JLN Options: BM&F Bovespa, Chilean Bourse To Develop Derivatives Market

Apr 12, 2012

Lead Stories

BM&F Bovespa, Chilean Bourse To Develop Derivatives Market
SAO PAULO (Dow Jones)–Brazil’s securities exchange, BM&F Bovespa SA (BVMF3.BR), announced a partnership with its Chilean counterpart to build a fully fledged derivatives market in that country, it said Thursday in a statement. BM&F Bovespa said it will provide its knowledge and expertise to the Chilean bourse Bolsa de Comercio de Santiago to develop its derivatives market, including such products as options and futures contracts in equities, interest rates and foreign exchange.

DAX Puts Hit Five-Year High on European Crisis Concern
By Alexis Xydias and Cecile Vannucci, Bloomberg
Options traders have increased bearish bets on the DAX Index to a more than five-year high versus the rest of Europe, seeking to protect gains after the German equity gauge rallied 17 percent in the first quarter. Puts outnumbered calls by 1.41-to-1 for the DAX yesterday, according to data compiled by Bloomberg. The ratio exceeded the put-to-call measure for the Euro Stoxx 50 Index by 24 percent on March 29, the most since December 2006.
VIX ETNs: Flows, Woes and Wows
by Paul Britt, Nasdaq
The temptation to get positive exposure to volatility using a fund indirectly based on the CBOE Volatility Index is understandable:Recent jumps in the equity indexes have been large and generally negative. And interest in volatility funds is running high. Investors sank just under $2 billion into the largest VIX product, the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca:VXX) in the first quarter of 2012, according to data compiled by IndexUniverse.

Oil Options Volatility Declines as Futures Increase
By Barbara Powell, Bloomberg
Oil options volatility fell as the underlying futures rose after Federal Reserve and Bank of Japan (8301) officials suggested the central banks would continue using monetary policy to bolster economic growth.
Implied volatility for at-the-money options expiring in June, a measure of expected price swings in futures and a gauge of options prices, was 26.96 percent as of 2:56 p.m. on the New York Mercantile Exchange, down from 28.24 percent yesterday.
Volatility has fallen for the past two days as crude has surged 2.6 percent after touching $100.68 on April 10, the lowest intraday price since Feb. 15.


National Stock Exchange of India taps FTSE for futures and options index
FTSE Group (“FTSE”), the award winning global index provider and the National Stock Exchange of India, today announce a new partnership resulting in the licensing of futures and options based on the world renowned FTSE 100 Index. The licensing will see the exchange launching the new product on the 3rd May, following recent regulatory approval granted by the Indian regulator.

Goodbye Exchanges: Hello Internalization and Dark Pools
by Chris Kentouris, International Securities Services
Executing orders on exchanges is quickly becoming a thing of the past.
About thirty three percent of U.S. trades are now being executed outside exchanges with internalization methodologies overriding dark pools, says a recent study released by New York-based consultancy Tabb Group.  Of the thirty three percent, thirteen percent was executed in dark pools and the rest was via internalization — a practice whereby broker-dealers match orders internally on their own trading desks before sending them to either dark pools or exchanges. The thirty three percent represents more than double the fifteen percent of orders executed outside exchanges in 2008.

The 2 Newest SPX Option Products
By Marty Kearney, MoneyShow.com
New SPX “super LEAPs” will meet the needs of traders and investors with extra-long time horizons, says Marty Kearney, who also discusses the early success of the PM-settled SPX options.  My guest today is Marty Kearney from the Chicago Board Options Exchange (CBOE). We’re talking about SPX options and what’s new there. So Marty, I know it’s been a popular product, but what’s new?
What’s new is we just got approval for five-year SPX products, and we’re calling these “super LEAPs.” You know, the LEAPs only go out about 30 months at the longest, but we’ve had big demand by certain types of investors—insurance companies, hedge funds, and things of that nature—that want something longer than two to two-and-a-half years. So this five-year, I think, can be a very interesting product.

Options on Futures

ICE Targets CME Dominance in Agricultural Futures
IntercontinentalExchange Inc. ICE on Thursday unveiled a big push into U.S. agricultural futures, challenging the dominance of CME Group Inc.
Atlanta-based ICE is plans to launch futures in corn, wheat, soybeans, soybean meal and soybean oil in May, competing with long-established products offered by CME’s Chicago Board of Trade unit. ICE lost out to CME in a bid battle for the CBOT…
CME spokesman Chris Grams said: “CME Group agricultural products, including CBOT Grain futures and options, are global benchmarks that continue to offer the deepest and most liquid markets to customers around the globe. We believe competition is good for business, and we will continue to work with our customers to meet their needs for agriculture risk management.”
ICE Announces New Grain and Oilseed Futures & Options
Press Release
ICE Futures U.S. will launch trading in futures for Corn, Wheat and Soybeans on May 14, and options on
May 15, pending review by the Commodity Futures Trading Commission.


US Appeals Court Decides Stealing Computer Code Isn’t Really Theft
by Chris Kentouris, International Securities Services
When is stealing not really theft?
When it involves an “intangible” high frequency trading code, says a U.S. appeals court.
That stance was explained in an opinion issued by the court on Thursday as to why it overturned the conviction of former Goldman Sachs programmer Sergey Aleynikov for downloading the bank’s proprietary HFT code. In February, the U.S. court of appeals for the second circuit ordered the release of Aleynikov without much of an explanation. Aleynikov was found guilty in December 2010 by a Manhattan lower court judge for the theft of trade secretes and interstate transportation of stolen property. He was sentenced to 97 months in jail followed by three years of supervised release and fined $12,500.


The Three Types of Options Premium
By Michael Thomsett, Benzinga
Traders often see options as having two kinds of premium — intrinsic value and time value. But this is not accurate. A third type of premium is where all of the uncertainty lies.
Intrinsic value
is easy to calculate. It is equal to the number of points the option is in the money. For example, Verizon (NYSE: VZ) closed at $38.46 on April 3, 2012. At that time the April 21 40 put was worth 2.12. This call was in the money 1.52 points (40 strike less 38.46 price). So the premium included $152 of intrinsic value. At the same time, the April 21 37 call was worth 1.43. This contained no intrinsic value since the call’s strike was lower than the current price.

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