JLN Options: Breaking News: NYSE Arca Announces Plans to Introduce Mini-Options

Apr 4, 2012

Lead Stories

Breaking News:  NYSE Arca Announces Plans to Introduce Mini-Options
Pending approval by the Securities and Exchange Commission, NYSE Arca Options is pleased to introduce mini-options contracts on SPDR® S&P 500® (SPY), Apple, Inc. (AAPL), SPDR® Gold Trust (GLD), Google Inc. (GOOG), and Amazon.com Inc. (AMZN).
NYSE Arca Options is taking the concept of listing and trading parallel options products of reduced value and size on the same underlying security as are currently listed on key indices and applying it to other high priced underlying securities. High priced underlying securities may have relatively expensive options and even a small percentage move in the share price can mean a large movement in the value of the option in terms of absolute dollars. Issues are selected that are priced greater than $100 and are among the most actively traded issues with average daily volume (“ADV”) of at least 45,000 contracts over the previous three calendar months.

* NYSE Arca just made this announcement. They do not yet have a link up on their web site for a press release.

SEC Puts Exchanges on Notice Over Computer-Driven Trades
By Joshua Gallu and Nina Mehta, Businessweek, April 04, 2012
More than five months before a software error ruined Bats Global Markets Inc. (BATS) (BATS)’s initial public offering, U.S. regulators put exchanges on notice that they need to do more to protect investors from technology gone awry. The missive came in the form of a prologue to a Securities and Exchange Commission case against Direct Edge Holdings LLC in October over claims the exchange operator had weak internal controls that caused its trading system to fail.
http://jlne.ws/HglGSb

Did a Rogue Algo Cause BATS IPO Crash?
By Ivy Schmerken, Advanced Trading
Research by a market data firm has traced the crash of BATS’ IPO to a single algorithm that executed over 500 times on Nasdaq, driving its price from $15.25 to about two cents in less than a second. In the week since a software glitch disrupted the initial public offering of BATS Global Markets, some experts have focused their attention on the idea that a rogue algorithm deliberately continued to sell BATS shares on a rival stock exchange.
According to research by Nanex, a provider of a streaming whole market data feed, an algorithm executed 567 trades on the Nasdaq Stock Market and pushed the price of BATS from $15.25 down to a few pennies – all within 900 milliseconds, or less than one second.
http://jlne.ws/Hgt7EX

Two new exchange-traded funds started through BATS
KansasCity.com
Two new exchange-traded funds were launched Tuesday through BATS Global Markets Inc., the first listings since the Lenexa-based company’s own public stock offering failed last month. BATS has launched several exchange-traded fund listings successfully, but its corporate stock listing service uses a different software system. The corporate listing system failed on March 23 when BATS tried to launch an initial public offering of its own stock on its own stock exchange. Although the software problem was diagnosed and then quickly fixed, BATS decided not to go through with the offering.
http://jlne.ws/HVM7LW

IntercontinentalExchange to launch new energy options, swaps
Reuters
Tue Apr 3, 2012
(Reuters) – The IntercontinentalExchange said on Tuesday it planned to launch 26 new cleared Over-The-Counter contracts covering refined products, natural gas and power options and swaps. All 26 contracts will be available for trade on Monday, April 30, 2012, the exchange said in a release.
The ICE will offer American-style options on heating oil and RBOB gasoline, as well average price options on those two commodities. That move will allow the exchange to compete directly with the CME Group’s energy-focused New York Mercantile Exchange subsidiary.
http://jlne.ws/HmwSdb

Can Volatility ETFs & VIX Futures Blow-up the Stock Market?
Vance Harwood, Six Figure Investing
The VIX Futures market has been on a bit of a tear—driven by inflows into volatility ETFs like Barclays’ VXX, VelocityShares’ XIV and TVIX, and ProShares’ UVXY. The chart below shows the resultant growth in the short term futures open interest and volume.
http://jlne.ws/HR4hLh

Largest option buying in equities so far
by David Russell from optionMONSTER
Nearing the halfway mark in today’s session, here are the individual equity names with the most call and put buying on optionMONSTER’s ActionTracker data system.
http://jlne.ws/HlptM2

Exchanges

Barclays Maintains an ‘Equalweight’ on CBOE Holdings (CBOE)
StreetInsider.com
Barclays maintains an ‘Equalweight’ on CBOE Holdings (NASDAQ: CBOE) price target of $25.00.
Analyst, Roger A. Freeman, said, “Given the lower-than-forecast volumes and pricing, our 1Q12 EPS estimate moves to $0.36 vs. $0.38. Our full year estimate moves to $1.64 from $1.68. Our price target remains at $25, the same 15x our updated 2012 EPS estimate. As such, we remain cautious on the shares at current levels, trading at 17x our 2012 EPS estimate.”
http://jlne.ws/HgmJ4y

CME Group purchases GreenX Holdings

Banking Business Review
CME Group has acquired a 100% equity interest in GreenX Holdings, the parent company of Green Exchange, thus acquiring the ownership of the firm.
CME Group will transfer GreenX contracts and open interest to CME Group’s portfolio of products, and will work with market forces to ensure that trading and clearing of existing contracts on CME Globex and CME ClearPort continues with nominal impact. Customers, who have open interest on GreenX will continue to be subject to the GreenX rulebook until the contracts and open interest are transitioned to a CME Group CFTC designated contract market, said the acquirer. CME Group products & services managing director and COO Bryan Durkin said GreenX has increased its market share and has positioned itself as an industry leader, providing innovative futures and options contracts for environmental markets.
http://jlne.ws/HQMvaY

Strategy

Fears of Firearm Curbs Spur Gun-Makers’ Options
Steven M. Sears, Barrons.com The Striking Price
Election-year worries about future gun curbs power calls on Smith & Wesson and Sturm Ruger.
Stocks of major gun makers are smoking hot from surging firearm sales on fears President Obama will be re-elected.
Sturm Ruger (ticker: RGR), a major gun manufacturer, has received orders this year for more than one million weapons. The company recently said it would not accept any new orders until it could catch up. The stock is trading near a 52-week high, as are shares of Smith and Wesson (SWHC), another iconic gun company, on fears President Obama will push for changes in gun laws if re-elected. This creates opportunities in bullish call options to monetize fear that a second Obama administration will diminish gun ownership rights.
Meanwhile, the National Rifle Association is warning members that President Obama’s lack of action to diminish gun laws during his first term was a ploy.  http://jlne.ws/HgBiRD

Curious Case of VIX And VIX Products
MarketBeat – WSJ
By Tom Lauricella
The brouhaha over the Credit Suisse leveraged VIX exchange traded note – aka TVIX – continues to raise more questions about the impact that index strategies are having on the VIX itself. Last week we took a stab at the idea that the VIX is being distorted by VIX exchange traded products. (Be forewarned, MarketBeat readers, of yet another acronym entering into the lexicon – ETP).
http://jlne.ws/I1Lj3B

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