JLN Options: In Options Land, Near-Term Signals All Clear. But Midyear In Doubt

Jan 26, 2012

Lead Stories

In Options Land, Near-Term Signals All Clear. But Midyear In Doubt
By Brendan Conway, Reuters
The market dynamic has been repeated several times since the financial crisis: Stocks rise sharply, and investors’ interest in options wanes at the very moment that it would cost less to buy options as portfolio insurance.
By a range of measures, the U.S. options market illustrates investors’ near-term bullishness. The Chicago Board Options Exchange Volatility Index, the “fear index,” has drifted below its historical average. That decline, which reflects the lower prices investors pay for puts and calls on the Standard & Poor’s 500-stock index, is the clearest sign of decreased demand for options. Meanwhile, the number of put options granting the right to sell the most popular exchange-traded fund, the SPDR S&P 500 ETF (SPY), fell to a one-year low of 8.8 million contracts following last Friday’s monthly options expiration, as more traders unwound their protective positions. The figure, known as the “open interest,” includes put options of all maturities.
http://jlne.ws/wJGg73

CBOE Futures Exchange (CFE) to Launch Futures on Radar Logic 28-Day Real Estate Index on February 2CHICAGO, Jan. 26, 2012 /PRNewswire/ — CBOE Futures Exchange, LLC (CFE) announced today that on Thursday, February 2, it plans to launch futures trading on the Radar Logic 25-Metropolitan Statistical Area (MSA) RPX Composite Index (futures symbol: RPXCP). The index tracks U.S. residential housing values as a whole and is one of several Radar Logic 28-Day Real Estate indexes on which CFE may offer futures contracts. CFE also announced that Barclays Capital will serve as the Designated Primary Market Maker (DPM) for Radar Logic 25-MSA RPX Composite Index futures.”We are pleased to partner with Radar Logic to bring to market the industry’s first real estate futures contract featuring comprehensive national residential real estate values and daily pricing,” CFE Managing Director James F. Lubin said. “Now, with CFE futures on RPX indexes, the residential real estate community will have a powerful risk management tool combining these unique contract features with the benefits of an exchange-traded marketplace — improved price discovery, market transparency, execution certainty and centralized clearing.” http://jlne.ws/dqtww6

‘Extreme’ S&P 500 Momentum, VIX Signal DropBy Lu Wang – Jan 26, 2012
The Standard & Poor’s 500 Index’s best January rally since 1997 has pushed a pair of momentum and sentiment gauges to levels seen only 6 percent of the time since 1993, a sign the market is due for a pullback, BTIG LLC said. The benchmark index’s 14-day relative strength index, which measures the degree that gains and losses outpace each other, rose above 70 yesterday for the first time since Feb. 18, according to data compiled by Bloomberg. Some technical analysts consider RSI readings above 70 a sign that stocks have risen too far, too fast. The Chicago Board Options Exchange Volatility Index (VIX), a gauge known as the VIX, fell below 20 for the first time since July on Jan. 19.
http://jlne.ws/zi7iDA
VIX ETFs Go Over A Cliff (VXX, TVIX, VXZ, XIV)
Wall Street Sector Selector
VIX Goes Over A Cliff (VXX, TVIX, VXZ, XIV)VIX ETFs tumble in response to Dr. Bernanke and FOMC interest rate announcements.
VIX, the CBOE Options Market Volatility Index, commonly known as the fear indicator, continued its plunge today as stocks rallied in response to Dr. Bernanke’s and the Federal Reserve’s ongoing accommodative monetary policies. VIX is widely seen as a predictor of future stock prices as when fear is high in the markets, VIX rises and stock prices tend to decline while the opposite is true in rising stock markets.
http://jlne.ws/AlYL2A

Fidelity Research Reveals Traders’ Motivations Beyond Investment GainsKeys to Success: Consistency, Curiosity and Flexibility
Press Release, BOSTON, Jan 26, 2012 (BUSINESS WIRE) — Fidelity Investments(R), a leader in helping individuals research and invest in the financial markets, today released research that shows active investors and active traders(1) derive on average 18 percent of their annual income from trading activities, but more than three quarters (78 percent) say they enjoy trading for other reasons. The survey also reveals the traits these traders consider key to their investing success, and what they would do differently if they could start over.
Beyond investment gains, traders find motivations in the following activities:
— Fifty-four percent enjoy discovering new opportunities (“the thrill of the hunt”).
— Fifty-three percent enjoy learning new investing skills.
— Many also enjoy engaging in social activities, including more than half who share news of their investing “wins and losses” with friends and family (59 percent share wins, 52 percent share losses), and half who seek guidance from trading peers.
http://jlne.ws/zwd9mD

Exchanges

Nasdaq’s Greifeld Says Not Interested in LSE, NYSE Bids
Businessweek January 26, 2012
By Elisa Martinuzzi and Whitney Kisling
Jan. 26 (Bloomberg) — Nasdaq OMX Group Inc. isn’t interested in buying the London Stock Exchange Group Plc or another attempt at NYSE Euronext, even as antitrust regulators recommend against Deutsche Boerse AG’s bid for the owner of the New York Stock Exchange, Chief Executive Officer Robert Greifeld said. Nasdaq OMX, which made a failed hostile bid for NYSE Euronext in April, doesn’t want the LSE, Greifeld told reporters today in Davos, Switzerland. He said later that he wouldn’t consider a second attempt at NYSE Euronext because the U.S. Justice Department rejected the idea.
http://jlne.ws/AhI3eM

Strategy

Volatility Spurs Aggressive Algo Strategies
In volatile markets traders choose more aggressive algorithmic trading strategies and increase the level of human interaction.
By Kerry M. Bowbliss, Advanced Trading January 25, 2012
Equity traders are no strangers to volatile markets, and in the last several months they have responded similarly to how they have during other turbulent times, by trading more aggressively.
“We see a definite shift in what people choose when you hit the very high volatility days,” says Dan Mathisson, managing director and head of Advanced Execution Services, Credit Suisse. When the market gets volatile, people shift from patient algos to aggressive algorithms. He explains, “There is much less use of full day VWAP and our Guerilla algorithm and a shift to Sniper and Blast, our most aggressive tools.”
Mathisson adds, “And we see shifts within algos, when people have a choice as to whether they want to be patient or aggressive with a particular algorithm, they choose aggressive.”
http://jlne.ws/wXw0dWGrowth concerns behind bearish options bets in YumBy Doris Frankel and Lisa Baertlein, ReutersWed Jan 25, 2012
* Yum February $60 puts stand out
* Yum overall options volume above the norm this week
By Doris Frankel and Lisa Baertlein
Option investors appear to have worries about Yum Brands Inc , taking out protection against a share price decline ahead of the fast-food chain’s quarterly report early next month, analysts say.
Prospects of slowing Chinese growth and unfavorable exchange rates, the same headwinds that threaten rival McDonald’s Corp , are worrying investors in the fast food purveyor.
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How to Use Options to Wring Return From Yahoo!
By STEVEN M. SEARS, Barrons.com
How to extract more return from the search engine’s moribund stock with options.
Yahoo! (ticker: YHOO) is dead. Or at least its stock has been dead money.
The stock has barely budged in the past year, and now it tops J.P. Morgan’s list of “range-bound stocks” that is distributed to Wall Street’s top investors. Rather than hoping Yahoo is acquired by another company, the rumor du jour swirling around it for the past few months, sophisticated investors can still profit from its stalled shares. Specifically, they can sell a March $15 put and March $17 call and profit while Yahoo remains stalled. Shares were recently at $15.64.
http://jlne.ws/xXg7EA

Options Education

Eurex and IFM announce joint educational initiativeEurex Group News Release
IFM to deliver its best-in-class derivatives education for Eurex training purposes/ Eurex webinar series to target traders and investors in English and Portuguese languages
Eurex Group and the Institute for Financial Markets (IFM) announced today that they have teamed up to offer a joint educational initiative. Both partners aim to bring IFM’s best-in-class derivatives education to Eurex Exchange members and potential clients as well as the general industry. One joint initiative will be the first-time offering of IFM’s well-respected courses in the form of webinars in English. A large subset of the webinars also will be available in Brazilian Portuguese. Members of the brokerage community will be involved to further extend customer outreach.
http://jlne.ws/xiQFM8

Events

Penson Worldwide, Inc. Fourth Quarter 2011 Conference Call On Tuesday, February 28, At 10 AM Eastern (9 AM Central)
Press Release
Penson Worldwide, Inc. (NASDAQ: PNSN) will host a conference call on Tuesday, February 28, 2012 at 10:00 AM Eastern Time (9:00 AM Central Time) with Philip A. Pendergraft, Chief Executive Officer; Bryce B. Engel, President & Chief Operating Officer; and Kevin W. McAleer, Chief Financial Officer. The call will be held to discuss results for the fourth quarter ended December 31, 2011 that will be issued in a release after the market closes on Monday, February 27, 2012. The call will be accessible live via a webcast on the Investor Relations section of www.penson.com. A webcast replay will be available shortly thereafter. Access the webcast link in advance to download any necessary software.
http://jlne.ws/wWtZzx

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