JLN Options: Global Growth Threatened in $693 Trillion Derivatives Review; Non-banks notch a win in long-running derivatives battle; U.S. Market Risk Dashboard Update – No Warning Signs, Yet

Apr 9, 2014

Lead Stories

Global Growth Threatened in $693 Trillion Derivatives Review
Abigail Moses – Bloomberg
Global regulators’ failure to align efforts to reform the $693 trillion derivatives market threatens to undermine economic growth, according to the International Swaps & Derivatives Association.

Non-banks notch a win in long-running derivatives battle
Lauren Tara LaCapra – Reuters
A group of small brokerages and large commodities companies convinced lawmakers to tweak a rule that they say would have made derivatives trading more expensive for them and sent more business to Wall Street banks that already dominate the market.

U.S. Market Risk Dashboard Update – No Warning Signs, Yet
The Options Insider
As of the Monday close, VIX is above its two year median level, indicating a stronger bid for short-dated SPX premium. Longer term implied volatility is still well-anchored with SPY one year at the money options priced near the first quartile threshold.

VXST Options to Launch April 10
Matt Moran – VIX Views
CBOE plans to launch options on the CBOE Short-Term Volatility Index (VXST) on Thursday, April 10.  Below are points that can help in your analysis.

Beta Is Four-Letter Word in Stocks at Start of Earnings
Michael P. Regan – Bloomberg
Beta has become a bad word on Wall Street, just in time for earnings season.
The second letter of the Greek alphabet is used as shorthand for a measurement of volatility in a security. Put simply, if a benchmark index rises 1 percent you can expect a high-beta stock to rise significantly more than 1 percent. If the benchmark falls more than 1 percent, look out below.

Ready for the Next Surge in Volatility?
Ronald Delegge – Fox Business
Is another surge in stock market fear and volatility ahead? Will you be ready when it happens?
“Public psychology is the most important single factor in shaping security markets,” said Gerald Loeb.
Loeb was right and that’s why we make it a regular habit at ETFguide to track movements and trading opportunities in the CBOE S&P 500 Volatility Index (ChicagoOptions:^VIX).

The Potential Perils of Low-Volatility Trading
Adam Warner – Schaeffer’s Investment Research
One of the byproducts of the recent Flight From Momentum is the relative outperformance of lower-octane names. There’s an ETF or ETN that tracks everything nowadays, including an iShares S&P 500 Low Volatility Portfolio ETF (SPLV).

Exchange Patent Claim Improperly Invalidated
Elizabeth Warmerdam – Courthouse News Service
In seven-year battle over trading technology, a federal judge improperly gutted the claim of a patent owned by International Securities Exchange, the Federal Circuit ruled.
The patent at issue discloses an “automated exchange” for trading financial instruments, and the previously invalidated claim says “processor means further comprises means for matching the remaining portion with professional orders or quotations in the book memory means on a pro rata basis.”
***JB: We reported the decision a few days ago but this is a closer look at the decision itself.

Carry trades are back – ‘fragile five’ in demand at euro’s expense
Anirban Nag – EuroNews
In demand are the currencies of the “fragile five” countries highly reliant on foreign capital – the Turkish lira, the South African rand, the Brazilian real, the Indonesian rupiah and the Indian rupee.
All five were shunned for much of last year because of fears the winding down of U.S. monetary stimulus would see funds withdrawn from emerging markets.
But the options market indicates a rally may have legs, as gauges of how choppy the major currencies will be have fallen, encouraging investors to take on more risk in search of returns.

5 Reason Gold Volatility Has Dramatically Declined
Tommy Humphreys – Investing.com
Volatility in the Gold market, both realized and implied, has dramatically declined during the past year as evidenced by the following two charts:…
Why the sudden reduced volatility in gold? And what clues does this offer us about what might be next for gold?

Macau Casinos Make Wynn’s Investors Most Bullish Ever
Inyoung Hwang and Namitha Jagadeesh – BloombergBusinessweek
A surge in gambling revenue from the world’s biggest casino hub has driven bullish wagers on Wynn Resorts Ltd. (WYNN:US) to their most expensive prices ever.
Options that appreciate when the stock rises cost the most since data going back to 2005 relative to bearish contracts, even after the shares slumped 14 percent from an all-time high last month. Wynn shares rallied 73 percent in 2013, fueled by a jump in Macau revenue.

Buy-side throws weight behind reform of broker models
The Trade
A buy-side desire for greater control and transparency is forcing brokers to re-think their coverage models, delegates at TradeTech Europe 2014 were told in Paris, but questions of trust still have the potential to hamper relationships.


CME E-Mini NASDAQ-100 Options Hits Record Volume as NASDAQ Falls
The Options Insider
On Friday, as the Nasdaq Composite Index continued its fall, the CME Group’s E-mini NASDAQ-100 options (NQ) saw record volume as 38,057 contracts traded. This surpassed the previous record set on February 19, 2014 when 25,929 contracts exchanged hands. Traders utilized the product on Friday to manage their exposure to leading technology and non-financial companies during the day’s rapidly changing marketplace.

Euronext to wind down Alternext Amsterdam
Press Release (NYSE)
Euronext, a wholly owned subsidiary of IntercontinentalExchange Group (NYSE: ICE), today announced that, following a strategic review, it will wind down Alternext  Amsterdam by the end of the year, or as soon as possible thereafter.  
Euronext will consult with the issuers of the two companies and two bonds currently listed on Alternext Amsterdam to discuss a potential move to Euronext Amsterdam or to other Euronext markets.

Virtex Launching International Cryptocurrency Exchange
Adam Hofman – Bitcoin Magazine
Virtex is soon launching a platform that will allow for the exchange of cryptocurrencies at an international level. The company based in Kaunas, Lithuania is the realization of a project led by CEO Paulius Meskauskas, CMO Tomas Andzelis, and CRO Mantas Gustys, and was inspired by new technologies in cryptocurrency.

Regulation and Enforcement

Senate Panel Approves Nominees to Futures Trading Commission
Alexandra Stevenson – The New York Times
The Senate Agriculture Committee on Tuesday approved the nomination of Timothy G. Massad, a former corporate lawyer, as chairman of the Commodity Futures Trading Commission, one of Wall Street’s toughest watchdogs.


An Options Strategy to Protect Unvested Stock
Alex Coppola – The Wall Street Journal
The client was a successful tech entrepreneur who sold his business for $27 million in 2013.
The company that bought the client’s firm paid him one third of the purchase price in cash, and the other $18 million in company stock.
Rather than being issued as a lump sum, though, the shares were to be allotted in six tranches over the course of 18 months. That distribution arrangement worried the client: How he could protect the value of stock that wasn’t even his to manage for another year and a half?

Big Volatility In Grain Market
Bernard Stegmueller Jr – Inside Futures
The supply/demand report was released today as corn prices initially spiked up $.10 within minutes as then we saw the contract reverse direction and trade $.10 lower after the market settled down & digested the news corn finished down $.05-$.07 ….
I think options could be your best play with high volatility it keeps premiums high and allows you to trade the option market as if you were in the futures depending how far out your strike prices are as the delta percentage could fluctuate.

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past Options Newsletters

Pin It on Pinterest

Share This Story