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Get Long Vol With Virtu Financial Going Into Q1 Earnings

Apr. 10, 2018 4:59 PM ETVirtu Financial, Inc. (VIRT)18 Comments


  • A consistently profitable business model with the benefit of increased profitability during market uncertainty makes it an ideal hedge to diversify a portfolio.
  • The company will report Q1 earnings on May 4th, 2018. Trading revenues and EPS are expected to be significantly higher due to increased global volatility since early February.
  • Continued expense synergies from KCG Holdings acquisition and lower income tax rate should ensure record profits for the quarter.

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After a very slow and steady climb in global equity markets throughout 2017, we have now finally begun to see a return to more normal levels of volatility. Investors had been warned about the lengths of previous bull market cycles, pending geopolitical events, climbing debt levels, and inevitable downturns in the business cycle and onset of recession. But they were able to look past all this because the uptrend in markets seemed so strong. US tax reform was being passed. Janet Yellen was up every couple of months to remind us that everything was to be gradual and data-dependent. The phrase "blow-off top" was being used to describe a final phase of euphoria to come, with the FANGs leading the way. But things have evolved. Since the beginning of February, we have seen a return to more normal levels of volatility, and the markets have stopped their relentless upward climb. US quantitative easing has turned into tightening, ECB and BOJ are reducing stimulus, debt levels are still high, and we have a new Trump tweet every couple of hours to remind us of new potential tariffs and how trade wars can be won. Coming into Q1 earning season, markets have been chopping around waiting to see how these events play out. Is the bullish trend still intact with markets to move higher, or will we drop below the 200dma and retest our lows? It's impossible to know what the future holds, but what we do know is that markets do fall, and recessions do happen. It is nearing a decade since it last happened. Now is an important time for investors to position their portfolios to reflect this increase in

This article was written by

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Analyst’s Disclosure: I am/we are long VIRT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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