JLN Options: Investors Embrace Volatility as Debt-Limit Deadline Looms; ISE Trades 20 Millionth Contract through Implied Order Functionality

Oct 15, 2013

Lead Stories

Investors Embrace Volatility as Debt-Limit Deadline Looms
Chris Dieterich – The Wall Street Journal
Stock investors so far have yawned at the likelihood of a U.S. default on its debt, but trading activity in exchange-traded funds tied to the VIX is soaring, indicating traders are loading up on hedges just in case events don’t turn out as they expect.

October Calm Keeps Market Swings Below Monthly Average
Whitney Kisling, Nikolaj Gammeltoft & Liz Capo McCormick – Bloomberg
Even with a deadline looming for the U.S. to avoid a debt default, it’s been a comparatively calm October for financial markets.
Daily swings in the Standard & Poor’s 500 Index (SPX) have averaged 0.78 percent so far this month, down from 0.9 percent for Octobers over the last eight decades and less than a quarter the moves in 1929, 1987 and 2008, data compiled by Bloomberg show.

Volatility Amid Government Gridlock
Adam Warner – Schaeffer’s Investment Research
Even though the market’s been kind of weak in many of our recent days, and even though the airwaves are filled with doomsday scenarios, we’re pretty clearly discounting a positive solution to this shutdown/debt ceiling situation.

Sentiment And Small Caps Suggest Good Run For Stocks
Ryan Detrick – Forbes
After big down days to start last week, we saw the 50th 300-point up day ever for the Dow Jones Industrial Average last Thursday. In fact, it was the best day for the S&P 500 Index (and SPY ETF) since the first day of the year. In the end, the SPY was able to finish green on the week after dropping the previous two weeks, thereby extending its streak without a three-week drop to a very impressive 73 weeks.

Government Default: Stocks Would Get Cheap Fast
Steven M. Sears – Barron’s
If the GOP continues to insist that health care changes accompany any increase in the debt ceiling, expect a sale in the stock market. Here’s how to shop.

Videocast: Final stretch for the VIX

Dark pool stock trading picks up as Europe debates new curbs
Sinead Cruise and Simon Jessop – Reuters
Fund managers are trading more assets on private exchanges known as dark pools, a growing trend that clashes with regulators’ mission to improve financial market transparency.

Ahead of the curve?
Richard Henderson – The Trade
As the US market approaches the third week of trading on swap execution facilities, volume figures suggest the buy-side has not yet fully embraced the new venues.



ISE Trades 20 Millionth Contract through Implied Order Functionality
Press Release (ISE)
The International Securities Exchange (ISE) today announced that trading of multi-legged strategy orders through its Implied Order* functionality has exceeded 20 million contracts. ISE’s Implied Order functionality has accounted for approximately seven percent of all non-crossing, multi-legged contract volume executed on ISE year-to-date.

CBOE Holdings: Strong Growth, Large Moat, And A Call Option On Volatility
Seeking Alpha
CBOE Holdings (CBOE) operates the largest options exchange in the U.S. and the company’s core earnings are generated by transaction fees from options and futures on its proprietary index products. These index products are the main drivers of CBOE’s exceptional earnings per share growth of 31.46 percent CAGR since the exchange became a publicly-traded company in 2010.

Industry Balks at Eliminating Exchange Rebates
Peter Chapman – Traders Magazine
Interest by money managers to eliminate exchange rebates is meeting resistance from exchanges, brokers and regulators.
At an industry conference last week, industry representatives balked at the idea of a pilot program that could drastically reduce rebates or replace maker-taker pricing altogether with a charge on both sides of a trade.

Clearing Firms Gird for Treasury Default
Katy Burne and Jacob Bunge – The Wall Street Journal
Some of the largest U.S. clearing firms are preparing for a potential U.S. Treasury default, the latest group to gird for the fallout if the government can’t break its budget impasse.


Regulation and Enforcement

SEC chief concerned about information overload for investors
Sarah N. Lynch – Reuters
U.S. regulators should review the federal rules governing how public companies disclose financial data to ensure investors don’t suffer from “information overload,” the top U.S. securities regulator said Tuesday.
**I’m hard pressed to think of a time when less information is better than more although it is said that ignorance is bliss. -JB

After sudden plunge, gold traders cry conspiracy
Alex Rosenberg – CNBC
Gold dropped $25 in two minutes Friday morning following what appeared to be a single massive sell order, and professional traders are now pronouncing the sale a deliberate attempt to manipulate the market.



Mark Sebastian Analysis: VIX and the Markets
Mark Sebastian – The Street
When I heard about the outlines of the deal from the House, I thought the president had made the republicans say “uncle.” I was relatively certain that on Monday morning, if a deal wasn’t already passed, the framework would be set and a deal would be imminent. Now that the president has proven there is no deal he can’t say no to. I think traders are going to be paying the price for not heading the markets history lesson: when it comes to event trading it always pays to wait, and/or take the sure money.

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