Lead Stories

CBOE volatility – where the bodies are buried
Andrew Wilkinson – Futures
Open interest across Vix futures options stands at around 9.4million contracts, heavily skewed towards call options used to benefit from a rise in volatility. There are around 7.2 million calls held among investors easily outnumbering by more than 3.3-times the number of put contracts held.

Volatility Index Yawns, Stretches, Hits Snooze, Heads for Sub-12
Brendan Conway – Barron’s
Market volatility and fear: Remember those? Remember the CBOE Volatility Index?
The benchmark so widely followed during the financial crisis is in a deep sleep. The VIX, as it’s called, got as low as 12.13 yesterday. This afternoon it’s slumbering at 12.16. Both figures are well below the measure’s long-term average of 20. The last time the index made such a long sleepwalk — heading below 12 that is — was last August.

Fed, central bank actions contributing to death of volatility: Colas
Wallace Witkowski – MarketWatch
Aggressive central bank policy over the past five years may have made the stock market comfortably numb and brought about the “death of volatility.”
“As long as central banks feel they must respond to weak economic conditions with strong medicine, equity investors will feel that the Fed, European Central Bank, Bank of Japan, and other central banks will be in their corner,” said Nicholas Colas, chief market strategist at ConvergEx Group, in a recent note.

Hedge-Fund Heavy Bets on More Volatility Ahead
Rob Copeland – The Wall Street Journal
John Bader, chairman and chief investment officer of Halcyon Asset Management LLC,  said he sees the Chicago Board Options Exchange Volatility Index, known as the market’s fear gauge, moving higher in the weeks to come as geopolitical concerns spook traders.

VIX Traders Bet on Calmer Markets as Stocks Rebound
Callie Bost – Bloomberg
The longest winning streak for the Dow Jones Industrial Average (INDU) this year and a wave of corporate deals has options traders lining up bets on a return to market tranquility.
The Chicago Board Options Exchange Volatility Index (VIX) is within three points of a record low after the Standard & Poor’s 500 Index added 4.5 percent since April 11. The cost of betting on market turbulence in the next month has fallen to a four-year low, data compiled by Bloomberg show.

The Latest Move by VIX Bears
Bearish bets are rising on the VIX
Adam Warner – Schaeffer’s Investment Research
Here’s a development that’s more relevant over here.
– Large traders and speculators raised their overall bearish bets in the VIX futures market last week for a second straight week and for the sixth time out of the last seven weeks, according to the latest data from the Commodity Futures Trading Commission (CFTC) released on Friday…
…This sheds a bit of light on the “Reverse Line Movement” we’ve noted in the VIX recently.

Videocast: Will VIX fall below 12?

Gensler’s Swaps Revolution Begins With GFI Poised to Open Up
Matthew Leising – Bloomberg
GFI Group Inc. (GFIG) anticipates that investors will soon start trading swaps on its platform, finally broadening access to a corner of the market previously reserved for banks.
The shift would be a victory for Gary Gensler, the former chairman of the U.S. Commodity Futures Trading Commission who helped rewrite the rules for the $710 trillion over-the-counter derivatives market.

Derivatives Markets Growing Again, With Few New Protections
Mayra Rodríguez Valladares – The New York Times
Despite slow economic growth in the United States and most of Europe still in or hovering around recession, global derivatives markets are 20 percent larger than in 2007. The Bank for International Settlements announced late last week that the global derivatives market is about $710 trillion.


CBOE, C2 and CFE Trading Schedule For the Memorial Day Holiday
Press Release (CBOE)
CBOE Holdings, Inc. (NASDAQ: CBOE) announced the following trading schedule for Chicago Board Options Exchange (CBOE), C2 Options ExchangeSM (C2SM) and CBOE Futures ExchangeSM (CFE) in observance of the Memorial Day holiday:
***JB: Short version most (not all) things are closed on Monday, May 26.

Energy exchange thriving under ICE ownership
Just before the landmark takeovers of NYSE Euronext and the Singapore Mercantile Exchange, ICE acquired a majority stake in Dutch energy exchange Endex in September 2012.
With ICE already owning the major energy trading venue in Europe, Endex strengthened the group’s position in natural gas and power derivatives on the continent.
Now, nine months after switching the Endex business onto ICE Futures Europe, trading activity has more than tripled on the platform compared to the same period in 2013.

Regulation and Enforcement

U.S. regulator to weed out unfair advantage for automated traders
The U.S. futures regulator wants to weed out any unfair advantage speed traders may have by getting sensitive information ahead of others, an official said on Tuesday, as it weighs new rules for computerized trading.
The Commodity Futures Trading Commission was also looking at whether it could get better market information by making computer-driven trading firms meet the same regulatory requirements as so-called floor traders.

Options Education

A Few Words on Liquidity
Al Sherbin – The Options Insider
I just wanted to say a few words about liquidity.  You will often hear options educators say “the first rule of trading is to trade liquid products.”  First, I want to reinforce that statement.  But, secondly (look away children), I want to say there are times when rules are made to be broken.


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