JLN Options: Expect Volatility to Reign This Week

Jun 26, 2012


Expect Volatility to Reign This Week
Kevin A. Tuttle, Minyanville
It’s always interesting to have the ability to analyze observers’ clashing perspectives after touring an art gallery.  Perspectives are ingrained from education, personal experience, and even emotional state. These incongruities also happen — and quite often, I might add — with financial analysis when the market becomes directionless.

Despite Recent Progress, U.S. Investors Still Pessimistic About Euro, With Negative Outlook on Global Equities
Press Release
TradeStation Securities (“TradeStation”), a wholly owned subsidiary of Monex Group, Inc. , which also includes Monex, Inc. (“Monex”) and Monex Boom Securities, today announced the results of the “Monex Global Retail Investor Survey, Vol. 5,” revealing that an overwhelming majority of TradeStation clients (74%) are worried that the European debt crisis could result in a serious financial crisis.
Twenty-nine percent of TradeStation clients say that the European debt crisis is a factor in making their investment decisions — as opposed to 24% who say they will base their decisions on the strength of the U.S. economy. More than half project that global equities will be down over the next three months, with an additional 26% predicting that they will remain flat. Although pessimism about the stock market is predominant among investors, a majority of TradeStation customers (69%) say that the U.S. stock market will outperform stocks in Europe/U.K., Asia (excluding Japan) and Japan.

OptionMonster Volatility Sonar Report with Jamie Tyrrell of Group1 Trading:

OptionMonster Eric Wilkinson of CMZ Group:


OCC Board Of Directors Expands And Welcomes New Members
Press Release
OCC announced today the election of six new members to its Board of Directors including two in newly created Public Director roles.
The new Directors are Steven G. Crutchfield, CEO of NYSE Amex Options LLC and Senior Vice President, NYSE Euronext, appointed Exchange Director; Elizabeth K. King, Head of Regulatory Affairs, GETCO LLC; Kevin G. Russell, Managing Director, Head of Equities Trading for the Americas, Citigroup Global Markets Inc.; and Jonathan B. Werts, Managing Director, Global Execution Services Bank of America Merrill Lynch. Mr. Crutchfield replaces Thomas F. Callahan as an Exchange Director and the new members replace Paul J. Brody, William D. Felder and Valar J. Mihan.
Furthermore, Phillip A. Pendergraft was elected to a second term and Gerald J. McGraw was appointed Board Vice Chairman. In addition to the new members above, OCC expanded its Board of Directors to include two new Public Directors for a total of 18 members from 16. Appointed to those positions were Matthew B. Gelber and Alice P. White.

CBOE Holdings, Inc. Announces Date Of Second-Quarter 2012 Earnings Release And Conference Call
Press Release
CBOE Holdings, Inc. (NASDAQ: CBOE) will announce financial results for the second quarter of 2012 before the market opens on Thursday, August 2, 2012. A conference call with remarks by CBOE Holdings, Inc. senior management will begin at 7:30 a.m. Central Time. A presentation will be referenced during the call and will be available on the Investor Relations section of our website at http://ir.cboe.com under Events and Presentations.
A live audio webcast of the conference call will be available on the Investor Relations section of CBOE’s website at http://ir.cboe.com under Events & Presentations.  The presentation will be archived on the company’s website for replay.  In addition, participants may listen to the live conference call via telephone by using the dial-in numbers listed below.
Date: Thursday, August 2, 2012
Time: 7:30 a.m. Central Time
Live Dial-in Information:
U.S. and Canada: (877) 372-0876
International: (253) 237-1167
(Participants should dial in ten minutes prior to the start of call.)


Regulator Proposes New Rule for Large Derivatives Trades
Ben Protess, Dealbook
Wall Street traders making big bets on derivatives would receive relief from regulation only if they met certain standards under a rule proposed on Monday.
The Commodity Futures Trading Commission voted to introduce a draft rule that limits how firms can qualify for exemptions through so-called block trades.


OptionsCity Software to integrate with YellowJacket
Press Release
OptionsCity Software, a leading provider of electronic trading solutions, today announced that it has signed an agreement to integrate with YellowJacket, an advanced communication platform operated by IntercontinentalExchange (NYSE: ICE) designed to meet the needs of traders and brokers in the derivative markets. OptionsCity’s pricing and theoretical values will be displayed within ICE’s YellowJacket interface beginning in the third quarter of 2012.

CQG Premieres Spreadsheet Trader for Multimarket Monitoring and Trade Execution
Press Release
QG has launched Spreadsheet Trader in response to trader and broker demand for tools to better navigate and perform in increasingly fragmented markets, the company announced today at the International Derivatives Expo (IDX) 2012.
According to Thom Hartle, CQG’s Director of Product Training, “Spreadsheet Trader builds on the global market visualization capabilities of CQG’s Portfolio Monitor by combining trade execution functionality with robust market visualization and analytical tools.” The new interface features fully integrated depth-of-market trading functionality, enabling order execution through CQG’s network of Hosted Exchange Gateways.

Hong Kong Exchange Renews Contract With NASDAQ OMX and Upgrades to INET-Based Trading Platform
Press Release
The NASDAQ OMX Group, Inc. announces that the Hong Kong Exchanges & Clearing Ltd (HKEx) will upgrade its derivatives trading system (HKATS) and clearing system (DCASS) to NASDAQ OMX’s Genium INET technology. In addition HKEx has extended its support contract with NASDAQ OMX for a further five years. The platform upgrade is scheduled to be in effect by fourth quarter of 2013.
The Genium INET powered platform will provide HKEx with integrated trading and clearing of a wide range of derivatives including financial index futures and options, stock futures and options, currency futures, interest rate futures, fixed income futures, commodity futures, volatility index futures and dividend futures.


A Hedge Against Rising Euro Fears
Buy VIX calls in the event that Europe’s leaders fail to reach a resolution later this week to the continent’s credit crisis.
Steven M. Sears, Barron’s
There is nothing to fear but volatility. The 16% intraday spike in the Chicago Board Options Exchange’s Volatility Index Monday was just a taste of a crisis foretold if the European Union accomplishes little later this week in Brussels.

Beyond VIX: Using ETF Correlations to Measure Risk
John Spence, ETF Trends
The CBOE Volatility Index, or VIX, is known as Wall Street’s fear gauge. However, ETF correlations may be a better tool for measuring risk because sectors and asset classes moving in lockstep is a sign of a troubled market, according to a
ConvergEx Group strategist.
“In terms of assessing market health, a decline in correlation is a positive for markets since it shows investors are focused on individual sector and stock fundamentals instead of a macro ‘Do or die’ concerns,” writes Nicholas Colas in a ConvergEx note Tuesday. “By that measure, we’re moving in the wrong direction, and not just because of recent decline in risk assets.”

Options basics: Deep-in-the-money options
For beginning investors, the world of options can seem incredibly byzantine and utterly inaccessible.
While more complex strategies like butterflies and iron corridors are inappropriate for non-sophisticated traders, there exist a number of options techniques that can enhance the portfolios of somewhat knowledgeable investors. One such strategy is to use deep-in-the-money options.

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