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Strategies & Market Trends : Canadian Options -- Ignore unavailable to you. Want to Upgrade?

To: Tommy D who wrote (845)	2/25/1998 7:08:00 AM
From: Porter Davis	Read Replies (2) \| Respond to of 1598

>>Canadian market...lacks liquidity Comments like this one really get my knickers in a knot. We have exactly the same ratio of dogs to dancing ladies as the US market. Granted, they overwhelm us with the number of listings, so there are many more attractive option classes to trade in the US market, but be careful if you wander into their dog-patch. Listings such as ABX in Toronto beats the US counter-part hands down. No contest. There are probably 10 to 15 quality classes to trade here with another ten that have their days. Check the open interest and average daily trading volume. If it don't fit, don't force it--but there are plenty of good stocks to play. Broad-brush comments like "Canadian markets lack liquidity" reveal more about the speaker than the subject. Happy trading. Porter

To: Tommy D who wrote (845)	2/26/1998 9:41:00 PM
From: Dave.S	Read Replies (1) \| Respond to of 1598

The major problem we've got at the TSE options is the lack of automation. Everything is manually done. The handling of an options trade goes like this: 1) Receipt of the order over the phone or terminal and time stamped 2) Order taken by a trader to the square where the option is traded 3) Trade executed 4) Trades written up by both sides on trade tickets 5) Tickets given to input clerk who enters both sides of the trade to be reported to the Cdn Derivatives Clearing Corp. 6) Trades reported back to the firm 7) Limit orders booked by filling out a day order slip or a GTC slip 8) Day or GTC orders placed in the "book" by market makers - the book is actually a filing box or slot in the trading post 9) Market makers continually arranging limit orders to stay current so they don't trade through an order 10) Runners taking the second part of trades to the firms who placed the limit orders 11) Trades reported back to the firm This "system" works well during quiet times but becomes a nightmare during busy times. Twice in the last 3 years the system has broken down - both in the TXO pit. The Quebec referendum was a fiasco which caused a major drop in client business from which we have yet to recover from. The market makers (Gordon capital) were totally unprepared for the hundreds of orders which piled up on their desk before the opening and the CFO's (change orders) which followed during the day. They were not able to sort through the orders until the afternoon when the market had totally changed in volatility and direction. Not only did the clients who were long puts lose their money but those long calls had no chance to sell until the market had dropped off from the initial surge. Lesson - don't take positions in the TXO's when an event is going to occur which is certain to move the market in a discrete manner. The vol will drop and the market may not open. The solution of course is to automated the whole thing. The TSE is working towards this with a completion date about 1 year away. Hopefully we will not have another referendum before then.