Lead Stories

CBOE Holdings to Acquire Data and Analytics Platforms of Livevol, Inc.
Press Release – CBOE
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that it has entered into a definitive agreement to acquire the market data services and trading analytics platforms of Livevol, Inc., a leading provider of equity and index options technology and market data services to professional and retail traders. The acquisition, which has been approved by the board of directors of both CBOE Holdings, Inc. and Livevol, Inc., is expected to close by June 30, 2015. Financial terms of the deal were not disclosed.
According to the agreement, CBOE Holdings will acquire the Livevol Core, Livevol Pro and Livevol X trading analytics platforms, as well as Livevol Enterprise and other market data solutions products. Livevol Securities, Inc., the company’s broker-dealer unit, is not included in the deal. The acquired properties will become subsidiaries of CBOE Holdings upon completion of the deal. Livevol’s 17 employees will join CBOE Holdings.
jlne.ws/1ALpczQ

***DA: It will be interesting to see what CBOE does with its new acquisition. Last I heard, Livevol was playing up the value of its analytics from a regulatory oversight standpoint. I do remember being impressed with the granularity of its data, so it may have value as an add-on suite for traders.

Yahoo Spinoff Shock Lingering in Options Market on IRS Concern
Callie Bost – Bloomberg
While Yahoo! Inc.’s stock has climbed back from last month’s spinoff scare, options trading shows the issue is still on investors’ minds.
Bearish Yahoo contracts are about the most expensive relative to bullish ones in nearly two years, data compiled by Bloomberg show. The gap, a sign traders are buying insurance against a falling stock, has remained wide even after the shares erased most of a 7.6 percent plunge from May 19. That drop was triggered by new tax scrutiny for spinoffs at a time Yahoo is planning to create a separate company for its Alibaba Group Holding Ltd. stake.
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***DA: Normally, when I see bearish and yahoo in the same sentence, the story involves gold bugs, foil hats and AM radio.

Hedge funds just made their largest bet against the yen in nearly 3 years
Joseph Adinolfi – MarketWatch
Hedge funds just made their largest bet against the yen in nearly three years, according to the latest data from the Commodity Futures Trading Commission.
CFTC data showed that noncommercial traders, a category that primarily comprises hedge funds, increased bets that the yen will fall in value by $4 billion in the week between May 19 and May 26 — bringing the total amount held short against the Japanese currency to $6.3 billion.
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Greek Standoff Takes Another Twist as Dueling Plans Are Drafted
Nikos Chrysoloras, Rebecca Christie and Corina Ruhe – Bloomberg
The impasse over Greece’s future lingered as both sides worked on rival proposals for the conditions of a financial lifeline with debt payments looming.
Greek Prime Minister Alexis Tsipras said his government submitted a new plan, while officials from the country’s creditors were said to be finalizing what would be a final offer to avoid the country defaulting. While the euro rallied on optimism over a deal, Dutch Finance Minister Jeroen Dijsselbloem, who leads the euro-area finance ministers’ group, said institutions are still far from any agreement.
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***DA: A Greek default is not a matter of “if” but “when.”

ECB’s QE is stirring market volatility, warns financial regulator
Juliet Samuel – MarketWatch
A recent surge in government bond market volatility can be blamed on the quantitative-easing program of the European Central Bank, according to one of Europe’s top financial regulators.
EIOPA, the body responsible for regulating insurers and pension funds in the European Union, has warned that the ECB’s decision to buy billions of euros’ worth of sovereign bonds, to kick-start the region’s economy, has caused markets to become choppier.
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***DA: When market participants are in constant danger of being run over by a large order, liquidity suffers.

So Far VIX in 2015 Tells a Different Story Than 2014
Russell Rhoads – CBOE Options Hub
Over the weekend I was asked to take a look at the first five months of 2015 with respect to the volatility markets. Since volatility indexes need to be looked at in relation to recent history I decided to compare VIX in the first five months of 2015 to VIX last year. Before getting to that comparison, keep in mind the stock market action in early 2014 was very similar to that during the first five months of this year. In 2014 the S&P 500 was up 4.07% while this year the S&P 500 was 2.36% higher as of the end of May. Also there was a similar number of market pullbacks. In the first five months of 2014 there were 21 trading days where the S&P 500 was down 0.5% or more, while this year there have been 22 trading days where the S&P 500 lost 0.5% or more. The big difference in 2015 has been in volatility space.
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Halfway To A Textbook Recession – Weekly Market Outlook
Price Headley – CBOE Options Hub
After three straight weeks of bullish progress, the weight of those gains finally proved to be too much. The prod was a surprisingly weak revised reading on Q1’s GDP growth. Rather than growing at a 0.2% clip as first thought, the second (of three) updates on the nation’s overall economic activity rolled in at -0.7%. That was enough to send the S&P 500 (SPX) (SPY) down 0.63% on Friday, bringing the weekly loss to 0.87%.
And yet, the market has yet to move past the point of no return and start a selloff that can’t be quickly halted. It’s close to some key levels though.
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***DA: Same textbook; different edition.

Sorry, But You Can’t Trade Germany Risk-Free
Adam Warner – Schaeffer’s Investment Research
Is a popular currency-hedged trade on Germany too good to be true?
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A Look at Market Volatility Through a Different Lens
www.equities.com
We would venture that there is a strong correlation between the amount of ink spilled about an asset class or sector and its volatility. So given that the energy sector fell nearly 5.5% in the last month without much interest is somewhat curious.
Or, is it?
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Why Benchmarks Don’t Matter
NASDAQ
When you assess how your investments perform, comparing your returns with popular benchmarks is hardly meaningful. Inappropriate comparisons can cause you more harm than good if they tempt you to bail on an otherwise solid approach.
“How am I doing so far?” is a fair question every investor asks. Our human nature tempts us to compare our performance numbers with the benchmarks the popular press reports on, such as the Dow Jones Industrial Average, the Standard & Poor’s 500 and the Nasdaq Composite index.
jlne.ws/1Q3ATsE

Bank Nifty option sellers may face a double whammy if RBI holds interest rates
Ram Sahgal – Economic Times
With a desire to gain from high options prices, overseas P-Note traders, brokers’ prop desks and short-term punters have taken certain bets which could potentially backfire if the RBI holds interest rates steady at Tuesday’s policy meet and makes comments perceived to reflect more gloom than cheer, derivatives analysts said. These constituents have, ahead of RBI’s policy on Tuesday, sold bank shares in the cash market and purchased bank futures. Against this, they have also sold Bank Nifty call and put options to pocket the high prices, or premiums, of these options.
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Exchanges

CBOE Holdings Reports May 2015 Trading Volume
Press Release – CBOE
CBOE Holdings, Inc. (NASDAQ: CBOE) reported today that total trading volume during May for options contracts on Chicago Board Options Exchange (CBOE) and C2 Options Exchange (C2) and futures contracts on CBOE Futures Exchange (CFE) was 85.3 million contracts, a decrease of 7 percent from April 2015 and 12 percent from May 2014.
Total options and futures average daily volume (ADV) at CBOE Holdings during May was 4.3 million contracts, a decrease of 2 percent from April 2015 and 8 percent from May 2014.
jlne.ws/1dIPhWh

CBOE Futures Exchange Reports May 2015 Trading Volume
Press Release – CBOE
CBOE Futures Exchange, LLC (CFE) today reported that May 2015 monthly average daily volume (ADV) and monthly total volume, both exchangewide at CFE and for futures on the CBOE Volatility Index (VIX Index), rose from last month and from year-ago levels.
VIX Futures
May average daily volume in VIX futures was 174,923 contracts, an increase of 9 percent from April 2015 and 22 percent from May 2014. Total volume in VIX futures for May was 3.5 million contracts, an increase of 3 percent from the previous month and 16 percent from a year ago.
jlne.ws/1I8ut4q

ISE Holdings Reports Business Activity for May 2015
Press Release – International Securities Exchange
ISE and ISE Gemini combined represent 17.8% of equity options market share, excluding dividend trades.
ISE and ISE Gemini reported a combined ADV of 2.4 million contracts.
Dividend trades made up 1.0% of industry volume in May 2015.
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CME Group Volume Averaged 14.1 Million Contracts per Day in May 2015, Up 8 Percent from May 2014
Press Release – CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that May 2015 volume averaged 14.1 million contracts per day, up 8 percent from May 2014. Total volume for May 2015 was more than 281 million contracts, of which 88 percent was traded electronically. Options volume in May averaged 2.6 million contracts per day, up 13 percent versus May 2014, with electronic options growing 33 percent over the same period.
jlne.ws/cjpXe7

OCC Cleared Contract Volume Declined 3% in May
Press Release – OCC
OCC, the world’s largest equity derivatives clearing organization, announced today that cleared contract volume in May reached 308,639,215 contracts, a 3 percent decrease from the May 2014 volume of 319,742,239 contracts. OCC’s year-to-date average daily cleared contract volume is down 7 percent from 2014 with 16,144,143 contracts in 2015.
jlne.ws/1Q3HVO0

Options Exchange Marketshare – May 2015
OCC – via email

May 2015 Total Options Marketshare:
AMEX- 7.96%
BATS- 9.73%
BOX- 2.24%
CBOE- 24.76%
C2- 2.13%
GEM- 3.67%
ISE- 12.33%
MIAX- 6.84%
NOBO- 0.69%
NSDQ- 6.12%
NYSE Arca- 8.36%
OMX PHLX- 15.16%

May 2014 Total Options Marketshare:
AMEX- 11.29%
BATS- 3.74%
BOX- 2.65%
CBOE- 28.02%
C2- 1.78%
GEM- 2.04%
ISE- 12.22%
MIAX- 2.56%
NOBO- 0.76%
NSDQ- 9.58%
NYSE Arca- 11.14%
OMX PHLX- 14.22%

May 2015 Equity Options Marketshare:
AMEX- 8.79%
BATS- 10.75%
BOX- 2.48%
CBOE- 17.08%
C2- 2.30%
GEM- 4.05%
ISE- 13.57%
MIAX- 7.56%
NOBO- 0.76%
NSDQ- 6.76%
NYSE Arca- 9.20%
OMX PHLX- 16.71%

May 2014 Equity Options Marketshare:
AMEX- 12.40%
BATS- 4.16%
BOX- 2.95%
CBOE- 20.37%
C2- 1.96%
GEM- 2.26%
ISE- 13.55%
MIAX- 2.85%
NOBO- 0.84%
NSDQ- 10.63%
NYSE Arca- 12.24%
OMX PHLX- 15.79%

Strategy

Chinese Stock Rally Will Continue, Traders Believe
Steven M. Sears – Barron’s
Investors are more worried about missing a rally in China than hedging against sharp declines, at least according to pricing patterns in the global options market.
This is remarkable given how sharply Chinese stocks declined last week on fears that tighter margin standards would upset one of the world’s best performing markets.
jlne.ws/1dcpzZm

Trade of the Day: iPath VIX Short-Term Futures ETN (VXX)
Jon Markman – InvestorPlace
Stocks finished modestly higher on Monday in exceptionally jumbled trading that started with a feint higher, then a feint lower, then a sharp advance midday, followed by an equally sharp decline into the close. It was a bad session for trend-following traders, who got chopped up — but overall not a bad session at all for major mid-cap and large-cap stocks.
The U.S. dollar was stronger, gold was flat, crude oil sank a bit and Treasurys fell hard. The support for stocks was largely attributed to some iteration of the “good news is good news” theme, as the May ISM manufacturing index and April construction-spending data surprised to the upside. Also helping sentiment were spending and inflation data.
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