JLN Options: Forex options show sharp slide in pessimism about euro

Oct 4, 2012

Lead Stories

Forex options show sharp slide in pessimism about euro
Julie Haviv, Reuters
Expectations that Spain will ask for a bailout and the European Central Bank’s latest policy moves have eased fears of the region’s debt crisis, causing options investors to seek the least protection against the euro’s drop in more than two years.
The single currency shared by 17 countries has rebounded from a recent three-week low on beliefs that Spain, the euro zone’s fourth largest economy, will soon join Greece, Portugal and Ireland in requesting a rescue.
http://jlne.ws/UHhbRA

CFE Temporarily Postpones Launch Date For S&P 500 Variance Futures
Press Release (Full Text)
CBOE Futures Exchange, LLC (CFE) today announced that it has temporarily postponed the launch of S&P 500 Variance futures, originally scheduled to begin on Thursday, October 4.  The additional time will allow market participants to further prepare for the trading and clearing of S&P 500 Variance futures.
CFE plans to launch S&P 500 Variance futures later this quarter and will announce the new launch date when it has been determined.
http://jlne.ws/UHhA6i

Swap Regulators Face Push for Delays as Oct. 12 Deadline Looms
Silla Brush and Matthew Leising, BloombergBusinessweek
The U.S. Commodity Futures Trading Commission, facing an Oct. 12 start date for a slate of derivatives rules, is being bombarded with requests from lobbying groups to ease or delay the Dodd-Frank Act measures.
Trade associations representing agribusiness firms Bunge Ltd. (BG) and Archer Daniels Midland Co. (ADM) want to delay swap-dealer rules for non-banks. Banks and asset managers want regulators to finally say whether foreign exchange derivatives will be subject to the rules. And representatives of Ford Motor Credit Co. and Barclays Plc (BARC) have met with CFTC staff to clarify that financial entities used for asset-backed securities are exempt.
http://jlne.ws/PT2PMV

SEC charges hedge fund managers with defrauding investors
Futures
The Securities and Exchange Commission today separately charged a pair of hedge fund managers and their firms with lying to investors about how they were handling the money invested in their respective hedge funds. The charges are the latest in a series of actions taken by the SEC Enforcement Division and its Asset Management Unit against hedge fund-related misconduct in the markets.
http://jlne.ws/VzTqy3

Exchanges

CME, ICE drop position limit plans after ruling against CFTC
Reuters
Exchange operators CME Group and ICE Futures U.S. said on Wednesday they would stick with their existing position limits regimes after a court threw out the U.S. Commodity Futures Trading Commission’s (CFTC) new rule to curb commodity market speculation.
CME Group and ICE, a subsidiary of IntercontinentalExchange Inc, had proposed revisions to their own position limit rules to bring them in line with the changes mandated by the CFTC.
http://jlne.ws/VzU66o

BATS September Market Share Drops, Volume Up
John D’Antona Jr., Traders Magazine
BATS Global Markets reported that the matched market share of its two national stock exchanges totaled 12.0 percent in September, the third month in a row topping the 12-percent mark.
But that is down from 12.8 percent in August. A year ago, its share was 12.0 percent.
Volume in September was up from August, but down from a year ago.
http://jlne.ws/UHhgVn

Technology

Regulation won’t stop high-speed trading, analyst says
Tabb Group CEO says market makers will find other ways to make use of algo trading technologies
Penny Jones, DatacenterDynamics
The founder and CEO of financial market analyst firm Tabb Group Larry Tabb said he does not believe restrictions on high frequency trading (HFT) will stop the adoption of technologies around algorithmic trading.
Tabb was commenting in an analysis in which he investigates the outcomes of the European Parliament’s Review of the Markets in Financial instruments Directive, which proposes monetary restrictions on investment firms for routing order, the lowing of latency to a 500ms resting period for all orders before cancellation and modification and a ban on the use of proprietary capital in Order-to-trade rations in trading, among other areas.
http://jlne.ws/VzXkXG

Options: New “Crawler” Helps Traders Navigate Complex Order Books
Peter Chapman, Traders Magazine
MEB Options has joined forces with the International Securities Exchange to make available a service that helps traders locate the various legs in their multi-leg trades.
The service, developed by MEB, an institutional brokerage based in Chicago, is called “Spread Crawler.”
The crawler scans the complex order books of six exchanges, including NYSE Amex, NYSE Arca Chicago Board Options Exchange, C2, ISE, and Nasdaq OMX Phlx. The object is to locate quotes appropriate for the trader, on each leg.
http://jlne.ws/VzT4aw

Strategy

Use Options to Play QE3
QE3 creates option-driven income opportunity in gold and energy
Lawrence Meyers, InvestorPlace
So the Fed has initiated yet another round of quantitative easing. I’m not here to judge whether this plan will help at all (even though it won’t). Instead, I’m here to tell you how to use options to profit from yet another government-driven market event.
The big goober about QE3 that’s going to stick in everyone’s craw, particularly those on fixed income, is that it will cause inflation. We’re already seeing it, although the government’s CPI report doesn’t give you the true insight.
http://jlne.ws/VzVdTE

The Hoax Of VIX-Based ETFs As Risk-Proxy Investments
Peter F. Way, Seeking Alpha
I recently looked at a SA article by a new contributor and, in passing, he commented (intelligently) on perceptions of risk and volatility by investors. Since Risk and Reward are the two most basic dimensions of concern to investors, I sought to find what else might have been written here on SA about the topic.
On the SA Home page there is an entry window box where a “symbol, author or keyword” will bring an appropriate response. So I entered “risk”.
To my delight, the magic mirror on the wall told me: RISK is defunct.
Hurray! Good triumphs over evil!
http://jlne.ws/VzXWN5

ETFs and VIX: The Facts and the Risk
Michael Iachini, Charles Schwab
Investors often worry about market volatility—especially the kind of big negative moves seen during the credit crisis of 2008 or the summer of 2011. It’s natural to look for investments that increase in value when markets decline in order to get some downside protection, which is why some investors start looking toward the VIX—a volatility index published by the Chicago Board Options Exchange. You can’t buy the VIX itself, though, and the exchange-traded products that use VIX futures have some big risks that investors should understand before buying.
http://jlne.ws/VzYt1h

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