JLN Options: High-Yield Bond ETF Implied Volatility Skyrockets

Nov 20, 2012

Lead Stories

High-Yield Bond ETF Implied Volatility Skyrockets
John Spence, ETF Trends
Wall Street’s fear gauge, the CBOE Volatility Index, has remained quiet despite the market’s recent choppiness on fiscal cliff fears and Europe’s debt crisis flaring up again. However, popular high-yield bond ETFs are telling a different story.
The VIX fell 7% during Monday’s stock rally and is hovering near multiyear lows.

Why is the VIX So Low?
Teeka Tiwari, NASDAQ
The VIX, also known as the “fear indicator” in a measure of the amount of people buying downside protection options (Puts) on the S&P 500.  When the market is getting clobbered (like now), this index will reflect increased Put buying by rising in price. What’s odd is that if we take a quick look at a the VIX chart we can see that it has barely budged. Rising from a low of 14 to just 16 even as the S&P 500 has dropped about 8%.
** Is it just me or have people been asking this same question for the last several months? –JB

Nasdaq chief urges cliff deal without big dividend tax hike
Robert Schroeder, MarketWatch
NASDAQ OMX’s chief executive Robert Greifeld thinks there needs to be shared sacrifice to help get the government’s debt under control. But investors shouldn’t sacrifice too much in the form of much higher dividends set to take effect next year, he said.

Special Report: How gaming Libor became business as usual
In late 1996, Marcy Engel, then a lawyer for Wall Street heavyweight Salomon Brothers Inc, fired off a warning letter to U.S. regulators: If they approved a Chicago Mercantile Exchange plan to change how a popular futures contract was priced, they would put at risk the integrity of a key interest rate in the global financial system.
** Long article but interesting.  –JB

Options Names Ken Barnes as New Senior VP of Corporate Development
Former NYSE Euronext executive to lead corporate and product strategy
Press Release
Options, provider of the Options PIPE® Private Financial Cloud services platform for the exchange, banking, trading and investment communities, today announced that industry veteran Ken Barnes has been appointed as the firm’s Senior Vice President of Corporate Development.


Exchanges Get Closer Inspection
Scott Patterson and Jean Eaglesham, The Wall Street Journal
Federal securities regulators are stepping up oversight of stock exchanges as they scramble to catch up to trading advantages that some say have developed for sophisticated clients at the expense of ordinary investors.
That effort has led the Securities and Exchange Commission to expand an enforcement probe into a broader look at how exchanges develop new products, communicate with investors and provide incentives to trade, according to people familiar with the probe.


A Step Back for Derivatives Regulation
The New York Times
On the campaign trail, President Obama took credit for imposing tough rules on Wall Street. But, last week, the administration moved to weaken new rules on derivatives.

SEC Commissioner Questions Hedge Fund Advertising Rule
FIN Alternatives
The Securities and Exchange Commission is set to allow hedge funds to openly advertise and market their wares next year, but it certainly doesn’t seem happy about it.


Waiting For A Santa Claus Rally
Cam Hui, Seeking Alpha
In my post last week I noted a number of positive divergences in the FX market (see Waiting for the bounce) and thought that equities were poised for a bounce. Now I am seeing bullish divergences in the VIX Index as well, which suggest that the markets are poised for a more sustainable rally into December much like the traditional Santa Claus rally.

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Past Options Newsletters

The Spread – July 30, 2021

The Spread – July 30, 2021

Earnings season in full bloom; Options lead year-to-date derivatives volume; Robinhood’s IPO; John gets real with Get Real VR: Conflicting factors underpin volatility; Cboe cleared for fall European competition; and the Cboe Options Institute’s Kevin Davitt talks about vega in this week’s “Term of the Week.”

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