JLN Options: Despite Gold Selloff, Options Traders Bank on Rebound

Apr 16, 2013

Lead Stories

Despite Gold Selloff, Options Traders Bank on Rebound
Carolyn Cui, The Wall Street Journal
So gold notched its biggest one-day drop in 30 years. What’s next?
Despite the heavy losses, broken technical levels and waves of margin calls, the options market for the yellow metal is beaming with optimism.

Gold Options: Graphical description of the price slump
Ole Hansen, TradingFloor.com
The biggest two-day sell-off in 30 years has triggered some major moves in gold options. Implied volatility has surged, with the cost of downside protection rising the most. Implied volatility has almost doubled after rising to almost 29 percent, which in a near-term historical context has only been exceeded twice in the past five years.

Did SPDR Gold Trust ETF (GLD) Option Traders Predict the Gold Drop?  
Andrea Kramer, Schaeffer’s Investment Research
The shares of the SPDR Gold Trust (ETF) (NYSEARCA:GLD) fell to a two-year low of $130.51 on Monday, falling in sympathy with gold futures. What’s more, there are more than a few fresh option bears likely celebrating the commodity’s downturn, as evidenced by the recent glut of well-timed put positions.

VIX Futures, Gold ETF Volatility Index Futures Set Daily Records  
The Options Insider
The CBOE Futures Exchange, LLC (CFE) announced CBOE Volatility Index (VIX index) futures hit an all-time single-day volume record of an estimated 449,955 contracts on Monday. This surpassed the previous record of 302,278 contracts set on February 25, 2013.
**See press release from CBOE under “Exchanges” below. -JB

Market’s ‘Fear Gauge’ Surges 40% Following Boston Explosions
Jennifer Booton, Matt Egan, Fox Business
The VIX, commonly known as the stock market’s “fear gauge,” posted its biggest one-day gain since August 2011, surging 36% on Monday following two explosions near the finish line of the Boston Marathon that killed at least two people and left dozens injured.

Sharp drop in gold caught many funds off guard: Burbank
Svea Herbst-Bayliss, Reuters
Hedge fund manager John Burbank, a long-time investor in gold, said the recent sharp selloff in the precious metal came as a surprise to many investors as some economic improvement and a general decline in commodity prices took their toll.

Hedge Fund Billionaires John Paulson And David Einhorn Lost $640M In Gold Market Collapse
Agustino Fontevecchia, Forbes
The gold bloodbath that hit the market over the past two trading sessions has definitely caused a dent in the portfolio of billionaire hedge fund managers.  John Paulson and David Einhorn suffered combined losses of more than $640 million since Friday, according to their latest SEC filings, with the bulk concentrated in the former’s massive position in the SPDR Gold ETF.  Einhorn’s Greenlight took a big hit on its holdings of the gold miners ETF.

Silver Slump Splits Hedge Funds From Ingot Hoarders: Commodities
Nicholas Larkin and Debarati Roy, BloombergBusinessweek
Hedge funds are betting on cheaper silver for the first time since at least 2006, splitting from investors accumulating close to the biggest hoard ever and the analyst consensus for prices to rebound from a bear market.

What Bull Market? Shares in VIX Trackers More Than Double
Brendan Conway, Barron’s
Investors keep looking under rocks for the ideal market hedge, and the search just turns up worms. Nikolaj Gammeltoft and Cecile Vannucci of Bloomberg News observe this morning that the two most heavily traded securities tied to the Chicago Board Options Exchange’s “fear gauge” have seen shares outstanding more than double this year.

Knight Revenue Cut in Half in 2012, Loss Exceeds $500M
Tom Steinert-Threlkeld, Traders Magazine
Knight Capital Group saw its revenue cut in half last year, in the aftermath of the flood of erroneous orders it sent out onto the nation’s exchanges August 1.
Knight’s revenue fell to $736.1 million in 2012, from $1.4 billion in 2011, according to a filing with the Securities and Exchange Commission amending its agreement to merge with fellow market maker GETCO.



VIX Futures Bust Through Old Daily Volume Record
Press Release (CBOE)
The CBOE Futures Exchange, LLC (CFE) announced today that CBOE Volatility Index (VIX index) futures established an all-time single-day volume record of an estimated 449,955 contracts. Monday’s record eclipsed the 302,278-contract record set on February 25, 2013.
In addition, the CBOE Gold ETF Volatility Index (GV) futures contract traded a single-day record of an estimated 1,488 contracts today. The previous record, 765 contracts, was set on March 28, 2013.

CBOE’s VIX Options Establish New Single-Day Volume Record
Press Release (CBOE)
Chicago Board Options Exchange (CBOE) today reported that options on the CBOE Volatility Index (VIX index) established an all-time, single-day volume record yesterday, April 15. Options volume totaled 1,399,863 contracts, beating the previous record of 1,388,634 contracts traded on February 26, 2013.
As reported yesterday, CBOE Futures Exchange’s (CFE®) VIX futures also set an all-time, single-day volume record on Monday, with 449,955 contracts changing hands. The new futures record surpassed the previous record of 302,278 contracts traded on February 25, 2013.

CME Group Announces Multiple Trading Volume Records Across Metals Complex    
Press Release (PR Newswire)
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that yesterday it reached multiple daily trading volume records across its metals complex, including a combined futures and options volume increase of 78 percent for its Metals Products asset class.
On Monday, April 15, 2013, CME Group’s metals complex reached a new record for combined futures and options trading of 1,478,376 contracts, surpassing the previous record of 831,721 contracts set on August 24, 2011.


London Data Exchange to complete expansion by May
CBR Online
The expansion will add 3,500sqft of colocation space in North West London
London Data Exchange (LDeX) will complete the expansion of its LDeX1 data centre by 31 May 2013, adding 3,500ft2 of colocation space in North West London.


Trading Options on Banks? You Need to Read This  
John Jagerson and Wade Hansen, InvestorPlace
Sure, big banks can make tradeable moves on earnings – but make sure those moves aren’t already priced into the options.

An Options Strategy The Rolling Stones Would Love< /b>
JJ Kinahan, Forbes
“Time, time, time is on my side.”
So say the Rolling Stones in the famous song they recorded in 1964.  Many newer options traders have put themselves in a situation where the exact opposite is true.  They put on too many trades which can turn the ticking of the clock into a stressful event rather than a savvy way of putting time on your side.  It is time to consider using the Calendar (also called, Time or Horizontal) spread.

Exploit This Volatility Spike With Iron Condors
Tyler Craig, InvestorPlace
After a day where gold and silver stole the headlines, you might think all the noteworthy movement was limited to the commodity space.
Well, think again.

Watch the Fibonacci levels after a busy week for stocks and commodities
Moby Waller, Market Intelligence Center
After a quiet time in the markets with steady gains throughout 2013, it’s been a wild and woolly run in the financial markets in recent days. The S&P 500 Index (SPY) just made a long awaited all-time high, meanwhile Gold (GLD) had its biggest two-day drop in 30+ years. Other commodities have been crushed as well.


Maverick Trading Announces 2013 Spring Traders Summit at CBOE and CBOT 
Press Release (The Wall Street Journal)
Maverick Trading, the premier proprietary trading firm headquartered in Salt Lake City, Utah, today publicly announced its 2013 Spring Traders Summit would be held at the Chicago Board Options Exchange and the Chicago Board of Trade April 19 and 20, 2013. In conjunction with the firm’s social activities, management and support personnel will be conducting a series of seminars and small group workshops for the firm’s traders.

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