Lead Stories
CBOE Wins Illinois Court Ruling Barring ISE Max SPY Index
Andrew Harris, Bloomberg
CBOE Holdings Inc. (CBOE) won an Illinois judge’s decision preventing International Securities Exchange LLC from offering new options trading based on the McGraw-Hill Cos. (MHP) S&P 500 Index.
Judge Franklin U. Valderrama in Chicago today ruled that the ISE proposal violated a 2010 court order barring ISE from providing an exchange market for options based on McGraw-Hill’s Standard & Poor’s Financial Services LLC-licensed product.
http://jlne.ws/SOCwsH
Volatility Gurus Still Looking for a Bang
Brendan Conway, Barron’s
MKM Partners’ derivative strategist Jim Strugger’s view this morning is pretty much the same as it was a month ago: The “next inevitable shock” to the stock market is on its way.
The CBOE Volatility Index has been below 25 for four months now, one of the longest quiet periods since the onset of the financial crisis.
http://jlne.ws/SO4aZu
Hedge fund masters flunk money-making test
Tommy Wilkes and Dasha Afanasieva, Reuters
Generating strong returns is getting so tough for hedge fund managers, supposedly the high-earning masters of any market, that some are shutting up shop and more look poised to follow.
Years of choppy markets whipsawed by political risk have crippled performance and left many firms with little in the way of income earned by hefty fees.
http://jlne.ws/SOAzMZ
Actively Managed Funds Losing Out to ETFs
ETF Trends (via Yahoo Finance)
Passive indexed fund options including ETFs continue to gather steam, whereas actively managed funds are bleeding assets as investors have little to show for the high manager fees.
According to Morningstar, about $144 billion flowed into passive funds over the past five years while actively managed funds lost over $460 billion, writes Gregory Leonberger, Director of Research, for Marquette Associates.
http://jlne.ws/SOBgGa
Stock options gain traction on NSE (India)
Palak Shah & Sameer Mulgaonkar, Business Standard
The National Stock Exchange (NSE) has become a hot spot for options traders. In the equity derivatives segment, the market share of the futures segment has gone down, while that of options is gaining.
The market share of stock options in NSE’s derivative segment rose from just two per cent last year to nearly 7.5 per cent this October.
http://jlne.ws/SOEzwW
Exchanges
IntercontinentalExchange profit slips 1.2%
Saabira Chaudhuri, MarketWatch
IntercontinentalExchange Inc.’s ICE third-quarter earnings fell 1.2% as the Atlanta-based commodities exchange operator saw its transaction and clearing fees fall.
In July, the exchange said that all cleared over-the-counter products listed on its energy market will be transitioned to futures products in January, becoming the first exchange to take such a step ahead of new financial regulations.
http://jlne.ws/SOFuxz
Strategy
Why Carl Icahn Bought Options So Far Out
Ian Cooper, Examiner
After taking a massive one day gain of more than 476% gains on Netflix calls, I received the following question:
“Ian, why would Carl Icahn load up on call options so far out.”
For those unaware, this is in reference to Carl Icahn’s disclosed 10% stake in Netflix yesterday. Icahn believes NFLX will get bought out over the next two years and picked up a 10% stake, which included a massive buy on September 2014 call options.
http://jlne.ws/SOyoJq
Using Options to Trade Double Tops
Tom Aspray, Forbes
Potential double top formations can provide profit opportunities for option traders and MoneyShow’s Tom Aspray explains how two key technical tools can be used to take advantage of this Important pattern.
Double tops and double bottoms can often alert the investor to major turning points especially when they are observed in the weekly charts of a major market average or a key commodity like crude oil.
http://jlne.ws/SOAR6o
Implied Volatility -> Its Effect on Option Premiums
Gary Kwapik, Benzinga
One of the ways an option premium is priced is due to implied volatility.
Implied volatility basically shows the expected volatility of a stock over the life of the option. As a stock’s price changes the option premium (cost) moves accordingly.
http://jlne.ws/Rz04BO
