DERIVATIVES: ETN trading surges on VIX spike
7 March 2012 | By Helen Bartholomew, International Financing Review
Trading in listed volatility products surged yesterday as volatility indices spiked on the back of hefty losses across global equity benchmarks. Barclays’ iPath VXX note – the most liquid of the exchange-traded volatility products – delivered its most active session since September 2011 as more than 51m shares traded compared to total shares outstanding of 63m.
Volatility spiked following a 3.4% fall in the EuroStoxx 50 index and a 1.5% decline in the S&P 500. The VIX index of short-dated options volatility on the S&P 500 hit a two-week high of 21.24 after closing at 18.05 on Monday, while the VStoxx index of options volatility on the EuroStoxx 50 pan-European equity benchmark rose to a five week high of 29.07, gaining more than five index points over Monday’s 23.8 close.
Bears Devour Put Options On Plunging XLB, Call Buyers Hit Shufflemaster Jackpot Caitlin Duffy, Contributor, Forbes
XLB – Materials Select Sector SPDR ETF – U.S. equities are in retreat today after data showing Europe’s economy contracted in the fourth quarter sparked global growth concerns.
Shares in the XLB, an exchange-traded fund that tracks the performance of the Materials Select Sector Index, were down 2.2% this morning at $35.89, with all 30 stocks represented in the fund, including top holdings DuPont and Freeport McMoRan, on the decline just before midday in New York.
Williams-Sonoma: Options Plays Ahead of Earnings
By Beth Gaston Moon. InvestorPlace Mar 7, 2012
Why was Tuesday’s put volume nine times the average one-month put volume?
Williams-Sonoma (NYSE:WSM) is reporting earnings before the open tomorrow, and option traders have been notably active ahead of this news. Yesterday, about 17,000 options traded hands — 11,000 on the put side and 5,000 on the call side. According to Steve Claussen, chief investment strategist at OptionsHouse, “Williams Sonoma normally trades more puts than calls, but [Tuesday] the put volume was nine times the [average one-month volume].”
How To Avoid Dividend Loss When Using Options
Worried your stock will get called away and you’ll miss the dividend? Here’s how to avoid it.
By Lawrence Meyers, InvestorPlace
I’ve been asked a few questions via email lately regarding the selling of covered calls on stocks with dividends. Is the payout of the dividend affected if you sell a call against a stock you own? What if the stock gets called away? How do you deal with these situations?
The answer is that if you own the underlying stock on the ex-dividend date, you will collect the dividend. If the stock gets called away before the ex-dividend date, you will not get paid the dividend. In addition, option premiums are affected if the ex-dividend date occurs before the option’s expiration date.
The easiest way to make certain you don’t miss out on a dividend when selling a covered call is to write calls against stocks that don’t pay a dividend in the first place! In fact, that’s one of the very reasons to write calls – to create a dividend on a stock that doesn’t actually pay one.
CBOE Special Feature — OEX: The Original Index Option Contract
By Jill Malandrino, TheStreet
Russell Rhoads is an instructor with The Options Institute at the Chicago Board Options Exchange. He is a financial author and editor having contributed to multiple magazines and edited several books for Wiley publishing. In 2008 he wrote Candlestick Charting For Dummies and is the author of Option Spread Trading: A Comprehensive Guide to Strategies and Tactics. Russell also wrote Trading VIX Derivatives: Trading and Hedging Strategies using VIX Futures, Options and Exchange-Traded Notes. In addition to his duties for the CBOE, he instructs a graduate level options course at the University of Illinois – Chicago and acts as an instructor for the Options Industry Council.
On Saturday, March 24, the CBOE, Option Pit and OptionsProfits are hosting a full-day course, The Professional Approach to Trading SPX.