers rebuying the ETF's ... many on margin and writing covered calls on them again. Petterffy commented that as long as the averages stay within a 2-3% range this process just goes on and on. When asked what he thought would be the outcome chuckled and said he did have some thoughts. He did not go into real great detail about his thoughts but said that when there is an event that is not anticipated by the market and is of market moving impact; The side of this two sided trade that has been profitable for both sides and has been symbiotically effective and profitable will break down as there will not be enough gamma for the one side to adjust there position and there will be a quick vacuum where a 5% move will occur... in a fairly instantaneous fashion. *That is the most cogent explanation* *for why the VIX is so low and has been*..... It's in a sense being arbitraged away so long as there has been the relative stability in the market indicies. with yields on the 10 year continuing to go down it continues to flatten the yield curve which does bad things to bank earnings as the spread between the cost of funding and the lending and other market operations they do have margin compression. Why are yields going so low? we'll see. were are at 2.32% today and and are threatening to break dow in yield from a rectangular trading range and fall below an important supportive FIB level... Unless yields get support here... BUNDS are down to 22 basis points and so global money continues to come in and pull bond yields lower... and/ or the something is going on in the economy..... uncharted waters. The weak job number did not impact equities. John

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