JLN Options: Citadel lost $30 mln in Facebook fiasco

May 24, 2012

Lead Stories

Citadel lost $30 mln in Facebook fiasco
Citadel Securities’ market-making business lost around $30 million due to Facebook Inc’s botched initial public offering on Nasdaq OMX Group Inc’s U.S. stock exchange, a source with knowledge of the situation said on Thursday.
The losses at Citadel Securities, which has assets under management of around $1 billion, are in line with losses at Knight Capital Group, which said on Wednesday in a regulatory filing it suffered a pre-tax loss of $30 million to $35 million.

Citadel Trading Executive Leaving; Facebook Loss Seen Up To $35M
Jacob Bunge, The Wall Street Journal
A senior executive in the stock- and options-trading division of hedge fund firm Citadel LLC plans to retire in the coming weeks.
Andrew Kolinsky currently serves as president of Citadel Execution Services, the broker-dealer unit responsible for funneling orders from retail brokerage firms to exchanges and private trading platforms. Citadel accounts for about 7% of daily volume in U.S. listed stock options and 4% of domestic equities, according to the firm’s own estimates.

CBOE To Give More Options On S&P 500 Index
Fox Business
Options traders will soon have more time to position their bets on the S&P 500 index, as the Chicago Board Options Exchange plans to begin listing weekly options farther in advance.
CBOE, the largest options exchange by volume, announced Tuesday plans to list weekly options on the Standard and Poor’s 500-stock index, or SPX, as much as five weeks in advance, as opposed to listing just one week ahead, as the exchange currently does, for a total of as many as four weekly options trading at one time.

Emerging Stocks Fall Most in Six Months on European Debt Concern
Christine Harvey and Gan Yen Kuan, Bloomberg
Emerging-market stocks slid the most in six months as concern deepened that Europe’s debt crisis will reduce developing-nation exports and curb demand for riskier assets…
The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, rose 0.6 percent to 33.75.


CME Group Inc. Announces Preliminary Results from its 2012 Annual Meeting of Shareholders
Press Release
CME Group Inc. CME +0.87% today announced the preliminary shareholder voting results from its 2012 annual meeting.
At the meeting, shareholders:
elected Dennis H. Chookaszian, Larry G. Gerdes, Daniel R. Glickman, James E. Oliff, Edemir Pinto, Alex J. Pollock and William R. Shepard each for a two-year term expiring in 2014;
ratified the appointment of Ernst & Young as the company’s independent registered public accounting firm for 2012;
approved on an advisory basis the compensation of the company’s named executive officers;
approved the Fourth Amended and Restated Certificate of Incorporation of CME Group Inc. to eliminate the classification of the company’s board as of the 2014 annual meeting;
approved the CME Group Inc. Amended and Restated Omnibus Stock Plan; and
approved the CME Group Inc. Amended and Restated Employee Stock Purchase Plan.
Shareholders did not approve the shareholder proposal to amend the company’s By-Laws to allow shareholders to nominate director candidates for inclusion in the company’s proxy materials.


NYSE Euronext : NYSE Technologies and the Warsaw Stock Exchange announce market data partnership
Press Release
NYSE Technologies and the Warsaw Stock Exchange announce market data partnership
–Building further on the long term technology partnership shared between NYSE Technologies and WSE —
–Further cooperation to extend index licenses to NYSE Euronext’s customer base–
–Further development of the Warsaw Stock Exchange’s new market data policies–
Amsterdam, Brussels, Lisbon, London, Paris, Warsaw: 24 May 2012 -NYSE Technologies, the commercial technology division of NYSE Euronext, today announced its market data partnership with the Warsaw Stock Exchange (WSE). Customers will now have access to the WSE’s market data services via NYSE Technologies’ innovative suite of market data products and services.


Buy U.S. Financial ETF Puts to Protect Against European Fallout
Financial options trading suggests a long, difficult summer for stocks.
Ground zero of the crisis gripping the financial world is Europe, but the fallout is being felt in the U.S. financial sector. So, to benefit or gain protection from Europe’s festering economic crisis, buy put options on the Select Sector Financial SPDR exchange-traded fund (ticker: XLF).
The ETF, made up of major U.S. banks and other financial firms, is highly correlated to the Euro Stoxx 50 index of large-cap European shares. When the Euro Stoxx index moves, the Select Sector Financial SPDR moves with it, correlating with 73% of Europe’s move.

Buying VIX Calls As A Portfolio Hedge
Jim Fink, Seeking Alpha
Because VIX calls are based on VIX futures instead of the more volatile “spot” VIX, in the past I suggested that it would be easier to hedge a portfolio against a “black swan” stock market decline using S&P 500 puts-either the cash-settled SPX index puts or the equity-settled SPY ETF puts.
Well, I stand corrected. In preparing for a conference down in beautiful Palm Beach, Florida, I read two academic studies-one published in 2009 and another published in 2012-that found VIX calls to be a much more effective portfolio hedge than S&P 500 puts.

VIX and SPX Locked In a Cage Match. Who Will Win?
Mark Sebastian, Options Insider
The tough love at the big Euro Summit did not really produce the news that stocks were looking for this morning.  In reality, the grand poobahs there have to talk tough and Germany has to push back, since they are only country that can sell debt with 0% interest (that is a stunner!).  Euro issue bonds, like who is going to buy those?  A few billion in stimulus might come out of the summit, but really, if countries cannot abide by their commitments, it will not matter anyway, as confidence is going to evaporate.  That leaves us with the cage match between the SPX (can it hold) and the VIX (can it explode).

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