Lead Stories

Options Industry Has Second-Best Volume Year in 2013
Kaitlyn Kiernan – The Wall Street Journal
In the options market, an overall increase in volume last year wasn’t a win for all.
The options industry notched its second-heaviest volume year in 2013, helped by strong gains in options tied to benchmark indexes. Trading volumes grew 2.7% in 2013 to 4.1 billion contracts, with a total of $1.2 trillion in options premium exchanging hands throughout the year, industry clearinghouse the OCC said Thursday.
http://jlne.ws/1l7TjGO

2014: A Slower-Moving 2013? We Expect Low Volatility To Continue
Deutsche Bank Markets Research
US equities’ 2013 performance was impressive: a 32% total return, and especially impressive from our option market perspective was the exceptionally low volatility in the market. The only years over the past quarter century with lower SPX RV than 2013’s 11.2% happened around Fed tightening cycles – which in itself indicates that low vol could be here to stay.
http://jlne.ws/1bEeIPs (PDF)

For Indecisive Travelers, an Options Market for Airfares
Justin Bachman – Bloomberg
Airfare pricing is complex, to say the least, and flight shopping can be a chore beset by uncertainty: Do I buy or wait? And if I wait, will I suffer that sick feeling later that I dallied too long and the fare shot up?
There might be a different option. Options Away, a startup based in Chicago, is seeking to build a market for options on airfares, a tiny piece of price insurance that can lock in an airfare for a specific period and give a buyer time to deal with the purchase later, after considering travel plans with family and friends.
http://jlne.ws/1bEfXyg

Utility Bears at Five-Year High as Bond Yields Increase: Options
Lu Wang and Nikolaj Gammeltoft – Bloomberg
The cost of hedging against losses in utility shares has risen to a five-year high after rising bond yields made dividends less appealing and short sellers boosted bearish bets.
A gauge of options prices known as implied volatility has risen 8.8 percent to 14.19 in the past month for the Utilities Select Sector SPDR Fund (XLU), an exchange-traded security tracking power companies, according to data on three-month contracts compiled by Bloomberg.
http://jlne.ws/1bEhMLs

A Tale of Two Volatility Derivatives
Adam Warner – Schaeffer’s Investment Research
In today’s installment of “Better Know a Volatility Derivative,” I bring you two: the CBOE VIX Premium Strategy Index (VPD) and the CBOE Capped VIX Premium Strategy Index (VPN).
I touched on VPN recently as a possible driver of out-of-the-money (OTM) call volume in CBOE Volatility Index (INDEXCBOE:VIX) options. But let’s look into these a little further.
http://jlne.ws/1i31npC

Dark trading booms in 2013 as European markets recover
The Trade
Dark trading volumes on multilateral trading facilities (MTFs) increased by over 40% last year amid a broader recovery for European markets.
Total value traded on European exchanges reached €8.46 trillion in 2013, up 5.1% compared to 2012, according to figures from Thomson Reuters Equity Market Share Reporter.
http://jlne.ws/19FxonP

Exchanges

ISE Reports Business Activity for December and Full Year 2013
Press Release (ISE)
The International Securities Exchange (ISE) today reported a combined average daily volume (ADV) of 2.4 million contracts in December 2013 for its two exchanges, ISE and ISE Gemini. This represents 18.3% of U.S. equity options market share.
Average daily volume for full year 2013 for ISE was 2.4 million contracts, making it the second largest U.S. equity options exchange with market share of 16.6%*. Since launching on August 5, 2013, ISE Gemini reported an ADV of 308,000, with steady month-over-month increases in ADV and market share. Total combined volume for both exchanges was 638.8 million contracts for the full year.
http://jlne.ws/1dtW4yo

2013 Trading Volume Reaches New All-Time High At CBOE Futures Exchange
Press Release (CFE)
For a fourth consecutive year, exchange-wide trading volume at CFE set a new annual record.  The 40.2 million contracts traded in 2013 was an increase of 68 percent from the 23.9 million contracts traded in 2012.  Average daily volume (ADV) at CFE also reached a new high for a fourth straight year in 2013.  The 159,498 contracts per day was 67 percent above the ADV of 95,569 contracts in 2012.  
Trading volume in VIX futures totaled 39.9 million contracts for the year, a fourth straight annual volume record, and surpassing the 23.8 million contracts traded in 2012 by 68 percent.  Average daily volume in VIX futures was 158,508 contracts, also a fourth consecutive annual record, and up 67 percent from 2012.
http://jlne.ws/1dZtpzl

CME Daily Trading Volume Up in December; ICE Also Up
Everdeen Mason – NASDAQ
CME Group Inc.’s ( CME ) December daily trading volume rose as a major jump in interest-rate and energy contract volumes offset a drop in its other product lines, while rival exchange IntercontinentalExchange Group ( ICE ) reported a jump in futures and options contract volume.
http://jlne.ws/1bEg253

Singapore to clear U.S. derivatives
Press Release (via Futures Magazine)
Singapore Exchange (SGX Derivatives Clearing) has become the first Asian clearing house authorized as a Derivatives Clearing Organization (DCO) by a U.S. derivatives regulator, the Commodity Futures Trading Commission (CFTC).
The CFTC issued an order granting SGX-DC registration as a DCO pursuant to Section 5b of the Commodity Exchange Act.
http://jlne.ws/1bEhswe

Options Exchange Marketshare – December 2013
OCC (via email)

December 2013 Total Options Marketshare:
AMEX-                 12.69%
BATS-                     2.28%
BOX-                       1.84%
CBOE-                   26.82%                                                            
C2-                          1.79%
GEM-                      2.86%
ISE-                        13.00%
MIAX-                     2.54%
NOBO-                    0.58%
NSDQ-                    9.08%
NYSE Arca-           9.62%
OMX PHLX-         16.91%

December 2012 Total Options Marketshare:
AMEX-                  14.26%
BATS-                      3.52%
BOX-                        2.65%
CBOE-                    23.02%
C2-                            1.35%
ISE-                          15.45%
MIAX-                      0.01%
NOBO-                     0.97%
NSDQ-                      5.27%
NYSE Arca-             10.74%
OMX PHLX-           22.77%

December 2013 Equity Options Marketshare:
AMEX-                  13.97%
BATS-                      2.52%    
BOX-                        2.03%
CBOE-                    19.44%
C2-                            1.97%
GEM-                        3.16%
ISE-                         14.32%
MIAX-                       2.80%
NOBO-                     0.64%
NSDQ-                     10.01%
NYSE Arca-           10.49%
OMX PHLX-          18.65%

December 2012 Equity Options Marketshare:
AMEX-                 15.56%
BATS-                      3.85%
BOX-                       2.90%
CBOE-                   16.22%
C2-                            1.43%
ISE-                        16.75%
MIAX-                     0.01%
NOBO-                    1.06%
NSDQ-                    5.76%
NYSE Arca-          11.68%
OMX PHLX-         24.77%

Regulation and Enforcement

U.S. regulators temper overseas swaps guidance as lawsuit looms
Sarah N. Lynch – Reuters
U.S. regulators said Friday they will provide temporary relief to swap dealers affected by a November staff memo that expanded the scope of their power to regulate derivatives overseas.
http://jlne.ws/1bEfoo7

Regulator of Wall Street Loses Its Hard-Charging Chairman
Ben Protess – Dealbook
Gary Gensler squeezed into a Washington auditorium last month, mingling with the 300 guests at his farewell party and basking in the attention as a who’s who of finance recounted his campaign to rein in Wall Street risk-taking.
http://jlne.ws/1bEhW5F

Strategy

VIX Rallying with the SPX = UGLY
Mark Sebastian – The Options Insider
When the SPX rallies and the VIX rallies at the same time it is almost always negative for the S&P 500.  Take a look at how SPY vols has been moving and SPY has moved over the last few weeks.
http://jlne.ws/1bEf88G

Options Education

A Few Pennies Can Make a Difference
Dan Passarelli – The Options Insider
One of the more difficult problems with which to deal for an options trader has historically been the broad bid-ask spreads quoted for options. I often refer to them in class and depending on how large the spread, it may keep me out of a potential trade.
http://jlne.ws/1dtWDsh

 

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