LEAD STORIES

Forex Option Gauges Suggest Risk Rally to Continue
David Willmer, The Wall Street Journal
Investor risk appetite continued to improve in Europe Friday and, if foreign exchange option market gauges are to be believed, the recovery has further to run.
Implied volatilities, a measure used to gauge expected future price movements, traded at multi-year lows in many currency pairings; a signal investors are becoming increasingly confident the period of turbulence and uncertainty that has rocked global financial markets may be reaching a conclusion.
http://jlne.ws/Ub1DFg

Forex options less optimistic on dollar as Fed looms
Julie Haviv, Reuters
Expectations for more U.S. stimulus and diminished fears of the euro zone debt crisis has options investors souring on the dollar in favor of the euro.
The euro hit a four-month high against the greenback on Wednesday, bolstered by hopes that the euro zone’s recent efforts to address its crisis will bear fruit, and that the U.S. Federal Reserve will buy more bonds, seen as a dollar negative.
http://jlne.ws/QYDy8v

Fed Destroys VIX
Wall Street Sector Selector
Dr. Bernanke has done it again.  Just like how “Super Mario” Draghi destroyed the VIX last week, Dr. Bernanke has destroyed the VIX this week through another round of QE3.  The Chairman plans to continue to keep interest rates near zero until mid 2015, to start buying $40 billion worth of mortgage backed securities each month, and continue “Operation Twist.”  All of Dr. Ben’s “easing” words have destroyed fear in the marketplace and the VIX and VIX ETFs, as the VIX index dropped 11.08% to close at 14.05, while the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VIX) lost 7.41% to close at a scary low of $8.87.
http://jlne.ws/QYvS5W

Fear gauge, long in slumber mode, could awaken in fall
Doris Frankel, Reuters
A calm summer has allowed many on Wall Street to take vacations this year, but don’t count on the tranquility lasting into the fall.
Massive central bank intervention has kept a lid on the market turmoil of the past year, and helped major U.S. stock indices advance to multi-year highs even as the European debt crisis remains a threat, and demand slowed in major world economies.
http://jlne.ws/Pihy4z

Optimism Grips the Options Market
Investors have been increasing their call buying of many big financial-services stocks.
Steven M. Sears, Barron’s
Options traders are signaling their optimism about the stock market by embracing a wide swath of financial-services stocks.
Bank of America (ticker: BAC), Citigroup (C), JPMorgan Chase (JPM) are suddenly among the options market’s most actively traded options.
The Select Sector SPDR-Financial (XLF), an exchange-traded fund filled with banks and other financial-services companies, also keeps attracting buyers of call options.
http://jlne.ws/NsdJLU

Exchanges

CME Group: Gold Trading Halted Twice to Prevent Volatility
Tatyana Shumsky, The Wall Street Journal
Exchange operator CME Group Inc. (CME) said it halted trading in gold futures twice Thursday to prevent excessive price volatility, according to an email from a spokesman.
Stop Logic, a type of circuit breaker that pauses trading for between five and 20 seconds, was triggered at 12:14:47 EDT and at 12:31:20 EDT Thursday.
http://jlne.ws/Oo6C2P

London Gold and Commodities Exchange Formally Launches Foreign Exchange Options Trading Service
Press Release
LGCEX, a leading provider of commodity futures and brokerage trading services to all types of traders and with access to major markets worldwide has initiated the official launching of another trading service-the Foreign Exchange Options trading Service along with the introduction of a ground-breaking FXOptions Trading platform that will be used by the clients in their forex trading activities.
http://jlne.ws/PilGBr

AdvisorShares ‘Buy Write’ ETF Launches Next Week
Brendan Conway, Barron’s
Buy the stock, sell a call option against it to generate income. The “covered call” is a staid options-trading strategy that helps drive AdvisorShares’ latest fund offering.
The STAR Global Buy-Write ETF is set to launch on NYSE Arca under the ticker VEGA next Tuesday, the company said today in a press release. The fund is sub-advised by Partnervest Advisory Services in Santa Barbara, Calif.
http://jlne.ws/Pii16L

Consolidated Audit Trail Industry Call
Press Release
The national securities exchanges and FINRA (collectively the “SROs”) together invite interested industry participants to join a conference call and WebEx presentation on Wednesday, September 19, 2012 at 4:15 p.m. ET regarding SEC Rule 613 requiring the creation of a Consolidated Audit Trail (CAT).
During this call, the SROs will provide an overview of Rule 613, the steps the SROs are taking to develop an NMS CAT Plan as required in Rule 613, and how the SROs plan to solicit industry comments and feedback on key implementation issues.  In addition, the SROs will announce future industry events at which interested industry participants are invited to share feedback on implementation issues.
http://jlne.ws/PiiWnH
** Follow link for details on how to access the call/web portion. –JB

ICE Traders Held Talks With CME
Leslie Josephs, The Wall Street Journal
Some two dozen traders who trade on IntercontinentalExchange Inc.’s ICE Futures U.S. met with executives from rival exchange CME Group Inc. last month to discuss the possibility of launching similar contracts there for so-called soft commodities, traders said.
Soft commodities refer to coffee, cocoa, sugar and orange juice. ICE Futures U.S. is home to the world’s main arabica-coffee, raw-sugar, cotton and frozen-orange-juice concentrate futures markets.
http://jlne.ws/Q8AwJV

Regulation

SEC May Extend Planned Rule to Brokers, Shillman Says
Nina Mehta and Nikolaj Gammeltoft, Bloomberg
The U.S. Securities and Exchange Commission may include large brokers and dark pools in a planned rule aimed at ensuring that regulated securities markets have adequate technology systems, an SEC official said.
The SEC is working to turn policies on how exchanges manage their automated systems into regulations in the wake of a $440 million Knight Capital Group Inc. (KCG) trading loss triggered by a software malfunction last month. 
http://jlne.ws/PilodJ

Technology

SEC Awards Contract to HFT Firm
John D’Antona Jr., Traders Magazine
As part of a two-pronged strategy to better police the equities market, the Securities and Exchange Commission has awarded a government contract to a high-frequency trading firm to provide a real-time system to track market activity for equities and options.
The other part of the regulator’s strategy along with the equities and options trade data feed, is the formation of a new group, the Office of Analytics and Research. 
http://jlne.ws/QYEgCt

SEC says bolstering market technology standards a priority
John McCrank, Reuters
With high-profile technical glitches costing U.S. exchanges and trading firms hundreds of millions of dollars in recent months, U.S. regulators are taking a deeper look at creating enforceable technology review standards for exchanges and market participants.
http://jlne.ws
/OnvwzM

Strategy

How to Profit from Option Volatility – Know Your Options
Kevin Matras, Zacks.com (via NASDAQ)
There’s been a lot of talk about volatility in stocks lately.
But today, I want to focus on options volatility and what it means for the options investor.
So let’s start off with a definition:
Volatility measures the rate at which a security moves up and down. If a security is moving up and down quickly, volatility will be high. Conversely, if a security is moving up or down slowly, volatility will be low.
Options volatility is largely pinned to the underlying stock.
http://jlne.ws/PihL7Q

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