JLN Options: Investors Look to Cheap Hedges Ahead of Fed Announcement; Options Crowd Bets on March Fed Taper; S&P 500: The Fed Taper Explained By SPX Options

Dec 17, 2013

Lead Stories

Investors Look to Cheap Hedges Ahead of Fed Announcement
Kaitlyn Kiernan – The Wall Street Journal
The Federal Reserve isn’t expected to pull back on its easing efforts at this week’s meeting, but some investors are buying cheap insurance in the form of stock options in case the Fed spooks the markets.

Options Crowd Bets on March Fed Taper
Steven M. Sears – Barron’s
Beware the ides of March. The March options expiration cycle is emerging as a time when investors expect the current bull market to be taken to slaughter.

S&P 500: The Fed Taper Explained By SPX Options
J.W. Jones – ETF Daily News
With the last major news item for 2013 less than 48 hours away, I thought I would share some insights as to what the S&P 500 Cash Index (SPX) options were pricing into the Federal Reserve’s monetary policy announcement due out Wednesday.

Buckle Up Investors, Volatility May Return In 2014
The Street
The Dow Jones Industrial Average rallied nearly 130 points on Monday yet the CBOE Volatility Index was also higher for the fourth straight day. In fact, the VIX is up 17% so far in December, a signal of anxiety and hedging below a seemingly calm surface in U.S. stocks.

Did Slow and Steady Lose the Race?
Adam Warner – Schaeffer’s Investment Research
If there’s one thing we can all agree on about the market, it’s that 2013 was a pretty strong year amid a sea of low volatility and little in the way of shakeouts. Slow and steady seemed like the optimal strategy, right?

The changing landscape of Europe’s equity derivatives market
Jonathan Watkins – Future and Options Intelligence
Europe’s single stock futures and options markets have been traditionally dominated by local exchanges, but as competition increases, the landscape could be set to change across the continent.


LCH.Clearnet expands credit default swap clearing service
Clare Hutchison – Reuters
LCH.Clearnet, the clearing house majority owned by the London Stock Exchange, has expanded its credit default swap (CDS) clearing service, as it seeks to improve efficiency for clients and capitalise on derivatives trading reforms.

Regulation and Enforcement

Crunch time for exchanges’ ‘vertical silo’ as EU rules finalised
Philip Stafford – Financial Times
After three sometimes interminable years, Europe stands on the brink of agreeing its flagship financial markets legislation. European policy makers meet tomorrow to hammer out the final details for the Markets in Financial Instruments Directive, and an accompanying piece in which some rules are given the greater force of a full-blown Regulation.


IV Spreads in VIX Are Odd
Mark Sebastian – The Options Insider
In the last few months we have watched the implied volatility of VIX options basically implode.  Some would argue that it is a crowded trade.  I would argue that the options are finally finding a normal volatility after trading above an 80% IV for almost 3 years.  That being said, the movement in VIX options in the last few days has been extremely odd.

The VIX Continues to Argue that Equities are Vulnerable to Weakness
Mike Paulenoff – AdviceTrade.com
What are we supposed to make of the VOLATILITY S&P 500 (VIX) today? The VIX is up slightly, but the S&P 500 Index (SPX) is up 0.7% too!
That is weird, no, especially on such a violent- and strong-upside reversal in the SPX.

Videocast: Last-minute VIX buying


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