JLN Options: Options traders gear up to "strangle" and "straddle" Twitter; Nasdaq options markets briefly declare self-help against CBOE; Where Will VIX Be Next Friday?

Nov 15, 2013

Lead Stories

Options traders gear up to “strangle” and “straddle” Twitter
Doris Frankel – Reuters
Traders itching to “strangle” or “straddle” the newly launched shares of Twitter Inc will finally get their chance on Friday when trading in the social media company’s options launches on U.S. exchanges.
**Some options terminology is very evocative. -JB

Nasdaq options markets briefly declare self-help against CBOE
Nasdaq OMX Group Inc said on Friday that several of its operated exchanges briefly declared “self-help” against the Chicago Board Options Exchange before revoking it about 20 minutes later.

Where Will VIX Be Next Friday?
Mark Sebastian – The Options Insider
Next week is the week before Thanksgiving.  Typically, that week begins the most important time of the trading year:  The Holiday Crush.  The holiday crush is when we see the ‘weekend effect’ in options on steroids.

Insurance against failed futures brokerages would be costly: study
Tom Polansek – Reuters
An insurance program to protect U.S. futures traders from financial losses when a brokerage collapses would come at a high cost, according to a study released on Friday.

Options Data Suggests Longer-Dated Treasuries Likely to Drop in Near Term
J.W. Jones – Minyanville
The incredible rally in equities in 2013 has begun to stir concern among many that the stock market is now in a bubble. We have entered the euphoric stage of this bull market and equity prices cannot and will not go lower according to some talking heads in the financial punditry.

Videocast: VIX stuck at low levels

Power market flux creates threats and opportunities for exchanges
Gillian Carr – Risk.net
Financial regulation, low volatility, flattened prices and the integration of regional markets have put European electricity trading in a state of flux. That poses threats and opportunities for power exchanges – and some industry observers say it could result in mergers.

5 ways to know you’re in a bubble
Mark Hulbert – MarketWatch
 At a time when the 23-year-old CEO of Snapchat, a two-year-old company with no revenue, turns down a $3 billion buyout offer from Facebook, and when Twitter makes a spectacular debut, many people are reminded of the heady days of Internet stocks in the late 1990s and early 2000s.


CBOE adding employees, office space in move across the street
Ryan Ori – ChicagoRealEstateDaily.com
The company that owns the Chicago Board Options Exchange is moving its regulatory department across the street and expanding its office space following a federal probe that forced it to expand staff and pay a fine.

CME Group says its Clearport system was hacked in July
Reuters (via Yahoo Finance)
CME Group Inc, the world’s largest futures exchange operator, said Friday one of its clearing systems was hacked in July, and the incident is the subject of a federal criminal investigation.

CME Group Confirms Cyber Intrusion
Press Release (CME via The Wall Street Journal)
In a communication to certain customers today, CME Group confirmed it was the victim of a cyber intrusion in July, making it one of the many organizations subject to this type of crime in recent months.
To date, there is no evidence that trades on CME Globex were adversely impacted, or that the provision of clearing services by CME Clearing or CME Clearing Europe, or trading in CME markets, were disrupted.

Regulation and Enforcement

Treasuries Not Good Enough as Swaps Collateral in CFTC Rule
Matthew Leising – Bloomberg
Rules under consideration by federal regulators could require clearinghouses to back up Treasuries pledged as collateral in the $693 trillion over-the-counter derivatives market with credit lines, according to industry executives.
**Not sure I understand the rationale behind this. Or rather, of all the things they want to fix and rules they might dream to impose I would think this would be pretty far down the list. -JB


Emerging Market Play for Futures Traders
Jared Woodard – The Street
One of the most interesting futures products to be launched in the last few years is the CBOE Emerging Markets ETF Volatility Index (VXEEM) Security Futures. Like many of the other products offered at the CBOE Futures Exchange, VXEM futures are a very close cousin to the popular CBOE Volatility Index (VIX) futures. There are several ways in which the two products are similar.

Options Education

The Evolution of the Holiday Effect in VIX Futures
Bill Luby – CBOE
With fewer trading days and a historical record that favors an uptick in stocks and a downtick in volatility, the end of the year never fails to present an intriguing set of trading opportunities.
One phenomenon related to the above is something I have labeled the “holiday effect,” which is the tendency of the CBOE Volatility Index (VIX) December futures to trade at a discount to the midpoint of the VIX November and January futures.

Open Interest as an Odds Enhancer
Brandon Wendell – The Options Insider
Open interest is reported on TV daily in relationship to F&O but many people still misunderstand it and how it can be beneficial to you as a trader.
The first thing to realize is that open interest is not volume.  Volume refers to the number of contracts that have been traded on that particular day.


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