JLN Options: Options Market Mixed On Janus and Bill Gross; VIX Resisting Panic as S&P 500 Rout Erases $320 Billion; A somewhat puzzling pummeling on Wall Street

Sep 26, 2014

Observation and Insights

Matthew Scharpf, Vice President Sell Side Business Development, Eurex – Trading with a Creative MindMatthew Scharpf, Vice President Sell Side Business Development, Eurex – Trading with a Creative Mind
JohnLothianNews.com

“You’re filling your toolbox…You’re not going to need it today or tomorrow, but one day it’s good to have.”

Matthew Scharpf, vice president of sell side business development for Eurex, gives a unique look at systems in the financial industry and how we can connect new pieces together to create innovation. Using his guitar and knowledge of music, Scharpf explains how individual notes can be combined into chords and used in a variety of instances to create different songs. And even when it may seem like there are some limitations in songwriting, different tools and methods can help facilitate the creation of something new. Scharpf compares this system to the financial industry and tells his audience how this type of thinking also applies to their careers. There may be times when different parts of a system utilized with other tools can create something new and innovative. It’s just a matter of thinking outside the box.

Watch the video »

Lead Stories

Options Market Mixed On Janus and Bill Gross
Steve Sears – Barron’s
Options trading in Janus Capital Group (JNS) has a surprisingly defensive tone even though the stock is up some 34% on news Bill Gross was joining.
Gross, of course, is the Bond King of Wall Street. He built PIMCO into one of the world’s largest bond firms, only to stun the Street today with news he was joining a firm that has not been highly-regarded since the 1990s.
http://jlne.ws/1ncIoQp

VIX Resisting Panic as S&P 500 Rout Erases $320 Billion
Callie Bost and Joseph Ciolli – Bloomberg
Even as $320 billion was erased from U.S. equity values yesterday and all but 14 companies in the Standard & Poor’s 500 Index fell, volatility gauges signaled investors have yet to enter panic mode.
The 18 percent increase in the Chicago Board Options Exchange Volatility Index sent the measure to 15.64 yesterday, below its peak level during every major drop since 2012, data compiled by Bloomberg show. The VIX, derived from the price of options used to hedge against losses, is hovering around its average level from the past three years, the data show.
http://jlne.ws/1ncJkEB

A somewhat puzzling pummeling on Wall Street
Kim Peterson – CBS News
Stocks got slammed Thursday, suffering their worst one-day loss in months and leaving investors and market watchers bewildered.
No obvious reason accounted for the drop. Could it be related to Apple (AAPL), which saw shares slide 3.8 percent after an iPhone software glitch? Was it the ongoing Russia-Ukraine conflict? The U.S.-led airstrikes in Syria? Weak U.S. durable goods orders in August?
http://jlne.ws/Zgz6Z2

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Extreme Fear: Epic Top, or Overreaction?
Adam Warner – Schaeffer’s Investment Research
Want another sign that fear is taking over? CNNMoney runs a Fear and Greed Index, and it’s looking pretty ugly:
They look at seven factors and rate them on a Fear and Greed scale, and there’s only one factor not in “Extreme Fear” right now: volatility.
Yes, that’s right. Volatility is “Neutral,” and everything else is in Extreme Fear! And I’d suggest by the time you maybe click on this, volatility will be in Extreme Fear, too. The CBOE Volatility Index (VIX) is escaping above its upper Bollinger Bands and deviating far from moving averages as I type.
http://jlne.ws/1nd0eCT

Wild stock market ride is just beginning
Mark Hulbert – MarketWatch
This week’s extraordinary stock market volatility is just a harbinger of things to come.
The Dow Jones Industrial Average’s DJIA, +0.99% daily change each day this week, for example, has been in the triple digits. The CBOE’s Volatility Index VIX, -5.24%   closed Thursday more than 30% higher than where it stood at the end of last week.
Unfortunately for those of you who crave calm markets, October is likely to be even more volatile, at least as measured by the VIX.
http://jlne.ws/1ncLeoG

Alibaba options debut will see strong demand
 Joseph Nordqvist – Market Business News
On Monday stock options of Alibaba Group Holding Ltd will debut. Analysts expect for the to be strong demand for puts and calls, particularly after the attention of the company’s IPO when it went public last week – in which it raised over $21 billion.
http://jlne.ws/1ncM4lc

Quick View: FX industry gets organised
Philip Stafford – Financial Times
It’s the world’s biggest, most liquid and most accessible market and is closely watched by governments and central banks alike. Yet now the foreign exchange market also feels the need for a lobby group to look out for its interests.
Yesterday saw the launch of the Foreign Exchange Professionals Association (FXPA), which aims “to engage key US and international regulators, policy makers, the general public and news media” in a range of industry issues.
http://jlne.ws/Ylfbqx

Traders lose heavily as NSE benchmark falls below key level
Ashutosh Shyam – The Economic Times
Put writers who bet on Nifty staying above 8,000 lost heavily on Thursday after the index fell below the crucial mark. The traders are likely to have lost as much as Rs 40 per lot after their bet turned awry.
The 8,000 level had the maximum open interest position and many traders were confident that the index would not breach this level.
http://jlne.ws/1ncYsld

Regulation and Enforcement

Wall Street scared new attorney general could be Preet
Kevin Dugan – New York Post
Attorney General Eric Holder is heading to the exit door — and that’s making Wall Street nervous.
Executives in the financial services industry see Manhattan US Attorney Preet Bharara as a possible successor — and with his tough-on-corporate-crime history, believe a renewed focus on Wall Street could be coming to Washington.
http://jlne.ws/1ncJNGP

Inside the New York Fed: Secret Recordings and a Culture Clash
Jake Bernstein – Pro Publica
Barely a year removed from the devastation of the 2008 financial crisis, the president of the Federal Reserve Bank of New York faced a crossroads. Congress had set its sights on reform. The biggest banks in the nation had shown that their failure could threaten the entire financial system. Lawmakers wanted new safeguards.The Federal Reserve, and, by dint of its location off Wall Street, the New York Fed, was the logical choice to head the effort. Except it had failed miserably in catching the meltdown.
http://jlne.ws/YlcANa

Strategy

What to look for in Alibaba options
Jon “DRJ” Najarian – optionMONSTER
Alibaba options will be very active when they start trading on Monday, but they probably will not surpass the standing record of 365,000 contracts set by Facebook’s first calls and puts.
That’s because unlike FB, Alibaba hardly allocated any IPO shares to the public. So BABA holders are primarily institutional, and many of them will have access to over-the-counter options, trading for instance as Carl Icahn and Bill Ackman do directly through the likes of Goldman Sachs, Deutsche Bank, and Credit Suisse rather than on listed options markets.
http://jlne.ws/1ncVm0G

Events

Lifecycle of a Financial Derivative Training Class – Financial Markets World
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Life Cycle of a Financial Derivative
Oct 20-21, 2014, Chicago       Nov 3-4, 2014, New York City
Registration Fee: US$1,695.00     Register    
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Instructor: Mayra Rodriguez Valladares
Hours: 9:00 am – 5:00 pm each day; Registration/Breakfast begins at 8:30 am
Chicago Location: Club Quarters Hotel, 75 E. Wacker Dr., Chicago 
New York City Location: Club Quarters Hotel, 52 William Street (Wall Street Area) 
The financial press usually concentrates on how financial derivatives are utilized to hedge or speculate or on how the misuse of financial derivatives has caused significant financial losses at financial institutions, municipalities, and corporations. Yet, key legal and operational risks in the global use of financial derivatives remain a mystery, even to many practitioners in this rapidly growing global industry. Transacting derivatives is detailed and document intensive. The very architecture of derivatives’ front, middle, and back office functions can present numerous challenges to both on-site and off-site bank examiners, auditors, and compliance professionals. These professionals require specialized and routinely upgraded supervisory skills to meet their demanding objectives.
http://jlne.ws/1nd6CtV

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