Lead Stories

NYSE Euronext Explores Adding Partners To Amex Joint Venture
By Jacob Bunge Of DOW JONES NEWSWIRES
NYSE Euronext (NYX) may add more equity partners to its Amex stock-options exchange, expanding a strategy that has boosted trading volume and turned the platform into the Big Board parent’s largest U.S. derivatives market. Seven banks and trading forms agreed to take a near-50% stake in NYSE Amex in 2009 in return for a steady flow of trading business that has almost doubled contract volume on the former American Stock Exchange, which NYSE acquired a year earlier. NYSE Amex has held conversations with several more firms interested in joining the venture, though there are no formal discussions right now, according to Steve Crutchfield, chief executive of the exchange.
“We would certainly entertain the possibility of adding new partners over time,” said Crutchfield in an interview on the sidelines of a Security Traders Association event.
Expanding the consortium ownership group could further lift business on NYSE Amex, which is the fourth-largest U.S. options exchange and has outgrown NYSE Arca, its sister market. The original equity-sharing deal underscored the king-making power of big firms, which do their own options trading and also handle the orders of individual investors. This month NYSE Amex’s market share of all U.S. options trading was 13.3%, compared to 7% when NYSE Euronext bought the exchange, according to data from the clearinghouse OCC.
http://jlne.ws/wP9li1

Nifty Options Prices Near 3-Month Low on Interest Rate Pause Expectations
Bloomberg
By Santanu Chakraborty – Jan 23, 2012
Options to protect against losses in Indian stocks fell to the lowest level since October amid expectation the central bank will keep interest rates unchanged and as the rupee strengthened. India VIX (INVIXN), a gauge of options prices in the S&P CNX Nifty Index, was 22.64 at 12:15 p.m. in Mumbai, near the lowest since Oct. 28, data compiled by Bloomberg show. VIX soared 64 percent last year, its biggest annual gain since 2008 when the Nifty had its largest-ever yearly decline.
http://jlne.ws/z6VgnP

FOCUS: Speculators Start Buying Metals Futures, Options Again -CFTC Forbes (Kitco News) – A price rebound for metals across the board encouraged speculators to start to rebuild bullish positions in both precious and base metals futures and options, according to U.S. government data released Friday.
All metals contracts traded on the Comex division of the New York Mercantile Exchange and the Nymex saw net long positions for speculators rise in both the legacy and disaggregated weekly commitment of traders reports. These were released by the U.S. Commodity Futures Trading Commission for the week ended Jan. 17. Speculator’s positions in copper also turned to net long from net short for the first time late last year.
http://jlne.ws/zAjvko

Increased liquidity likely to boost short term options trading by hedge funds and institutions
Hedge Funds Review
Author: Clare Dickinson
Short-term options accounted for a growing portion of total options volumes last year and hedge fund use is likely to grow in 2012, says Tabb. Infrastructure requirements may be prohibitive, however.
Short-term options (STO) were a significant factor in record options volumes last year as their popularity among institutional and retail investors increased. Hedge funds are employing them for directional bets and hedging purposes and their use is likely to grow in 2012 as a result of increasing liquidity.
The STO market is relatively new. The options, originally based on indexes, were introduced by the Chicago Board Options Exchange (CBOE) in 2005 but it was June 2010 when they began to take off following a take-up by multiple exchanges plus the introduction of STOs on single stocks and exchange traded funds (ETFs), according to Andy Nybo, a principal and head of derivatives at Tabb Group and author of Accelerated Expirations: The Growing Relevance of Short-term Options.
http://jlne.ws/y3sDiZ

January 23, 2012: Index, ETF option volumes near midday
Chris McKhann tradeMONSTER
Option volume remains strong with at 5.8 million contracts so far today, with mixed sentiment in the indexes and ETFs, optionMONSTER’s data systems show.
The SPDR S&P 500 Fund (SPY) has seen 662,000 options trade, 383,000 of which are puts. The CBOE Volatility Index (VIX) options are next with 238,000 and are dominated by 144,000 puts, a ratio that is seen as bullish for stocks.
http://jlne.ws/xycZqL

Exchanges

Speculators have field day with options
In an uncertain equity market, investors find solace in the segment
B G Shirsat & Rajesh Bhayani / Mumbai Jan 24, 2012
If the market is not conducive for investment, speculate was the formula of global investors in 2011. This is reflected in turnover data of exchanges globally, as culled from the World Federation of Exchanges (WEF). Derivative trading data across the globe suggest that trading in index-based options grew, despite cash market volumes shrinking. And, even within derivatives, volumes other than in index options showed no significant rise. The data showed equity cash segment volumes remained stable despite a fall in market capitalisation. The number of contracts traded in equity derivatives grew 9.4 per cent as speculators increased their presence in derivatives, especially in stock index options.
http://jlne.ws/zmzfgq

Strategy

A Risk-On Stock Options Trade
MONDAY, JANUARY 23, 2012
The Striking Price By STEVEN M. SEARS, Barrons.com
How to maximize returns and limit risk with a few well-placed call options.
The Standard & Poor’s 500 index is up about 4.6% since the year began, and one measure of the risk of owning stocks, the Chicago Board Options Exchange’s Volatility Index (VIX), has fallen to the relatively optimistic level of 18.07. Before the excitement of a rising market makes the flat overall performance of the 2011 U.S. stock market a distant memory, one lesson must be remembered: take advantage of alternate beats in the stock and options market to avoid getting hamstrung by the market’s risk on/risk off tempo. When stock prices are high, and options prices are low, as they are now, take profits on stocks, and buy options on that which was just sold.
http://jlne.ws/Ak7AMC
Don’t Drink the Rally Kool-Aid: It’s Time to Get a Bit Short!
InvestorPlace
Why it’s time to buy these S&P 500 put options
By Dan Sheridan, Sheridan Mentoring
Where is most of your money stashed? I’m not trying to get personal, I promise! But, I’m willing to bet the bulk of it is in your retirement account.
Another question: Will the stuff in your retirement account be happier if the market goes up or down? The answer is probably, “Up!”
Your portfolio likely has a strong bullish bias. 2008 hurt so much because most of your assets were in the market when everything fell apart between the eight months of torture between September 2008 and March 2009.
Do I know something you don’t know about the market? Of course not. What I do know, however, is that your portfolio is probably leaning long and the market is trading in the upper end of the range. And with those kinds of conditions, I
’d personally like to start having a few put options around. In particular, I’m going to focus on the SPDR S&P 500 (NYSE:SPY), which is currently trading at $131.54. The one-, two- and three-year high is around $135.
http://jlne.ws/yGrSH1

VIX Products: Is There A Need For More Low Volatility ETFs?
Bill Luby: The more I think about it, the less I understand the need for even more low volatility ETPs. Sure, I understand that in high volatility markets many investors want a more conservative portfolio that is insulated against sharp moves in the wrong direction. In that respect, I can somewhat understand the appeal of the hugely popular PowerShares S&P 500 Low Volatility Portfolio ETN (NYSEArca:SPLV), which has now attracted more than $1 billion in assets in the eight months since it launched.
http://jlne.ws/wnNyAv

Options Education

OIC launches the latest podcast, “Does the Rumor Mill Effect Options?” in its weekly podcast series, Options Talk with OIC.http://jlne.ws/ai4hAU

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