Fed Bringing Stock Turbulence to Traders as VIX Climbs
By Callie Bost and Jeff Kearns, Bloomberg
As investors try to decode the Federal Reserve’s next step, options traders are betting that regardless of what happens, it’ll be a rocky ride for stocks.
Expectations for future price swings have jumped in the past month, with the Chicago Board Options Exchange Volatility Index rising 11 percent since Aug. 22 to 12.73. At the same time, the market has been so calm lately that a gauge of historical volatility is at 5.9, near a three-year low. The ratio between the two measures reached a 19-month high this week, according to data compiled by Bloomberg.
Options Most Bearish on Pound Since 2008 Before Scots Referendum
By Lukanyo Mnyanda and Lucy Meakin, Bloomberg
Options traders are stocking up on protection against declines in the pound, reflecting risk they see of a selloff in the British currency should Scotland choose tomorrow to become Europe’s newest nation state.
Traders are the most bearish on sterling versus the euro since the 2008 financial crisis. The pound fell to a nine-month low last week after a poll showed nationalists in the lead for the first time this year. While polls last night showed the anti-independence Better Together group back in the lead, the gap was closing. One-week volatility in the currency jumped to the most since 2010 yesterday.
Sterling inches higher after Scottish polls, volatility jumps
By Patrick Graham and Anirban Nag, Reuters
Sterling crept higher on Wednesday, helped by a handful of polls showing the “No” camp holding onto a slender lead in the run-in to Thursday’s referendum on Scottish independence.
Nerves remain high ahead of the Scots vote and the cost of hedging against sharp overnight swings in the British pound doubled compared to Wednesday’s European close. One-week options imply the highest levels of volatility since 2008.
|PLAY LIKE A WALL STREET PRO
Intuitive, visual options trading at your fingertips with OptionsPlay
Get your free 30-day trial here
No more slogging through complex analytics to determine optimal strikes based on the market, or your view. OptionsPlay® cuts through the noise – delivering a satisfying new experience for investors of all levels.
OptionsPlay redefines the Options trading experience with OptionsPlay Ideas — an easy-to-use, visually striking blend of powerful analytics, trade opportunities and comprehensive strategy analysis.
Faith in Hedge Funds Unshaken by Calpers’ Move
California Public Employees’ Retirement System oversees $298 billion
Anna Prior, The Wall Street Journal
Financial advisers who use hedge funds in their clients’ portfolios say they aren’t rethinking that approach after a huge California pension fund announced plans to exit the hedge-fund market.
The decision by the California Public Employees’ Retirement System, the country’s largest pension fund, “does create a ripple,” says Robert Benson, chief investment officer for Laird Norton Wealth Management. “But I think this will be a ripple more than a tsunami.”
NYSE Says Alibaba to Get All the Time It Needs at Opening
By Sam Mamudi, Bloomberg
The clock won’t be ticking on Alibaba Group Holding Ltd. as market makers work to arrange its first trade on the New York Stock Exchange.
“Whether it’s 15 minutes to get to that solution or an hour and 15 minutes, we don’t really care,” David Ethridge, the senior vice president at NYSE Group Inc. who heads its initial public offering unit, said in an interview. “We’re going to be very supportive to the underwriting teams, the designated market maker and all the other market participants in making sure we give them the kind of launch they want.”
Alibaba options expected to be listed on Sept. 29
By SAQIB IQBAL AHMED, Reuters
NEW YORK – Investors looking to hedge their bets or speculate on the direction of Alibaba Group’s IPO- stock, after its expected public sale of shares on Friday, will be able to trade its options in two weeks, as US options exchanges are expected to list contracts on the company.
The Chinese e-commerce company’s options will be listed on CBOE Holdings Inc. and International Securities Exchange Holdings’ options exchanges on Sept. 29, pending the company’s public sale of shares this week, the exchanges said on Tuesday (Wednesday, PHL time).
Will CBOE and C2 Gain by Listing Alibaba Options Post-IPO?
Zacks Equity Research
CBOE Holdings Inc. (CBOE – Analyst Report) disclosed its intention to list options derivatives for Alibaba Group Holding Ltd., following the latter’s initial public offering (IPO) on Sep 19 at NYSE, under the symbol BABA. The increased volatility that Alibaba stock is likely to experience attracts the attention of this options exchange.
CBOE Holdings plans to list Alibaba options within a fortnight of the IPO, by Sep 29. The U.S. options exchange would list this eCommerce behemoth’s option contracts in its both primary exchange – Chicago Board Options Exchange Inc., or CBOE, as well as in its all-electronic options exchange – C2 Options Exchange Inc., or C2.
ICE Futures US Sets Daily Volume and Open Interest Record in mini MSCI Complex and Daily Volume Record in mini MSCI Emerging Markets
NEW YORK–(BUSINESS WIRE)– Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, announced today that ICE Futures U.S. achieved a daily volume and open interest record in the mini MSCI Index futures complex and a second consecutive daily volume record in the mini MSCI Emerging Markets Index future on Tuesday, September 16, 2014.
Regulation and Enforcement
High-frequency trading firm to pay $16M penalty
Kevin McCoy, USA TODAY
A New York-based high-frequency trading firm was hit with a record $16 million settlement penalty Wednesday for violating a federal rule that requires all broker-dealers to maintain minimum levels of net liquid assets or net capital.
Latour Trading operated without maintaining the required net capital on 19 of 24 reporting dates during a two-year period — falling below the mark by as much as $28 million — the Securities and Exchange Commission announced in an administrative proceeding.
Barchart Trader Platform Adds Options Analysis
John D’Antona Jr., Traders Magazine Online News
Options traders are getting more functionality on their desktops and mobile devices.
Barchart.com, Inc., a provider of market data and information, announced the release of advanced options analysis and an options strategy builder within its Barchart Trader platform. Traders will be able to react to data faster, trade smarter and cheaper.
Among the new add-on features to the platform are an advanced options price calculator with user-defined inputs and multiple pricing models for calculating Greeks and theoretical values.
Bad News for Hedge Funds Good for BlackRock Stock
The massive asset manager is the natural beneficiary as investors tire of high fees and low returns.
Steven M. Sears, Barron’s
The hedge fund industry is experiencing a Marie Antoinette moment.
After years of stories about the massive houses, art collections, exotic autos, tax breaks, and fantastic life styles of hedge fund managers, some of the people who pay for those luxuries are saying, No more.
The fund managers may not lose their heads, à la Marie Antoinette, but their gilded pay packages may suffer a sordid end.
When to Implement a Covered Call ETF Investment
by Tom Lydon, ETF Trends
As volatility picks up, exchange traded funds that track a covered call strategy may help investors diversify a portfolio and augment their income generation.
On the recent webcast, Using Options to Maximize Returns, Nicolas Piquard, Vice President and Options Strategist with Horizons ETFs Management, points out that according to the Tobin Q’s ratio, a ratio that compares the market value of a company to the replacement value of its assets, the markets are looking pricey.
Goldman Sachs Says Buy Protection on These Stocks…Now
By Ben Levisohn, Barron’s
The folks at Goldman Sachs are warning that October usually brings higher market volatility–and recommend investors buy “long volatility positions” in companies where event risk has not been priced into the options market, including Bristol-Myers Squibb (BMY), JC Penney (JCP), Ford Motor (F) and Intel (INTC).
Goldman Sachs’ John Marshall and Katherine Fogertey explain:
We expect a seasonal pickup in implied and realized volatility as we approach year-end…On average since 1928, October realized volatility has been 19 vs 15 for all other months. In recent years, October volatility has been even higher and even more of a standout driven by volatility spikes in 1997, 2002, and 2008.
Are Traders Over-Preparing for a Sell-Off?
If you take an aggressive approach to VIX mean-reversion plays, the recent move is actionable
by Adam Warner, Schaeffer’s Investment Research
I often mention that I use the CBOE Volatility Index (VIX) closing greater than 20% above its 10-day simple moving average (SMA) as a trigger point. I also use it as a proxy for declaring VIX overbought, which (to me) is bearish for volatility and bullish for the market on the theory that VIX tends to mean revert.
Basic OptionsPlay with CBOE
Thursday, September 18th 2014 @ 2PM EST
Options trading is quickly growing with many investors finding value in the use of options for trading opportunities and generating income. Join us for an introduction to some of the basics of options trading and how the OptionsPlay software can help you navigate the market.
Peter Lusk, Senior Instructor at CBOE, and Tony Zhang, Head of Product Strategy at OptionsPlay, will walk you through the basics for getting started with options trading.
In this complimentary webinar, we’ll cover:
• Introduction to the basics of option contracts.
• Understand the mechanics of three popular option strategies.
• Learn that every trade begins with a three-part forecast.
This will be followed by applying some of the key talking points and analytics using the OptionsPlay Platform.
To register: http://jlne.ws/1tfFZor
Exploring New Volatility Features in Metro 5.2
OptionsCity Webinar Wed, Sep 24, 2014 2:00 PM – 3:00 PM CDT
Hosted by: Dave Hrencecin and John Churchill
Ever wanted to have more flexibility when calibrating a volatility curve to match market prices? New to Metro 5.2 is the ability to assign the center of a floating volatility curve in terms of the point type. Instead of floating a curve along the current underlying, each curve can follow the 50 delta strike, or even a 1/2 standard deviation shift above the spot price. One added benefit is that the new functionality can provide a sticky strike volatility dynamic. Join us in this session as Quantitative Analyst, David Hrencecin, provides a comprehensive look at these new features, outlining the problems they solve for traders, as well as touching upon the future direction of volatility modeling at OptionsCity.
To register: http://jlne.ws/1tfCEFS