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    Retail bets on zero day options are growing, but they may come at a price

    It’s a sophisticated trading strategy that’s becoming more accessible to retail investors.
    The strategy: Zero days-to-expiration options — which is essentially a one-day bet on the direction of the markets.

    And CBOE Global Markets CEO Ed Tilly is in the thick of it. His company offers them all five weekdays.
    “It’s really become attractive and garnered a lot of interest in being able to express that opinion [on the market] in the short term,” Tilley told CNBC’s “ETF Edge” earlier this week.
    Zero days-to-expiration options are contracts that expire the same day they’re traded. Tilly believes these options are appealing to investors by allowing them to invest at the shortest duration of time left in a contract.
    “At the end of the trading day, the next result of that trade is settled in cash — not physically delivered like a stock or an ETF,” he said.

    Most effective as a tool for pros?

    Simplify Asset Management also offers these zero day-to-expiration options. Michael Green, the firm’s chief strategist and portfolio manager, also notes they’ve become especially attractive to individuals.

    “About a third of [our] trades are coming from retail, and about two-thirds are coming from institutional,” he said.
    Despite growing retail interest, Green emphasizes zero days-to-expiration options may be most effective as a tool for pros.
    “We use the phrase sophisticated retail investors, and I think there’s actually a really important distinction there,” Green said. “In general, those who are buying options on a consistent basis are doing more speculation than they actually are being sophisticated in terms of a return profile. It tends to be a losing bet.”

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    A controversial hack to save on plane tickets carries a ‘super big risk,’ says travel expert

    “Skiplagging,” also known as “hidden city ticketing,” is a counterintuitive way to book airline tickets to potentially save money.
    A traveler would book a multi-leg flight with a connection. Instead of flying to the final destination, the passenger opts to disembark at the connecting city.
    Many airlines prohibit the practice, so it comes with risks.

    Natnan Srisuwan | Moment | Getty Images

    “Skiplagging” is a money hack for travelers looking to save on airline tickets — but travel experts warn the practice comes with big risks.
    Also known as “hidden city ticketing,” the practice is a way to leverage a quirk in airfare pricing.

    Here’s the basic concept: Rather than fly nonstop to a desired city, a passenger would instead buy a multi-leg flight with a connection in their desired city. The traveler would disembark at the layover stop instead of flying the final leg.
    Sally French, a travel expert at NerdWallet, said travelers would be “surprised” to learn how often skiplagging is cheaper for fliers than buying a direct flight to their end destination.
    More from Personal Finance:How you can save $500 or more on a flight to Europe this yearCanceled or delayed flight? What to know about your rightsU.S. passport delays may be months long
    However, the practice also peeves airlines. In fact, many prohibit it — with a varying degree of consequences if a passenger is caught.
    Skiplagging has “been around for a while,” said David Slotnick, senior aviation business reporter at The Points Guy.

    However, “it’s controversial,” he said.
    “I think it reveals a bizarre and counterintuitive way the airline-pricing model works,” Slotnick said. “But in terms of being able to take advantage of that to save money, it’s a super big risk and you probably shouldn’t do it unless you fully understand what you’re doing.”

    Consequences include canceled flights, airline bans

    It has become easier to engage in the practice due to online travel bookings, including via sites like Skiplagged.com that specialize in such bookings, French said.
    Skiplagged.com has a series of frequently asked questions that speak to some of the associated risks, and advice for working around them.
    “This is perfectly legal and the savings can be significant, but there are some things to be aware of,” the company said in one FAQ response, adding: “You might upset the airline, so don’t do this often.”
    The risks were illustrated earlier this month when a teenager tried using the practice. The teen was scheduled to fly from Gainesville, Florida, to New York, with a stop in Charlotte, North Carolina; instead of disembarking in New York, the passenger planned to do so in Charlotte.

    Baona | E+ | Getty Images

    The carrier, American Airlines, reportedly discovered the traveler’s intent and canceled their ticket.
    In addition to getting a flight canceled — and then having to re-book last-minute, likely erasing any initial cost savings — travelers could get banned from an airline’s frequent-flier program and lose all its accompanying perks, Slotnick said.
    Carriers may also ban travelers from flying that airline in the future, he said. They also can theoretically take a traveler to court for damages.
    When booking a flight, travelers agree to airlines’ contracts, or conditions of carriage. These contracts set rules for passengers, and often forbid skiplagging (though generally don’t use that specific term), experts said.
    American Airlines’ contract, for example, states: “Your ticket is valid only when travel is to/from the cities on your ticket and in your trip record.”

    I think it reveals a bizarre and counterintuitive way the airline-pricing model works.

    David Slotnick
    senior aviation business reporter at The Points Guy

    More explicitly, it also prohibits reservations “made to exploit or circumvent fare and ticket rules,” examples of which include: “Purchasing a ticket without intending to fly all flights to gain lower fares (hidden city ticketing).”
    United Airline and Orbitz filed a lawsuit against Skiplagged.com’s founder in 2014, but a judge dismissed the case the following year.
    Carriers generally don’t like the practice because, for one thing, they can lose revenue. They may have been able to sell an empty seat to another passenger, or perhaps sell a more expensive nonstop ticket to the skiplagging passenger, for example.
    Additionally, when travelers deviate from what’s expected it messes with airlines’ internal planning, flight scheduling and data science, for example, Slotnick said.
    “They’re not angry that people save $20 on a flight,” he said. “It’s more the predictability in the data set.”
    Skiplagging only exists “as a result of airlines’ own pricing schemes,” Dan Gellert, chief operating officer of Skipplagged.com, said in an e-mail.
    “Airlines have monopolies on certain hub airports and their pricing reflects that. Thousands of people book Skiplagging or hidden city tickets every day and we generally hear of no issues from any of them,” Gellert said.

    There are other risks, inconveniences to skiplagging

    Travelers who use hidden city ticketing may be exposed to additional inconveniences. For example, you can’t check your bags, which will go onward to the final destination instead of the connecting city, French said.
    Bringing a bag on board as a carry-on is also a gamble: If a plane’s overhead space is full by the time you board, you may be forced to check your bag, French added.
    Passengers would also need to book separate one-way tickets. That’s because an airline would likely cancel a return ticket if you were a no-show for any leg of your flight, experts said.
    Additionally, flight schedules are “very unpredictable,” French said. Airlines may opt to reroute your flight through a different city — meaning your layover destination (where you’d intended to go) could change.
    “There are plenty of [other] ways to find good deals on flights,” especially for travelers willing to be flexible on trip timing and location, French said. Alternatives include using services like Google Explore and Going, which allow consumers to set flight alerts, she said. More

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    FTX lobbyist tried to buy Pacific island of Nauru to create a new superspecies, lawsuit says

    Gabe Bankman-Fried, the younger brother of FTX’s founder, tried to buy the island nation of Nauru, a Delaware lawsuit alleges.
    The allegation was in a suit filed by attorneys from Sullivan & Cromwell, which is seeking to recover billions of dollars from Sam Bankman-Fried after the collapse of FTX.
    Nauru, with a population of about 12,000, is a little over 2,100 miles away from Brisbane, Australia.

    The Nauru ring road runs right around the island nation of Nauru.
    (C) Hadi Zaher | Moment | Getty Images

    Sam Bankman-Fried’s younger brother, who was a top lobbyist for failed crypto exchange FTX, considered purchasing the island nation of Nauru in the Pacific to create a fortified apocalypse bunker state, a lawsuit filed in Delaware bankruptcy court shows.
    Gabe Bankman-Fried was looking at buying Nauru in the “event where 50%-99.99% of people die” to protect his philanthropic allies and create a genetically enhanced human species, according to the suit filed Thursday by attorneys from Sullivan & Cromwell, which is seeking to recover billions of dollars following the collapse of FTX.

    Bunker life is a well-documented fixation among tech billionaires, particularly those who identify as doomsday preppers. There’s also a fascination with buying large estates in the Pacific and even owning small islands there.
    In his years running FTX, the elder Bankman-Fried brother touted a philanthropic lifestyle called effective altruism and established the philanthropic arm with that in mind. Devotees of effective altruism work to maximize their income so they can give away their money in a fashion they see as most beneficial to humankind.
    Gabe Bankman-Fried was FTX’s most visible presence in Washington, D.C., and was connected to bipartisan charitable donations that ran into the hundreds of millions. Along with an unnamed philanthropic officer of FTX, he considered buying Nauru, in part to foster “sensible regulation around human genetic enhancement, and build a lab there.”
    A representative for Nauru confirmed the island nation was not and has never been for sale.
    Nauru, with a population of about 12,000, is a little over 2,100 miles away from Brisbane, Australia. It was there that FTX lawyers allege the Bankman-Fried team sought to establish an emergency base for itself and a select group of “EAs,” or effective altruists.

    In addition to serving as a haven in case of apocalypse, “probably there are other things it’s useful to do with a sovereign country, too,” according to a memo between the younger Bankman-Fried and the philanthropic advisor, which was noted in the suit.
    WATCH: FTX seeks to claw back $700 million from ex-Clinton aide’s investment firm More

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    Stocks making the biggest moves midday: Scholastic, AutoNation, Herc, American Express and more

    People look at vehicles at the AutoNation Toyota dealership in Cerritos, California.
    Mario Anzuoni | Reuters

    Check out the companies making headlines in midday trading.
    Scholastic — The publisher jumped about 11.5% after announcing it would increase its share repurchase amount by $100 million. Traders also appeared to cheer the company’s quarterly results. Scholastic posted $2.26 in earnings per share on revenue of $428.3 million.

    related investing news

    American Express — Shares slipped about 3.9% after the company reported second-quarter revenue of $15.05 billion, falling short of the $15.48 billion expected from analysts polled by Refinitiv. However, American Express’ earnings per share beat expectations.
    Herc — Herc dropped about 6.5% after Bank of America double-downgraded shares to underperform from buy. Analyst Sherif El-Sabbahy said the effect from the ongoing writers and actors strike in Hollywood will hurt the equipment rental stock.
    AutoNation — AutoNation tumbled 12.3% during midday trading. The car dealer reported second-quarter results that exceeded expectations on the top and bottom lines. AutoNation posted adjusted earnings of $6.29 per share on revenue of $6.89 billion. Analysts expected per-share earnings of $5.91 on revenue of $6.78 billion.
    Knight-Swift Transportation — Knight-Swift Transportation gained 0.8% in midday trading. The move comes even after Knight-Swift reported second-quarter earnings and revenue that were weaker than expected. The company also issued lackluster guidance.
    PPG Industries — Shares rose nearly 0.3% after PPG Industries posted strong second-quarter results. The supplier of paints, coatings and other materials posted adjusted earnings of $2.25 on revenue of $4.87 billion. Analysts polled by StreetAccount expected earnings of $2.14 per share and revenue of $4.84 billion. The company also raised its current-quarter and full-year earnings guidance.

    Capital One Financial — Capital One Financial rose 0.5% after the financial company topped earnings expectations for the second quarter. Capital One reported adjusted earnings of $3.52 per share, which topped a Refinitiv estimate of $3.23 per share. However, its revenue missed expectations. Total deposits also decreased 2% at the end of the second quarter.
    Intuitive Surgical — The health-care stock declined 3.2% after Intuitive Surgical posted weaker-than-expected systems revenue for the second quarter. The company posted systems revenue of $392.7 million, lower than the $415.9 million, according to a consensus estimate from StreetAccount.
    Sunnova Energy International — Shares fell 5% following a downgrade from BMO Capital Markets. The firm said although it is “constructive” on growth in the long term, the current macro environment for the residential solar industry in the U.S. remains challenging.
    CSX — CSX slid 3.7% after the transportation company reported disappointing second-quarter revenue. The company reported revenue of $3.7 billion, which was weaker than $3.74 billion expected by analysts polled by Refinitiv. Earnings per share came in line with consensus at 49 cents.
    — CNBC’s Michelle Fox, Alex Harring and Hakyung Kim contributed reporting. More

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    Cathie Wood says her flagship innovation fund has completely exited China

    Cathie Wood, CEO, Ark Invest, speaks during an interview on CNBC on the floor of the New York Stock Exchange, Feb. 27, 2023.
    Brendan McDermid | Reuters

    Ark Invest’s Cathie Wood said her flagship innovation fund has reduced its China exposure to zero as the developing market faces an economic slowdown.
    The tech investor revealed that her Ark Innovation ETF, with nearly $9 billion assets under management, according to Morningstar, has exited the stocks that generate revenue from China as she consolidated her portfolio toward her favorite bets like Tesla, Coinbase, Roku and Zoom in the market downturn.

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    3 hours ago

    “As we always do during bear markets, we concentrated our strategies towards our highest conviction names and the Chinese names, in particular, came out one by one as we were concentrating so that now, at least in the flagship strategy, we do have no exposure to China,” Wood said in a prerecorded investor webinar Thursday.
    ARKK used to own shares in Chinese tech giant Tencent and property site KE Holdings. Wood said her exposure to China and other emerging markets reached about 25% in 2020 as she was impressed by China’s initial response to the Covid pandemic.
    “We were looking at the fiscal and monetary policy responses around the world and were impressed with China’s restraint. They were not throwing money at the problem. They were very disciplined in terms of their monetary and fiscal policy responses,” Wood said.
    The innovation investor said she changed her stance on China after Beijing started to tighten its grip on the economy by cracking down on the ultrawealthy and the tech sector.
    The widely followed investor said she’s particularly concerned about China’s real estate market as the country incurred massive amounts of debt after over a decade of swift expansion.

    “It was responsible for roughly 15 years of double-digit real GDP growth … and growth like that can cover a lot of sins,” Wood said. “And those sins usually involve debt, and importantly in the property space, we do believe that China is facing its day of reckoning in this regard.”
    Ark Fintech Innovation ETF (ARKF) still owns a small stake in Chinese e-commerce company JD.com, but it has dumped other Chinese names like Pinduoduo and Tencent.
    Still, Wood said she might add back shares tied to China as the country overcomes the challenging period and the market enters a new bull cycle.
    “More diversification during bull markets, especially as we get more IPOs and as we reconsider some of the names that we let go in our concentration strategy,” Wood said.
    Her flagship fund has had a banner year so far as her top holdings rebounded from sharp losses triggered by rising rates. ARKK is up more than 50% in 2023. More

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    Here’s how making poor investment choices is like watching classic thriller ‘Jaws’

    “Recency bias” is a behavioral finance principle that can cost investors money.
    It causes people to rely on recent events — like a steep drop in the stock market — when making future choices.
    The psychological impulse is normal but can be harmful. Investors often buy high and sell low as a result, according to finance experts.

    Stephen Frink | The Image Bank | Getty Images

    Investors can get swept away by the fear or euphoria of the recent past — and it often costs them financially.
    “Recency bias” is the tendency to put too much emphasis on recent events, like a stock-market rout or the meteoric rise of bitcoin or a meme stock like GameStop, for example.

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    2 days ago

    3 days ago

    Investor choices are guided by these short-term events — which may be counter to their best interests, as is often the case when selling stocks in a panic.
    More from Personal Finance:’We’re all crazy when it comes to money,’ advisor saysWhy our brains are hard-wired for bank runsThe fear of missing out can be a killer for investors
    Recency bias is akin to a common yet illogical human impulse, such as watching Steven Spielberg’s classic summer blockbuster “Jaws,” a 1975 thriller about a Great White shark whose diet revolves more around humans than marine life, and then being afraid of the water.
    “Would you want to go for a long ocean swim after watching ‘Jaws’? Probably not, even though the actual risk of being attacked by a shark is infinitesimally small,” wrote Omar Aguilar, CEO and chief investment officer at Schwab Asset Management.

    Fans celebrate the June 14, 2005 release of the Jaws 30th Anniversary Edition DVD from Universal Studios Home Entertainment.
    Christopher Polk | Filmmagic | Getty Images

    Recency bias is normal, but can be costly

    Here’s a recent real-world illustration:

    The financial services sector was among the top performers of the S&P 500 Index in 2019, when it yielded a 32% annual return. Investors who chased that performance and subsequently bought a bunch of financial services stocks “may have been disappointed” when the sector’s returns fell by 2% in 2020 — a year when the S&P 500 had a positive 18% return, Aguilar said.
    Among other examples posed by financial experts: tilting a portfolio more heavily toward U.S. stocks after a string of underwhelming performance in international stocks, and overreliance on a mutual fund’s recent performance history to guide a buying decision.

    People need to understand that recency bias is normal, and it’s hard-wired.

    Charlie Fitzgerald III
    founding member of Moisand Fitzgerald Tamayo

    “Short-term market moves caused by recency bias can sap long-term results, making it more difficult for clients to reach their financial goals,” he said.
    The concept generally boils down to fear of loss or a “fear of missing out” — or, FOMO — based on market behavior, said Charlie Fitzgerald III, an Orlando, Florida-based certified financial planner.
    Acting on that impulse is akin to timing the investment markets, which is never a good idea; it often leads to buying high and selling low, he said.
    “People need to understand that recency bias is normal, and it’s hard-wired,” said Fitzgerald, a principal and founding member of Moisand Fitzgerald Tamayo. “It’s a survival instinct.”

    It’s like a bee sting, he said.
    “If I get stung by a bee once or twice, I’m not going to go there again,” Fitzgerald said. “The recent experience can override all logic.”
    Investors are most vulnerable to recency bias, he said, when on the precipice of a major life change like retirement, when market gyrations may seem especially scary.

    How to assemble a well-diversified portfolio

    Long-term investors with a well-diversified portfolio can feel confident about riding out a storm instead of panic-selling, however.
    Such a portfolio generally has broad exposure to the equity markets, via large-, mid- and small-cap stocks, as well as foreign stocks and maybe real estate, Fitzgerald said. It also holds short- and intermediate-term bonds, and maybe a sliver of cash, he added.

    Investors can get this broad market exposure by buying various low-cost index mutual funds or exchange-traded funds that track these segments. Or, investors can buy an all-in-one fund, like a target-date fund or balanced fund.
    One’s asset allocation — the share of stock and bond holdings — is generally guided by principles like investment horizon, tolerance for risk and ability to take risk, Fitzgerald said. For example, a young investor with three decades to retirement would likely hold at least 80% to 90% in stocks. More

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    Stocks making the biggest moves premarket: American Express, AutoNation, CSX and more

    Kara Birnbaum / CNBC

    Check out the companies making headlines before the bell:
    American Express — American Express slid 3% after posting smaller-than-expected revenue for the previous quarter, even as earnings per share beat expectations. The company reported second-quarter earnings of $2.89 per share on revenue of $15.05 billion. Analysts polled by Refinitiv had expected per-share earnings of $2.81 on revenue of $15.48 billion.

    AutoNation — Shares slid 3% even after AutoNation reported second-quarter results that beat expectations. The company beat on the top and bottom lines, reporting adjusted earnings of $6.29 per share on revenue of $6.89 billion. Analysts expected per-share earnings of $5.91 on revenues of $6.78 billion.
    Sunnova Energy — The solar company shed 2% after being downgraded by BMO to market perform from outperform. BMO cited the challenging macro backdrop for residential solar and said Sunnova’s debt issuances could weigh on the stock.
    CSX — CSX fell 4% after the transportation company missed revenue expectations in its second quarter. CSX reported revenue of $3.7 billion, lower than the $3.74 billion consensus estimate from Refinitiv. Earnings per share came in line with consensus at 49 cents.
    Capital One Financial — The financial stock rose slightly after the company posted better-than-expected earnings for the latest quarter. Capital One reported adjusted earnings of $3.52 per share, beating a Refinitiv estimate of $3.23 per share. However, its revenue missed expectations. Total deposits also decreased 2% at the end of the second quarter.
    PPG Industries — PPG Industries declined 2% even after reporting strong second-quarter results. The supplier of paints, coatings and other materials posted adjusted earnings of $2.25 on revenue of $4.87 billion. Analysts polled by StreetAccount expected earnings of $2.14 per share and revenue of $4.84 billion. The company also raised its current-quarter and full-year earnings guidance.

    Intuitive Surgical — Intuitive Surgical fell 4% after the health care firm reported weaker-than-expected systems revenue in its second quarter. Intuitive posted systems revenue of $392.7 million, lower than the $415.9 million StreetAccount consensus estimate. Otherwise, the company beat analysts’ expectations. It posted adjusted earnings of $1.42 per share and $1.76 billion in revenue. Analysts polled by Refinitiv forecasted earnings of $1.33 per share on $1.74 billion in revenue.
    Knight-Swift Transportation — The transportation stock dropped more than 2% after Knight-Swift reported lower-than-expected earnings in its second quarter and issued weak guidance. Knight-Swift reported adjusted earnings of 49 cents per share and $1.55 billion in revenue. Analysts were expecting 55 cents in earnings per share and a quarterly revenue of $1.60 billion, according to Refinitiv. The company said soft demand and a modest rise in driver turnover hurt the firm.
    Scholastic — Scholastic rose 6% after beating earnings-per-share expectations and sharing it will raise its share repurchase amount by $100 million. The publisher posted $2.26 earned per share, higher than the forecast of $1.70, according to one analyst surveyed by StreetAccount. Meanwhile, revenue came in at $428.3 million, lower than the $541.8 million expected.
    — CNBC’s Michelle Fox and Yun Li contributed reporting More

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    TikTok Shop strikes ‘buy now, pay later’ partnership in Malaysia as part of e-commerce push

    TikTok Shop, the e-commerce marketplace of the short video app, will offer “buy now, pay later” service Atome in Malaysia, as part of its e-commerce push into Southeast Asia.
    The partnership is expected to “drive growth” and “enable merchants and small businesses to offer their customers a convenient and flexible payment option,” Jonathan Low, e-commerce lead of strategy and special projects at TikTok Shop, said in a statement on Friday.
    TikTok Shop has been aggressively expanding into e-commerce in Southeast Asia, as the company looks outside the U.S. for growth.

    Two sellers offering merchandise for sale through a TikTok livestream.
    Bay Ismoyo | Afp | Getty Images

    TikTok struck a partnership with “buy now, pay later” service Atome to offer installment payments on its e-commerce marketplace in Malaysia, the latest in the company’s e-commerce push into Southeast Asia.
    TikTok Shop will include Atome as a payment option, which would allow customers to spread deferred payments over three or six months.

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    Atome is the BNPL arm of Singapore-based fintech firm Advance Intelligence Group, which is backed by major investors like SoftBank Vision Fund 2 and Warburg Pincus.
    The partnership is expected to “drive growth” and “enable merchants and small businesses to offer their customers a convenient and flexible payment option,” Jonathan Low, e-commerce lead of strategy and special projects at TikTok Shop, said in a statement on Friday.
    “By integrating Atome as a payment option on TikTok Shop, we’re excited to help drive ecommerce growth and support brands of all sizes,” said William Yang, head of commercial at Atome.

    Read more about tech and crypto from CNBC Pro

    The partnership comes as TikTok looks to markets outside of the U.S. for growth. While the U.S. is the company’s largest market, TikTok faces headwinds there after Montana became the first state to ban the app. The app has also been banned in India.
    In recent months, TikTok Shop has been aggressively expanding into e-commerce in Southeast Asia, competing against existing players like Sea’s Shopee and Alibaba’s Lazada.

    TikTok’s CEO previously said the company will pour “billions of dollars” into Southeast Asia over the next few years. As of April, TikTok said it has more than 325 million monthly users in Southeast Asia.
    In June, the company said it would invest $12.2 million to help over 120,000 small and medium-sized businesses sell online. The investment consists of cash grants, digital skills training and advertising credits for these businesses. More