Lead Stories

Leveraged Volatility Fund Set For 1-for-10 Reverse Split
Brendan Conway, Barron’s
“Alternative” assets tend to be radically different from the stocks and bonds to which most investors are accustomed. To wit: One of the most popular leveraged volatility funds, down 93% year-to-date, is set for a 1-for-10 reverse split a little over a week from now. Traders who know this product know that the complex engine under the hood all but requires periodic reverse splits.
http://jlne.ws/NvhYHJ

Stock investors gear up for more volatile September
Sudip Kar-Gupta, Reuters
Investors are betting on greater volatility in European stock markets next month by buying options to protect themselves against major moves up or down triggered by events in the euro zone and United States.
Each-way bets expiring on Sept. 21 are in demand, traders said, in the run-up to events that could result in fresh economic stimulus cash being pumped into markets and new plans to fight the euro zone debt crisis. Or not.
http://jlne.ws/Nvishd
** Our editor-at-large, Doug Ashburn, recently wrote a commentary for our Forex newsletter which touches on some of this as well.  You can read the article here. –JB

U.S. Stocks Little Changed Ahead of Bernanke’s Speech
Rita Nazareth, Bloomberg
U.S. stocks were little changed, following yesterday’s drop in the Standard & Poor’s 500 Index, as investors watched economic reports ahead of Federal Reserve Chairman Ben S. Bernanke’s speech on the economy in three days.
http://jlne.ws/NvlrWK
**  With the end of summer, the Labor Day holiday and (as Doug notes in the article I linked above) that Bernanke probably will not announce anything of import till the FOMC meeting in mid-September it looks to be a quiet week or two in the markets. –JB

Fear Is Creeping Back Into Equity Markets
Dhara Ranasinghe, CNBC
Are equity investors getting worried? Are they turning bearish after weeks of optimism?
Yes, they are, indicates the latest movement in the Volatility Index also known as the “fear index,” which measures investor sentiment and their expectations of stock market volatility.
http://jlne.ws/NviYvw

Hedge Funds Are Getting Clobbered In 2012
Nathan Vardi, Forbes
The hedge fund crowd is licking its wounds heading into the Labor Day weekend after getting clobbered by the market. As hedge funds look toward the homestretch of 2012 they will have to pull off a sector-wide miracle to stop 2012 from being one of the worst years their rich industry has ever experienced.
http://jlne.ws/NvjcTz

OptionMonster Daily Volatility Report with Jamie Tyrrell of Group1 Trading:

Exchanges

Eurex in Singapore expansion drive
Jeremy Grant, The Financial Times
Eurex, Europe’s largest derivatives exchange, has embarked on a drive to attract customers out of Singapore after the city state’s regulator allowed it to solicit banks and brokers to become members of its Frankfurt-based clearing house.
The move is a sign that the largest derivatives exchanges in the US and Europe are shifting their attention to Asia amid weak volumes in their home markets and as Asian banks start to consider connecting with western exchanges to provide customers with clearing services.
http://jlne.ws/PokHNw

Sensex Down 47 Points, Reaches Two-Week Low (India)
OutlookIndia
Falling for the third straight day, the Sensex today shed 47 points to close at over two-week low amid the Parliament failing to transact business yet again, raising concerns over fate of much-awaited economic reforms.
The BSE benchmark index, which had lost 171 points in previous two sessions, opened unchanged but dropped 108 points to 17,570.71 as metal counters including Sterlite Industries, Jindal Steel and Hindalco fell in the 3-5 per cent range tracking weak metal prices in London Metal Exchange (LME).
http://jlne.ws/OHyqBz

Regulation

Stress Tests, Swaps Rules, IPO Rules, CFPB: Compliance
Ellen Rosen, Bloomberg
U.S. banks with more than $10 billion in assets may get more time to institute internal stress testing required by the Dodd-Frank Act, U.S. banking regulators said yesterday.
The regulators proposed rules in December and January to require the big banks — holding companies under the Federal Reserve and national banks under the Office of the Comptroller of the Currency — to start self-testing their portfolios against adverse scenarios annually. The proposals, which initially called for banks to conduct tests this year, may be revised with a September 2013 deadline, the regulators said in coordinated statements.
http://jlne.ws/OHwwB5

Technology

Orc clients take advantage of CBOE CMi 2.0
Press Release
Orc clients to enjoy significantly improved performance for orders and trades with CBOE’s updated CMi 2.0 exchange protocol. Chicago, IL, Tuesday, August 28, 2012 – Orc, a leading provider of technology and services for the global financial industry, is pleased to announce its support of CBOE’s updated CMi 2.0 exchange protocol. Clients utilizing the Orc Trading products, including Orc Liquidator, Orc Market Maker and Orc Trader with Orc’s CBOE gateway will experience significantly improved performance for orders and trades.
http://jlne.ws/NvjGZI

High-Frequency Traders Flat-Out Buying Data Ahead of You
Geoffrey Rogow, The Wall Street Journal
When the Institute for Supply Management releases its index of manufacturing activity next week, the headlines from the report will flash to traders at what their eyes tell them is 10:00 am. But unless they are subscribers to a new low-latency feed provided by Thomson Reuters, they’ll actually be getting it late—and depending on how they’re positioned, it could be too late.
http://jlne.ws/RklK1K

Strategy

At Long Last, Gold Miners’ Turn to Shine 
Profit from a central-bank spurred revival in gold-mining stocks with a call-option strategy.
Steven M. Sears, Barron’s
Gold gets all the attention, but gold-mining stocks finally are getting some action.
Anticipation that central banks led by the Federal Reserve and the European Central Bank will inject more liquidity into the financial system has helped spur a rally in gold-mining stocks. The Market Vectors Gold Miners exchange-traded fund (GDX) is up about 9% in the past month, compared to a 2.8% gain for the SPDR Gold Trust (GLD), which tracks the metal.
http://jlne.ws/OnO6tb

Volatility Trading Digest – Seasonal Thoughts
The Options Insider
There is more than one way to think about seasonality. Unfortunately, for the equity markets the joy of summer delight often turns into despair by Oktoberfest. The seasonal tendency of the S&P 500 Index (SPX) is to peak in late August or early September and then decline until the end of October. In election years, the decline is usually finished by early October followed by an advance into the November election.
http://jlne.ws/Nvig1p

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