Debt ceiling worries spill into U.S. options market
Doris Frankel and Angela Moon – Reuters
With the U.S. government in Washington partially shut down, some options investors are starting to pay more for protection against market turmoil on worries that the current budget stalemate could lead to something more catastrophic – a default.
**Don’t look at me. I didn’t vote for them. -JB
VIX Doomsday Scenarios
Ophir Gottlieb – The Options Insider
If you want to get the real pulse of the market, you can look at the VIX, but it’s the volatillity of the VIX that will really tell you where we are. If the implied volatility of the VIX breaches 115%, that would represent a multi-year high; and that could be a signal of a doomsday market reaction.
Risk or Reward? S&P Implied Volatility Spread Near YTD Highs
The Options Insider
We noted to clients earlier this week that VIX option premiums were finally catching a bid, consistent with market participants repricing risk as the debt ceiling looms closer. Thursday’s broad market selloff was a continuation of that trend, accompanied as it was by large increases in equity and equity index implied volatility.
Ackman’s Move to Options Cuts Risk, Frees Capital
Kaitlyn Kiernan – The Wall Street Journal
William Ackman’s switch to the options market for his big bet against Herbalife Ltd. puts the famed hedge-fund manager in a less risky position, with the potential for freed up cash and leverage. But it also puts a deadline on his bearish bet.
OPTIONS REPORT: Mariner Targets Equity Volatility
Mary Schroeder – Traders Magazine
In today’s volatile market, the smart thing might be to take advantage of volatility instead of waiting for calmer waters. Mariner Investments Group, a $10 billion alternative asset manager based in New York, recently set up a multi-strategy incubation fund to be managed by leading investment talent. Its strategy is keeping an eye on volatility.
VXST – What and Why
Mark Sebastian – CBOE
One the major questions I have been getting about the index is ‘why would someone use this, instead of VIX?’ I liken VXST and VIX to the difference between gamma and Vega. Vega is a portfolios measure to the change in insurance prices, effectively implied volatility. Gamma is a portfolios exposure to actual market movement, or realized volatility.
SEC throws spanner in the works of new derivatives regime
Tom Braithwaite and Michael Mackenzie – Financial Times
The new world of electronic derivatives trading that launched this week has hit another snag in the unlikely form of the Securities and Exchange Commission.
US banks, institutional investors, European regulators and Democratic and Republican commissioners of the Commodity Futures Trading Commission had already pleaded for moderation and delay to the huge shake-up in derivatives markets.
Algo Traders Main Flash Crash Victims, Market Maker RSJ Says
Michael Winfrey, Peter Laca, and Lenka Ponikelska – The Washington Post with Bloomberg
Lightning-fast market plunges like the 2010 “flash crash” don’t hurt long-term investors and taxing algorithmic trading will drive the business from Europe, said the founder of RSJ AS, which trades a notional volume of $106 trillion in financial derivatives a year.
Market participants vent concerns about impact of shutdown on swaps derivatives trading
Several market participants recently expressed their concerns about the impact that the government shutdown is having on their swaps derivatives trading.
REGULATION & ENFORCEMENT
Revolving Door Helps SEC, Chairman Says
Andrew Ackerman – The Wall Street Journal
Washington’s revolving door is often used as a pejorative, but Mary Jo White said it’s personally helped her improve the Securities and Exchange Commission’s policing of Wall Street.
** *cough* Bullsh– *cough* -JB
Abusive trading patterns involve multiple exchanges, FINRA says
Wall Street’s securities regulator said on Thursday more than two-fifths of the abusive trading patterns detected by its new cross-market surveillance system involved more than one exchange and multiple participants.
The SEC Opens Up Its Speed-Trading Data Tap
Matthew Philips – BloombergBusinessweek
One of the biggest insights to come out of the May 2010 Flash Crash—when the Dow Jones industrial average suddenly plunged almost 1,000 points, then quickly recovered—wasn’t just how automated the stock market had become, but how little visibility regulators had into it.
New Leader Under Lens for Trading Commission
Ben Protess – Dealbook
As Gary Gensler’s tenure as a Wall Street regulator draws to a close, the White House has begun to vet a senior Treasury Department official as a potential replacement.
Ways to Play an End to Budget Crisis
Steven M. Sears – Barron’s
As many options investors wager that Congress will come to its senses, consider a few call options.