JLN Options: Record Short VIX Notes Sounding Alarm to Deutsche Bank; Yen’s Worst to Come in Options After Kuroda Shocks; The Options Industry Council Announces Second Highest Volume Month on Record

Nov 3, 2014

Lead Stories

Record Short VIX Notes Sounding Alarm to Deutsche Bank
Callie Bost – Bloomberg
Securities that usually gain value as the U.S. stock market gets calmer have never been more popular with investors. That concerns strategists at Deutsche Bank AG.
A combination of investor inflows and declining equity volatility has pushed the market value of the VelocityShares Daily Inverse VIX Short-Term ETN to about $1.2 billion and sent the ProShares Short VIX Short-Term Futures ETF (SVXY) to $564 million, data compiled by Bloomberg show. Both reached records last week.

Yen’s Worst to Come in Options After Kuroda Shocks
Kevin Buckland, Hiroko Komiya and Andrea Wong – Bloomberg
The worst is yet to come for the yen after Japan’s two-pronged attack on deflation sent the currency tumbling to its weakest level in almost seven years.
Option prices show traders see an 82 percent chance the yen, which has already slumped 6.8 percent this year, will drop an additional 1.1 percent to 115 per dollar in the next three months, according to data compiled by Bloomberg. That’s up from 17 percent on Oct. 30, the day before authorities surprised investors by saying the government pension fund will invest more of its money overseas and Bank of Japan Governor Haruhiko Kuroda will expand currency depreciating stimulus.

The Options Industry Council Announces Second Highest Volume Month on Record with October Trading Volume Increasing 22 Percent
Press Release – OIC
The Options Industry Council (OIC) announced today that 491,394,154 total options contracts were exchanged in October, a 22.32 percent increase compared to last October when 401,726,200 contracts were traded. This makes October the second highest volume month on record, following August 2011’s 550 million contracts.

Sapient options unusually active days before deal news
Saqib Iqbal Ahmed – Reuters
An unusually large number of bullish bets were placed on the options of Sapient Corp. (SAPE.O) just three days before the digital ad specialist announced plans to be acquired for $3.7 billion by French advertising giant Publicis (PUBP.PA), according to options market data.
Sapient shares jumped 43 percent to $24.73 on Monday after the company said it would be acquired by Publicis. The jump in the stock would result in big paper profits for some well-timed options bets last week, options strategists said.

New Junk-Bond Derivatives Are Hot as Traders Get Creative
Lisa Abramowicz – Bloomberg
When it gets tough to maneuver in the junk-bond market, traders can either give up or get creative. Plenty of them seem to be opting for creativity this time around.
There’s been a surge in demand for a relatively new index of derivatives that aims to replicate the risk and return of high-yield bonds. As volatility soars to the most in more than a year, trading in a total-return swaps index reached a record $4 billion in September from almost nothing in May, according to data compiled by Morgan Stanley.

Nobody Mourns Death of QE as Treasuries Prove Insatiable
Cordell Eddings, Liz Capo McCormick and Daniel Kruger – Bloomberg
Even with the end of unprecedented bond purchases from the Federal Reserve, demand for U.S. Treasuries looks as strong as ever.
Investors submitted bids for $5.54 trillion of government debt at auctions this year, or 3 times the amount sold, data compiled by Bloomberg show. The bid-to-cover ratio is higher than the 2.87 last year, when the Fed purchased more Treasuries than at any time since the central bank began quantitative easing in 2008, and has been exceeded only twice on record.

The Biggest Problem with Playing VQT
Adam Warner – Schaeffer’s Investment Research
Now that we’re hitting new highs, I think it’s safe to say the ISIS/Ebola/End of QE sell-off has officially run its course. Aside from adding to longs, the best path was clearly to just sit tight and wait out the market turbulence. Hindsight is 20/20 that way. But, what if I told you there was an exchange-traded fund (ETF) out there that could stay long in rallies, hedged with volatility into dips, and have no exposure during market meltdowns? You’d probably tell me that that’s impossible, and you’d be right. But, there is an ETF that tries to accomplish that, and it does pretty well.

Gold option volatility soars as investors race to protect against rout
Josephine Mason – Reuters
Gold option volatility soared to its highest level since early this year on Friday, as investors scrambled to protect their positions against a prolonged rout after bullion tumbled to its lowest in four years.
The 2-percent drop in gold December futures, its biggest one-day decline since July, fueled a revival of interest in options, in which trading had dimmed after months of range-bound prices.

Options spike with October volatility
Andrew Wilkinson – Futures Magazine
According to MKM Partners’ Jonathan Krinsky there have only been four months since 1950 when the S&P 500 index has fallen by at least 7% only to close higher on the month. That’s exactly what happened in October – a record month for major stock indices, which closed at record highs. The mix was a phenomenal one for traders: Heavy volumes driven by panic-led headlines caused a major spike in any measure of volatility you might wish to choose. The CBOE Volatility Index (VIX)(CFE:VI.C), by settling at 14.03 as index records were set at the end of October, stood at less than half of its mid-October intraday peak of 31.06.

Binary Options Broker Anyoption Plans a London Stock Exchange AIM IPO Valued at £150 Million
Avi Mizrahi – Forex Magnates
Binary options broker, Anyoption, is planning to publicly list its shares for trading on the London Stock Exchange Alternative Investment Market (LSE AIM) in order to raise about £30 million for acquisitions of online advertising companies in the US, EU, Australia and Japan.


Press Release – CBOE
CBOE Holdings, Inc. (NASDAQ: CBOE) reported today that trading volume for options contracts on Chicago Board Options Exchange (CBOE) and C2 Options ExchangeSM (C2SM) and futures contracts on CBOE Futures ExchangeSM (CFE) set an all-time monthly record of 163.08 million contracts in October. Average daily volume (ADV) was a record 7.09 million contracts, a 29-percent increase from October 2013 and a 37-percent increase from September 2014. The new ADV record surpasses CBOE Holdings’ previous ADV high of 6.65 million contracts in August 2011.

Press Release – CBOE
CBOE Futures Exchange, LLC (CFE) today reported that October 2014 was the busiest month all-time for trading of futures on the CBOE Volatility Index (VIX Index). New records were set in monthly average daily volume (ADV) and monthly total volume, as well as for single-day and week-long trading activity.

BATS Sets U.S. Equities, Options October Market Share Records; Europe Has Best Month of 2014
Press Release – BATS
BATS Global Markets (BATS) today reported October highlights including new monthly market share records of 21.4% in U.S. equities and 6.5% in U.S. options. The previous record for U.S. equities was 20.7% in April 2014 and the previous options record was 5.8% in September 2014. October marked the third consecutive month of record market share for BATS Options.
In Europe, BATS reported 22.3% market share, its strongest month in 2014. Notably, total average daily notional value traded was 45.4% higher than in October 2013. Separately, more than €368.0bn was reported to BXTR, the exchange’s trade reporting facility.
http://jlne.ws/13ASvFZ (PDF)

Options Exchange Marketshare – October 2014
Press Release – OCC (via email)

October 2014 Total Options Marketshare:
AMEX-                 10.26%
BATS-                     6.44%
BOX-                       2.00%
CBOE-                   29.42%                                                            
C2-                          2.25%
GEM-                      4.72%
ISE-                        10.74%
MIAX-                     3.27%
NOBO-                    0.67%
NSDQ-                    7.35%
NYSE Arca-           10.26%
OMX PHLX-         12.62%

October 2013 Total Options Marketshare:
AMEX-                  12.45%
BATS-                      3.62%
BOX-                        2.04%
CBOE-                    28.46%
C2-                            1.92%
GEM-                       2.26%
ISE-                          13.72%
MIAX-                      1.62%
NOBO-                     0.84%
NSDQ-                      8.05%
NYSE Arca-             10.14%
OMX PHLX-           14.88%

October 2014 Equity Options Marketshare:
AMEX-                  11.38%
BATS-                      7.24%    
BOX-                        2.25%
CBOE-                    21.01%
C2-                            2.51%
GEM-                        5.29%
ISE-                         12.05%
MIAX-                       3.68%
NOBO-                     0.76%
NSDQ-                      8.26%
NYSE Arca-           11.40%
OMX PHLX-          14.17%

October 2013 Equity Options Marketshare:
AMEX-                  13.80%
BATS-                      4.03%
BOX-                       2.28%
CBOE-                   20.56%
C2-                            2.13%
GEM-                       2.51%
ISE-                        15.25%
MIAX-                     1.80%
NOBO-                    0.94%
NSDQ-                    8.95%
NYSE Arca-          11.20%
OMX PHLX-         16.55%

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past Options Newsletters

Pin It on Pinterest

Share This Story