Lead Stories

Greece-Induced U.S. Stock Losses Look Overblown to VIX Traders
Callie Bost – Bloomberg
Don’t fret too much about the reaction in U.S. stocks to Greece, according to traders in products tracking volatility.
Futures contracts tied to levels on the Chicago Board Options Exchange Volatility Index are showing signs that last week’s swoon, which sent a measure of turbulence surging the most since 2013, was overblown. A popular exchange-traded note whose value appreciates with market calm is attracting the most cash in nine months.
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***DA: Comparing the current VIX to Greek-induced stock market losses is non sequitur. VIX is a 30-day snapshot whereas the situation in Greece and Europe is a decade-long train wreck.

New VIX Weeklys Futures and Options – Enhanced Precision and Responsiveness with More Wednesday Expirations
Matt Moran – CBOE Options Hub
CBOE Futures Exchange, LLC (CFE) plans to list futures with weekly expirations on the CBOE Volatility Index (VIX) beginning Thursday, July 23, 2015, subject to regulatory review. VIX Weeklys options at CBOE are expected to follow on a later date, also subject to regulatory approval. The new VIX Weeklys futures and options will offer more expirations that have the potential to provide more precision and responsiveness for investors. www.cboe.com/VIXWeeklys
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***DA: The bespokization of futures – the opposite of futurization of OTC derivatives.

Hedge funds show little fear buying Greek debt
Michelle Celarier – New York Post
Savvy hedge-fund investors in Greek bonds were shell-shocked by the country’s rebuke of the austerity plan with a “no” vote in Sunday’s referendum.
But while they didn’t see it coming, the hedgies say they plan to load up on Greek government debt once the market starts trading again.
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***JB: Honestly the “no” vote did not surprise me even a little bit. Maybe I should start a hedge fund.

Options on MSCI EAFE and EM Indexes – Bigger Notional Size and Added Expirations
Matt Moran – CBOE Options Hub
CBOE recently launched trading in options on the MSCI Emerging Markets Index (MXEF) and the MSCI EAFE Index (MXEA).CBOE’s options on MSCI indexes are designed to provide investors different ways to efficiently gain exposure to the global equity markets and execute risk management, hedging, asset allocation and income generation strategies.
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Markets prepare for new Greek currency as Grexit prospect grows
Roger Blitz and Philip Stafford – Financial Times
For months “Grexit” has been a regular topic for speculation among foreign currency specialists. But the working assumption has been that all parties in Greece’s drawn-out saga would find a way of resolving their differences and keep the country in the eurozone.
That is no longer the case following the resounding “No” vote in the Greek referendum. As the financial markets digested the referendum outcome, foreign exchange strategists began to factor in the increased probability, instead of mere possibility, of Grexit.
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The Greece Crisis is No Black Swan
Adam Warner – Schaeffer’s Investment Research
When the going gets tough, the tough get going… into European options!
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Options Trading ‘By Appointment’
Markets Media
In options, there are a limited number of highly liquid names, and the rest of the market consists of issues with questionable liquidity, i.e. a trader may or may not be able to easily and efficiently execute an order.
Estimates vary as to the size of the top tier — some market observers say it’s only about 50 issues, while others may say it is well north of 100. Whatever the number, less-liquid options are largely “trade by appointment,” said Andy Nybo, principal and head of derivatives research at Tabb Group.
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***DA: While you wait for your quote, have a seat over in the corner. We have some lovely issues of Reader’s Digest from 2012.

Exchanges

CME Group closes futures pits without extended U.S. review
Reuters
CME Group Inc ended open-outcry trading in most of its futures markets as planned on Monday as the U.S. Commodity Futures Trading Commission chose not to extend a review of the closures, according to the agency.
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***DA: And without fanfare. We went down to the gallery to watch the end, and saw virtually no activity at the close.

China Futures Exchange unveils moves to curb excessive trading
Reuters
China Financial Futures Exchange said on Monday it would limit daily trading in the CSI 500 index futures, and would also strengthen supervision over the use of index futures in hedging to calm the volatile market.
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***DA: Excessive trading is fine on the way up, but not on the way down.

Regulation & Enforcement

‘Flash Boys’ Programmer in Goldman Case Prevails Second Time
Chris Dolmetsch – Bloomberg
A former Goldman Sachs Group Inc. programmer who took the firm’s high frequency trading code when he left for another job was exonerated a second time after a judge ruled what he did wasn’t a crime.
Sergey Aleynikov, whose saga helped inspire Michael Lewis’s “Flash Boys,” was tried by New York prosecutors who took up the case after a federal conviction unraveled. His defense both times was that his actions were a disagreement between him and the bank better suited for civil litigation.
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***DA: When he left Goldman, he also took the stapler from his desk, but no one seems to talk about that.

CME Group’s Terry Duffy to Appear before the U.S. House Committee on Agriculture to Urge the Repeal of a Decades-Old Crude Oil Export Ban
Press Release – CME Group
CME Group Executive Chairman and President Terry Duffy will appear before the U.S. House Committee on Agriculture on Wednesday, July 8, to discuss How Lifting the Oil Export Ban Impacts the Rural Economy and Futures Markets.
“In the 1970’s, the U.S. government imposed a ban on the export of crude oil that put our nation’s energy producers at a competitive disadvantage and harmed market efficiency,” said Duffy. “Repealing this decades-old ban would strengthen the position of the U.S. as an energy leader, benefit energy markets through more robust price discovery, and benefit our economy by eliminating needless barriers to trade in crude oil.”
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Strategy

Why I’ll Be Shopping For A VIX Short This Week – ProShares Ultra VIX Short-Term Futures ETF Nathan Buehler – Seeking Alpha
U.S. economics still remain positive.
Historical patterns for UVXY show us that further upside risk in this environment is limited.
The Greece situation is way overblown.
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Events

Trading Comes Alive and Crosstown Classic This Week
Russell Rhoads – CBOE Options Hub
On Thursday I’ll be teaming up with Dan Sheridan for a one day seminar at CBOE focusing on trading Weeklys. Then on Friday students will be heading to the north side of Chicago to see the Cubs and White Sox meet for the first time in 2015. More information follows –

Trading Comes Alive! Income Opportunities Using Weeklys
Chicago Board Options Exchange
Thursday, July 9, 2015
8:00 a.m. – 4:15 pm Central

Crosstown Classics Ticket for July 10th Included in Seminar Price!
Heavy hitting names in investing — the Chicago Board Options Exchange and Sheridan Options Mentoring – are teaming up to present Trading Comes Alive! Income Opportunities Using Weeklys.

Russell Rhoads, Senior Instructor with The Options Institute at CBOE, and Dan Sheridan, Founder of Sheridan Options Mentoring, will host this live, in-person only seminar offering a comprehensive discussion of option pricing and the Greeks and how they affect Weeklys strategies. How to develop a trading plan and build an investment portfolio comprised of Weeklys Options will also be addressed.
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