Kyoshii

The CBOE put out a note on the Jan 18th concerning their Penny Pilot Program (PPP). That is what they call the program to test moving to penny options.

Anyway, they are going to roll out every friday for three weeks. The first week, just one WFMI. How they picked that one, I will never know. The third week, they will finally get to the QQQQ and INTC ( which really needs penny options )

I have no idea when they will roll it out for everything. bastids.


Friday, January 26, 2007
WFMI Whole Foods

Friday, February 9, 2007
IWM Ishares Russell 2000
QQQQ QQQQ
SMH SemiConductor Holders
AMD Advanced Micro Devices
INTC Intel
CAT Caterpiller
TXN Texas Instruments
FLEX Flextronics International
SUNW Sun Micro
A Agilent Tech, Inc.


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I have had a personal problem with payment for order flow ( payment for order flow ) for a long time. In Jan 2007, the SEC will have a trial for options priced in pennies. A penny option is an option that has a price increment that can move 0.01. Most options now trade with increments of 0.05 and 0.10. So say an option is trading at 1.05/1.10 bid/ask. The dealer makes the 0.05 ( $5 ) spread between the bid & ask. With penny priced options you COULD have a spread of 1.05/1.06. Not as much room to make money off the spread. Of course, some options will have a wider spread.

The move to penny options will give investors a better price. It will cut down on the amount dealers can make from the spread, and thus how much they can pay for order flow. This also hurts internalization ( internalization ) , but brokers continue to do that after equities went to pennies, so I cannot see it stopping with options.

I feel a broker has a duty for best execution, and payment for order flow is a conflict of interest. I think their are other ways of getting order flow besides payment for order flow. Subsidies, co marketing arrangements, and the like are ways that other markets increase order flow, and it should be the same with securities firms.

Here is a paper from 2001 by Allen Ferrell on payment for order flow. A good read if you have the time.

The SEC’s pilot on penny options pricing is scheduled to begin on Jan. 27. 2007.

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The godfather of soul passed today.   The man was a legend.

… 

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Well, I got my test results back for the C.A.I.A. level 1 exam. There is an article at Wikipedia for a little more background. Chartered Alternative Investment Analyst

I think the exam will be harder starting next September ( 2007 ), as they are removing the Investments part. But as for now, here are my impressions.

[1] Easy if you study enough

That is the whole point about this kind of test. It tests you on an understanding of concepts and applications, not minutiae. The questions on the test are not hard IF you understand what is going on with the concept. and by enough a mean a long enough time to get used to the concepts that you didn’t get on the job so that you can apply them. Actually, any test can be easy if you study enough.

[2] Work on the things you don’t know

If you , like me, are coming from a particular field, you will have to study some in the other areas. For me the derivatives parts were easy as well as the regulations.

The part that was not so easy was the fixed income and real estate. I never worked in either of those two area, so I was a little out of sorts.

[3] If you have a CFA, the test is easier FOR NOW

Note that the exam is changing for the Sep 2007 exam. Right now there is a lot of overlap between the CFA. The CAIA uses the CFA ethics book, so you already have that part and the Investment book is pretty standard for the CFA ( and MBA’s use it a lot also ). After Sep 2007 , only the ethics book will remain, with the rest becoming just alternative investments.

[4] Take a prep course

It will save you a bunch of time. If nothing else, it will help you organize the study materials. Schweser is finally coming out with a prep course , so I expect them to become the ‘big dog’ in the CAIA test prep area like they are for the CFA. If you have the time, EDHEC and INSEAD have three day programs. You will still have to study some after these intensive classes, so don’t think you can spend three days and then pass.

Prep packages

Schweser They have their first study guides just coming out now, but if they are as good as their CFA guides, it should be nice.

Uppermark Highly recommended. Great self study course.

KalmAI - Better to say nothing …

[5] Practice with your calculator

For me, I had practice test software that was the most help. The concepts were cool and I didn’t have a problem with them using the software, the test software did help me point out my weak spots in test taking. My main problem was making manual mistakes with my calculator. I sit in front of a computer all day with R and Gnumeric around for anytime I need to calculate anything. Doing things the old fashioned way took some time.

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I released this a few years ago for the Power PC (PPC). It is tload for Darwin/OSX, like the one in FreeBSD, updated as a Universal binary. I really do not understand why Apple has not included tload in Darwin/OSX. It is one of those “low tech” utilities that make using UNIX systems nice.

tload shows a scrolling ncurses graph of system load. So you can ssh to a system an get a visual representation of what is going on inside a server. tload helps those of us who run OSX headless as servers keep an eye one things, and it uses a lot fewer resources than top. I guess we don’t have enough of us running Darwin/OSX as a server.

I usually run a copy on my app server. I can just glance at a terminal window and see how the system is handling the load.

This release is a Universal command line binary, so it will play nice on your IntelMac. I did not include an installer, so just copy the binary to a place in your path such as /usr/bin or /usr/local/bin

Download tload 2.0.7 here.

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