Observations & Insight

In honor of the US holiday on Thursday (“Premature Shopping Day” – or, as it used to be called, “Thanksgiving Day”), John Lothian News will be closed, and that means no newsletters. But never fear, on Friday JLN, JLN Options and JLN Financials will be back in action. Meantime, to those of you who have a day off, our best wishes for the holiday!

PS: Options editor Jeff Bergstrom is at home cooking furiously in anticipation of hosting his family tomorrow. He will also be out Friday convalescing after said hosting duties. Editor-at-large Doug Ashburn is filling in today. On Friday, readers get editor-in-chief Jim Kharouf.

Lead Stories

CBOE Introduces The CBOE Mid-Term Volatility Index 
Wall Street Journal 
Chicago Board Options Exchange today announced that it has created a new benchmark volatility index — the CBOE Mid-Term Volatility Index (VXMT). CBOE began disseminating values for the new Mid-Term Volatility Index today. The CBOE Mid-Term Volatility Index is a measure of the expected volatility of the S&P 500(R) Index over a six-month time horizon. The VXMT index is calculated using the well-known CBOE Volatility Index (VIX) methodology, applied to S&P 500 Index (SPX) options that expire six to nine months in the future. 
***DA: I predict that, on its first day, the VXMT will make a new record low.

Stocks could see new volatility in 2014
With market indexes reaching new heights daily, some strategists say stocks could be heading straight into a buzz saw in 2014. That’s not to say the market will end next year lower, but several say whether it’s the Fed tapering its bond buying or some other catalyst, stocks could have a bigger fall next year than the shallow 6 percent decline of earlier this year.
***DA: There is a whole spectrum of things that could happen in 2014 – up, down, sideways, stratospheric, decimated. That is what markets are for.

Passing the Wall of Worry
As this bull market climbs its “wall of worry,” we can see its underlying strength. Valuation concerns and the risk of a major correction appear overblown, as we should see a continued rebound in economic fundamentals over the coming months.

Better hedging seen with local volatility indices
The Asset
The volatility of Australia’s main stock index – the S&P/ASX 200 – has come down since earlier this year. Interest in volatility indices has, however, remained high “across markets and within Australia” says Reid Steadman, vice-president of product management with S&P Dow Jones Indices.
***DA: Like politics, all volatility is local.

Why There’s No Such Thing as ‘Easy Money’
Trading still involves risk, despite a low volatility backdrop


Data Fees Kick CTAs and IBs When They’re Down
The Options Insider
Dan Collins, via The Options Insider We reported on the poor timing of the increase in exchange and data fees by CME Group two weeks ago but the full impact, particularly of the data fees, is just coming into focus and market participants are seeing sticker shock.

Exchanges could benefit from an Operation Waking Shark
Future and Options Intelligence
As cyber attacks on exchanges become a pressing issue, FOWi looks at how ‘war game’ scenarios could be used by global venues.


Three Black Friday Retailer Trading Strategies
Everyone knows Black Friday is one of the most important shopping days of the year for the retail sector. The day after Thanksgiving gets it name because retailers supposedly turn their first profit of the year on that day and their financials move into the black from the red.
***DA: I can’t believe JCP did not make their list, especially after seeing the way it bounced off $6.42 and shot up. The Dec $10 straddle looks cheap at $1.30.

Is This New Financial ETF Worth a Look?
The Horizons S&P Financial Select Sector Covered Call ETF (HFIN) seeks investment results that, before fees and expenses, generally correspond to the performance of the S&P 500 Financial Select Sector Stock Covered Call Index.


How To Win With Options – Know Your Options
Zacks.com via Nasdaq
Whether you believe the market will go up, down or sideways, there is an option strategy for you. More and more investors are using options in their trading as a way to beat the market. In fact, the number of options contracts traded has quadrupled over the past 10 years.
***DA: Looks like the sure winners are exchanges, brokers and vendors.

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