Markets

Bitcoin futures up and running, but trading is light

Bitcoin futures are up and running, but trading volumes are on the light side. Cboe CEO Ed Tilly is saying the start of bitcoin futures has been a success. “Our regulated market experienced a smooth operational open and orderly markets throughout the evening trading session. We look forward to the growth of this new derivatives market.” There were two trading halts, but they were part of the product design and were not unexpected. The Cboe website briefly experienced difficulties as so many tried to access the site when trading started at 6 p.m. ET on Sunday, but it quickly came back up. Others also felt that while the volume was small, the interest level was sufficient to be considered a success. JB Mackenzie, managing director of futures and forex for TD Ameritrade, told me, ...

Trader of the new bitcoin futures on the gain at the start: ‘Just figuring out its sea legs’

Trading in bitcoin futures has begun on the CBOE. The open has been quiet. At 6:35 PM ET, 341 lots had traded, according to one market maker, with each lot representing one bitcoin. The last print was $16,000, which is a premium to the spot price on the Gemini exchange, which was $15,680. Doug Cifu, CEO of Virtu, one of several market makers in the Cboe bitcoin futures, said he is posting bids and offers for the futures based on the spot price on the Gemini exchange. As the start of futures trading approached, the spot priced swung wildly. Shortly before the start of futures trading, at 5:55 PM ET, the spot price on Gemini was $14,610. At 6:03 PM, three minutes after the start of futures trading, the price rocketed to $15,900. Given the wild price swings in bitcoin—the price on the Gemini ...

With bitcoin futures set to trade, here’s how it’s going to work

The Cboe will launch futures trading in bitcoin at 6 p.m. ET on Sunday. The ticker symbol will be XBT. Since the interest level is so high, let’s try to answer a few basic questions on how this will work. So how does this work? The Cboe will start by listing three near-term serial months. They will likely be January, February and March. They will expire on two business days prior to the third Friday of the month. What will the initial prices be and what is the size of a contract? Each contract is one bitcoin. Market makers will set an initial price for each month and trading will begin. The front-month (January) price will likely be close to the underlying cash price. The minimum price interval is $10.00 per contract. The contracts are traded and settled in cash (you get dollars, not...

The market has a problem: There’s nothing left to rotate into

The market has a problem: there’s nothing left to rotate into. Stocks sold off again midday Tuesday for the second day in a row. On the surface, the tax bill that has been such a market mover got push-back from Democrats who organized protests against what they view as tax cuts for the rich. I have already warned that the tax bill is not a fait accompli, but for different reasons: It is not clear if corporate tax cuts will be a 2018 or 2019 event (the Senate bill pushes it out to 2019) and President Donald Trump has intimated that the corporate tax cut may only be 22 percent, not 20 percent. That is a half a loaf for traders, who are anticipating tax cuts in 2018 and a 20 percent tax cut. But the markets have already indicated there may not be too much juice left in the whole “...

The huge run in bank and industrial stocks may mean you’ve already missed the ‘tax trade’

We may be testing the limits of how far we can push the “tax cut” trade. Since early last week, when momentum in Washington really picked up, sectors that would see the biggest earnings boost from tax cuts have been notable outperformers. But there may be limits to how far investors can push this trade. Last week, Cannacord, working with Thomson Reuters, published a study on the sectors that would get the biggest boost from a 20 percent corporate tax cut. Four of them — energy, financials, industrials and telecom — would see notable double-digit gains in earnings. One sector, technology, would see almost no boost: Biggest gainers from 20 percent tax cut (boost to 2018 earnings) Energy 21.5 percent Financials 18.5 percent Industrials 13.2 percent Telecom 15.5 percent Tech 1.5 pe...

The bitcoin futures race is on

The race to get bitcoin futures is now on. The CBOE announced Monday it would begin trading bitcoin futures on Sunday evening at the start of global trading hours. The first full day of trading would be on Monday, Dec. 11. That would beat the CME, which has announced it, too, will begin trading bitcoin futures on Dec. 18, a week later, and the Nasdaq, which is also planning to introduce futures trading in the first half of 2018. Bitcoin enthusiasts are hopeful that a bitcoin ETF might be coming. The SEC denied applications to start bitcoin ETFs earlier in the year on the grounds that the cryptocurrency was “unregulated,” but CBOE head Ed Tilly said he plans to reapply with the SEC for a bitcoin ETF. The argument seems to be a simple one. The presence of a futures market will de...

Markets grapple with tug-of-war between tax cuts and Trump’s legal woes

Tax cuts versus potential legal troubles for the president: Which wins out in the markets? The markets have been focused for months on global economic growth, record earnings and the premium in the market for tax cuts. But traders have spent almost no time thinking about the risk premium in the market for President Donald Trump‘s potential legal troubles. It was an issue earlier in the year. Remember, the Dow dropped more than 300 points on May 17, when reports of a memo from former FBI Director James Comey surfaced, saying Trump asked him to stop the investigation into former National Security Advisor Michael Flynn. Comey had been fired just the week before. It’s important to remember that the rally in the past year has not been solely based on the global economic expansion an...

The market sees good and bad sides to tax cuts

This could be a big day. With the Senate nearing a vote on its tax bill, corporate tax cuts are getting much more real. Aside from the global economic expansion and the record earnings this expansion is producing, the biggest marginal mover for the stock market has been tax reform. If you doubt this, note that the S&P 500 moved 15 points in the hour after Sen. John McCain announced he was supporting the tax bill on Thursday. Stocks were initially lower in Friday’s premarket after the Senate announced a last-minute delay to its vote on the tax bill overnight on Thursday. But fresh momentum was building later Friday as more GOP senators voiced their support for the bill – including Montana Senator Steve Daines and Wisconsin Senator Ron Johnson, two of the last Senate GOP holdouts. ...

Tech’s ‘FAANG’ stocks take a breather during a year of big gains

It’s been a tough week for the FAANG stocks — though a few bounced back today. Facebook, Apple, Amazon, Netflix and Google parent Alphabet are all down for the week, anywhere from roughly 1 percent to 4 percent. That doesn’t sound like much, but when you’re dealing with this group, you’re in the biggest league of them all in terms of market capitalization. When they move, they move indexes, and they can make, and lose, a lot of money for investors. Apple, Facebook, Google and Amazon were four of the five biggest negative drags on the S&P 500 this week. Let me show you what I’m talking about. Collectively, the five FAANG stocks had a market capitalization of about $2.8 trillion at the end of last week. The entire value of the U.S. stock market was about $28...

Home Depot and these other stocks have powered the Dow’s move from 23,000 to 24,000

The Dow Jones industrial average first crossed 23,000 intraday on Oct. 17. Because the Dow is a price-weighted index, the higher-priced stocks typically have a bigger influence on the Dow’s movements. This again was the case with the move from 23,000 to 24,000, with higher-priced stocks such as UnitedHealth, Boeing, 3M and Apple all contributing the bulk of the gains. The one exception is Goldman Sachs, which despite being the second-highest-priced stock in the Dow (after Boeing), contributed only 23 points to the Dow’s gain. Here’s a breakdown of the stocks that contributed the most to the Dow’s 1,000-point run from 23,000 to 24,000, based on the closing prices on Oct. 17 to the opening prices today. Biggest point contributors These six (representing 20 percent of ...

Nasdaq to launch bitcoin futures in the second half of the year, officials say

Nasdaq plans to launch bitcoin futures as early as the second quarter of 2018, according to exchange officials. The CBOE and the CME have also announced plans to launch futures tied to the cryptocurrency shortly. A Nasdaq spokesperson said that the exchange’s futures would differentiate from CBOE and CME because Nasdaq would base its price off of 50 bitcoin sources from around the world, while CBOE is currently using one and the CME is using four. One issue facing bitcoin products is the issue of what happens if there is a “hard fork,” i.e. what happens if bitcoin splits into competing products. Nasdaq said that both sides of the fork would go in the index for one day, and after that the value of the other fork would be reinvested in bitcoin and the value of the index wou...

The next step for bitcoin is ETFs

Bitcoin is up more than 50 percent this month, crossing $10,000. What’s exciting investors is the expanding derivatives market for cryptocurrencies, which is adding some much-needed legitimacy. Last month, LedgerX, an institutional trading and clearing platform, began trading bitcoin options. The Chicago Mercantile Exchange and Cboe are set to roll out bitcoin futures soon. The assumption is that the trading of bitcoin futures will bring the next logical move: bitcoin exchange-traded funds, which will bring more attention to ETFs and further push legitimization of bitcoin. These are technically listed as exchange-traded products, since they would only be trading a single commodity, in this case bitcoins. Regardless: “ETFs will bring a LOT more capital to bitcoin,” Eric Ro...