JLN Options: Mini options struggle to maximise potential; Big trade bets on spike in volatility; Betting On a VIX Breakout

Mar 20, 2014

Lead Stories

Mini options struggle to maximise potential
Futures and Options World
Mini options based on five of the most liquid US stocks are struggling to match early market expectations one year after launch as the products aimed at retail investors have failed to build traction, says Jonathan Watkins.
Read more: Mini Options Apple Google CBOE ISE
March 18 marks a year since mini options hit the US market and early signs of the products taking off have disappeared along with high hopes of the products catching on.

Big trade bets on spike in volatility
The Options Insider
A huge trade is betting that volatility will spike higher in the next month.
optionMONSTER systems show that a trader bought 19,200 April 75 calls for the ask price of $0.33 in the iPath S&P 500 VIX Short-Term Futures Note. This is clearly a new position, as previous open interest in that strike was 9,418 contracts.

Betting On a VIX Breakout
Adam Warner – Schaeffer’s Investment Research
Somebody’s bunny thinks the CBOE Market Volatility Index (VIX) is going to see some fireworks in the next few months.
Should we run for the hills … right after buying some VIX futures?

China looks beyond commodity derivatives with equity options launch
Justin Lee – Risk Magazine
Commodities have been the mainstay of China’s derivative markets so far but the launch of equity options on two of the country’s main exchanges could see this dominance challenged.

Yellen Sellin’ in Europe and Asia, Too
Brendan Conway – Barron’s
Markets in Europe and Asia are following U.S. stocks lower Thursday. The theme is the same as Wednesday: Surprise at Federal Reserve chief Janet Yellen’s suggestion of relatively speedy interest-rate increases.

Carlyle’s commodity arm starts trading new gold and base metals fund
Barani Krishnan – Reuters
Vermillion, the commodity arm of U.S. private equity group Carlyle Group LP (CG.O), started trading a new gold and base metals fund this month as it seeks to rebuild market presence after losing more than half of its capital, people familiar with the matter said on Thursday.

News Release Distributor to Stop Selling to High-Speed Traders
William Alden – The New York Times
Eric T. Schneiderman, the New York State attorney general, can count another victory in his quest to curb some of the advantages enjoyed by the fastest traders on Wall Street.
Mr. Schneiderman’s office announced on Wednesday that Marketwired, a Canadian company that distributes news releases on behalf of public companies, had agreed to end its practice of selling its information feeds directly to high-frequency traders.

Videocast: Selling VIX premium

Speed Trader Sees Sisyphean Task in High-Frequency Crackdown
Sam Mamudi – Bloomberg
Mark Gorton knows what will happen on the day high-frequency traders’ computers get kicked out of the New York Stock Exchange.
“All you’re going to do is have a data center that’s across the street,” said Gorton, founder of the Lime Wire LLC music-sharing service and managing director of Tower Research Capital LLC, one of the most prolific equity traders in America. “Everyone’s going to want to put their computers there.”
***JB: It does not have to be a Sisyphean task except for the government’s predilection for regulations with loopholes a mile wide (actually I am pretty sure that is on purpose).

Regulation and Enforcement

US swaps regulator seeks help from markets to clean up data
Douwe Miedema – Reuters
The U.S. derivatives regulator on Wednesday asked market participants to answer a long list of questions it hopes will help it cope with a deluge of data on the $630 trillion market it newly regulates.

Bitcoin firms explore U.S. rules for derivative exchanges
Douwe Miedema – Reuters
Companies have inquired in the past month about regulations that would govern exchanges for bitcoin derivatives, a top U.S. regulator said on Wednesday, a sign such virtual currencies could become a more mainstream financial product.

Inside traders used spycraft to swap tips: prosecutors
Jennifer Smith – MarketWatch
Three men ran an insider-trading ring with information from one of New York’s premier mergers-and-acquisitions law firms, prosecutors say, taking care to chat in code and flash stock tips on napkins or sticky notes before gobbling them down under the clock inside the teeming great hall of Grand Central Terminal.
***SR: They ate napkins and sticky notes and got caught anyway. Sometimes crime does not pay.


A Better Way to Invest in Commodities — or Even the ‘Fear Index’?
Brendan Conway – Barron’s
Plenty of investors want to own commodities and inverse assets in theory. The trouble comes with executing it. The oft-published disclaimer says this index or that is “not directly investable.” The commodity futures market, which is where funds resort unless they store gold or silver in a vault, is a slippery beast.

Non-Directional Option Trades
By Kerry Given, MoneyShow.com
Though many traders focus on buying calls or puts expecting a large move in one direction or another, Kerry Given discusses several non-directional option strategies.

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