Bears Draw Blood on Facebook’s First Options Trading Day
Steven M. Sears, Barron’s
Facebook’s stock now has something in common with Mark Zuckerberg, the company’s founder. Both are under 30.
And it appears that option investors think that the stock can sink further.
Almost from the moment the options on Facebook began trading for the first time Tuesday morning, investors actively bought puts that would increase in value should Facebook (ticker: FB) fall below $30, which it did by noon.
http://jlne.ws/LfKyGD Facebook Contracts Top 365K in Fastest IPO Start
Cecile Vannucci and Nikolaj Gammeltoft, Bloomberg Businessweek
Investors flocked to the options market to protect shares of Facebook Inc. (FB) (FB) from more losses, making contracts on the social network website the most popular among the biggest initial public offerings in the last decade.
A total of 202,938 puts (FB) to sell the Menlo Park, California- based company and 162,482 calls to buy changed hands yesterday as the contracts traded for the first time, according to data compiled by Bloomberg. The total of 365,420 compares with 65,213 traded after General Motors Co. (GM) (GM)’s IPO and 22,736 for Google Inc. in 2004, then the biggest Internet offering ever.
http://jlne.ws/KcUZ28 CBOE volatility index up 11%, most since April 13
Sue Chang, MarketWatch
The CBOE Market Volatility Index jumped on Wednesday as U.S. stocks retreated on a combination of weak economic data at home and unrelenting problems in Europe.
http://jlne.ws/LTPljf Leveraged Volatility Trades Lagging VIX
Brendan Conway, Barron’s
Here’s a nice illustration why the construction of those leveraged “fear gauge” trades is so important: The volatility index is up about 11% at the moment as stocks sell off and options prices jump. But the market’s handful of leveraged trading vehicles are actually lagging behind the volatility index.
ExchangesWither the LME Trading Floor?
Andrea Hotter, The Wall Street Journal
Predictions of the demise of the London Metal Exchange trading floor started over a decade ago when the exchange introduced electronic trading, but have so far proven to be wrong…
People familiar with the matter said the U.S. exchange argues that ICE Clear Europe is the ideal platform for new product development.
ICE would also focus on the relatively-illiquid-by-comparison LME options market, similar to when it acquired the New York Board of Trade.
http://jlne.ws/KsxwrR NYSE Amex Options
As previously announced, the new options clearing system – Global Execution Management System (GEMS) – will be implemented on Monday, June 4th for NYSE Amex Options. Please note the following requirements as of that date for all current POPS users:
1) Only GEMS will be available as of Monday the 4th. POPS will not be available for log-in. Please note that a Comodo Security certificate is required for GEMS log in.
2) GEMS will launch June 4th with an initialized production data base. Therefore adjustments on trades occurring prior to June 4th must be accomplished via manual as-of trades as appropriate.
3) Users of the Online Floor Reports (OFR) system must select GEMS reports for any trades that occur from June 4th onward. To research trades that occurred or were entered into POPS prior to June 4th, select POPS reports from the drop-down menu.
Only GEMS Online and Batch Extract feeds and Batch EOD files will be produced as of June 4th.
StrategyWhy the Eurobond Crisis Matters to You and How to Protect Yourself from It
Greg Jensen, OptionsANIMAL (via NASDAQ)
The problems in Europe are more than just economic in nature, they are social. It has never been more evident than now as yields in sovereign debt continue to climb in Greece, Spain, Italy, Ireland, and a host of other European Union members and threaten default…
A dynamic collar trade is a trade where the risk can be limited, but still allowing for an upside if the stock decides to run. The trade is accomplished by buying the stock along with a long put option. This strategy alone (the married put) is a great trade, but can be very costly when Implied Volatility is high.