CANNABIS

Cannabis is a popular recreational /medicinal drug around the world, only behind alcohol, caffeine and tobacco. In the United States alone, it is believed that over 160 million Americans have tried Cannabis, with 25 million Americans having used it within the past year. 

Medical cannabis (or medical marijuana) refers to the use of cannabis and its constituent cannabinoids, such as tetrahydrocannabinol (THC), as medical therapy to treat disease or alleviate symptoms. 

The name Cannabis indica was listed in various Pharmacopoeias, and was widely used to designate Cannabis suitable for the manufacture of medicinal preparations. 

More than 20 states  (Alaska, Arizona, California, Colorado, Connecticut, DC, Delaware, Hawaii, Illinois, Maine, Massachusetts, Michigan, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington) have approved marijuana use for medicinal purposes and Colorado and Washington are opening up the plant for recreational use.

Marijuana companies rose more than 50 percent in 2013 and opened 2014 with a bang, rising almost 150 percent in just three weeks. 

A few that filed with the SEC at the time of this writing include CANN (currently halted pending SEC investigation), CANV, CBIS,  FULL and GWPH and GWPRF trades on NASDAQ, MCIG, NVLX, PHOT, VAPE.

HIGH FREQUENCY TRADING (HFT) ALGO BOTS

A special class of algorithmic trading is "high-frequency trading" (HFT), in which computers make elaborate decisions to initiate orders based on information that is received electronically, before human traders are capable of processing the information they observe.

As of 2009, high frequency trading firms account for 73% of all US equity trading volume; about 20% of options volume expected to be computer generated by 2010.

As of October 2013, Eric Hunsader, founder of Nanex estimates that 90-95% of all orders placed come from high frequency machines.

BIOTECH

A 2011 study notes the success rate in bringing new medicines to market in the past six years is only half of what it had been previously. Biotech drugs are twice more likely to gain approval than more traditional chemical drugs.

 

Moving from early stage Phase I clinical trials to FDA approval is roughly 10%, about half in earlier years.

 

Approval applications were filed for 55% of the drugs that made it to Phase III testing, and 80% of those gained eventual approval; though only half were approved on initial review.

SOURCE:  BIOMEDTRACKER 

In summary: 10% of biotechs move from early stage Phase I clinical trials to FDA approval, and only half of those are approved on initial review.

 

BITCOIN

Gold is known as an alternative to paper currencies, can be traded anywhere in the world, and has a limited supply; the same is true for bitcoin. 

 

Bitcoin is minted in quantities determined by an algorithm.  Currently there are 11 million in circulation and the pre-determined algorithm will determine additional mints until a finite supply about 21 million of them are created and no more.

 

This digital virtual currency trading under the symbol BTC or XBT,  became operational in early 2009; it was created by an unknown person using the alias Satoshi Nakamoto.  In 2011 the value of one Bitcoin rapidly rose from about $0.30 to $32, before falling back down $2; at the time of this writing, bitcoin equals roughly $300 USD.  Bitcoins have acquired a reputation for use by criminals to purchase drugs, launder money, and gamble. Since its inception, Bitcoin exchanges and transaction processors have been hacked routinely with losses totaling millions of USD.

Bitcoin uses cryptography, it does not do so to protect the privacy of individuals; all transactions are logged in a public file called the blockchain. It is possible, although difficult, to associate bitcoin transactions with real-life identities.

To use bitcoins one is assigned one or more bitcoin addresses, and wallets allow a user to complete transactions between addresses by requesting an update to the blockchain, the public transaction log instrumental to Bitcoin. Wallets come in a variety of forms: apps for mobile devices and computers, hardware devices, and paper tokens.



Link to realtime chart:  http://bitcoinwisdom.com/

DARK POOLS

Dark pools of liquidity (dark liquidity, dark pools or black pools) is trading volume or liquidity not openly available to the retail investor.  They are commonly traded with large block trades (at least 10,000 shares/block) by financial institutions with algorithms using quantitative strategies throughout the day or at scheduled times.

The main advantage in using dark pools is to avoid market impact from the transparency of a large block trade.  Dark pools are run by private brokerages (Barclays, Citi, Credit Suisse, Fidelity, Goldman Sachs, Deutsche Bank, UBS to name a few) which operate under fewer regulatory and public disclosure requirements than public exchanges.  Trading on the dark pools accounts for 32% of trades in 2012 versus 26% in 2008.

RECOVERING FINANCIAL SECTOR

Banks, brokers and insurance companies make up almost 17% of the S&P 500, almost twice the level from 2009 and closing in on technology companies at 17.6% as of the end of July 2013.

Banks were the biggest American industry during the bull market that began in 2002, when the S&P 500 more than doubled and the economy expanded as much as 3.5% annually. In the late 1990s, financial firms grew to almost 19% of the index, coinciding with the largest stock rally in U.S. history and more than 4% average annual growth in gross domestic product (GDP).

The last time financial shares were the largest group in the S&P 500 was May 2008, four months before Lehman Brothers Holdings Inc. filed the largest bankruptcy in U.S. history.  It took more than $2 trillion of credit-related losses and write downs, after risky trading and home lending led to the credit crisis. About $11 trillion vanished from U.S. equity market value in the following year and a half.

VIX

VIX is a weighted average of the out-of-the-money SPX options in the first two expirations, and adjusted to simulate the volatility of an option with 30 days to expiration.  It is never wrong since it is a calculation using actual bid/ask prices of these SPX options. 

If the VIX is going up, then the out-of-the-money options in the calculation are rising from trader’s accumulation (demand); likewise, the VIX drops from trader’s distribution (supply).

If the market is moving lower, but traders are not bidding up the out-of-the-money options (VIX doesn’t rise), then traders are already hedged, or are less leveraged, and the extent of a sell-off is not perceived as intimidating to them.

Use the VIX to complement your trading strategies rather than to predict market direction.  Compare the change to the past few weeks to gauge the overall fear or complacency in the market.  If the VIX is rising above the past trend, then uncertainty is increasing in the market over what may happen in the near term future; likewise, if the VIX is falling below the past trend, then complacency is increasing and option premiums are relatively low.