JLN Options: S&P 500 Drops as VIX Jumps on Ukraine, Mideast Tensions; U.S. SEC scuttles Nasdaq options rebate plan; Bubble Paranoia Setting in as S&P 500 Surge Stirs Angst

Jul 17, 2014

Lead Stories

S&P 500 Drops as VIX Jumps on Ukraine, Mideast Tensions
Joseph Ciolli and Callie Bost – Bloomberg (via MSN Money)
The Standard & Poor’s 500 Index (SPX -1.18%) fell the most in three months and the VIX had the biggest jump in more than a year amid intensifying tension in Ukraine and the Middle East.
The Standard & Poor’s 500 Index fell 1.2 percent to 1,958.14 at 4 p.m. in New York. The S&P 500 hadn’t risen or fallen 1 percent on a closing basis for 62 days, the longest streak of calm since 1995. The Dow slipped 161.19 points, or 0.9 percent, to 16,977.01. The Chicago Board Options Exchange Volatility Index surged 35 percent, the most since April 2013. Trading in S&P 500 companies was 43 percent above the 30-day average for this time of day.
http://jlne.ws/Uemhes

U.S. SEC scuttles Nasdaq options rebate plan
John McCrank – Reuters
The U.S. Securities and Exchange Commission has denied a plan by Nasdaq OMX Group Inc to offer rebates to some of the biggest customers of one of its options exchanges, based on the amount of trading they do across all three of Nasdaq’s options markets.
Nasdaq’s plan would have run afoul of rules stating that an exchange’s fees cannot be unfairly discriminatory or hinder competition, the SEC said in an order posted on its website on Thursday.
http://jlne.ws/1jUyX6F

Bubble Paranoia Setting in as S&P 500 Surge Stirs Angst
Lu Wang and Joseph Ciolli – Bloomberg
Two years of uninterrupted gains in U.S. stocks are sowing anxiety among financial professionals, with three in five saying the market is on the verge of a bubble or already in one, the Bloomberg Global Poll found.
Forty-seven percent of those surveyed said the equity market is close to unsustainable levels while 14 percent already saw a bubble, according to a quarterly poll of 562 investors, analysts and traders who are Bloomberg subscribers. Almost a third of respondents called the market for lower-rated corporate debt overheated and most said stock swings will increase within six months, the July 15-16 poll showed.
http://jlne.ws/1jUzdCK

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VIX-Piration Games | Trading Floor Blog
Trading Floor Blog | Schaeffer’s Investment Research
Yesterday was CBOE Volatility Index (VIX) futures and options expiration — always a fun time to watch the market opening.
For those new to the VIX games, the options and futures cash settle based on the initial quotes or trades in the qualified series on the S&P 500 Index (SPX) options board.
http://jlne.ws/UelM49

Regulation and Enforcement

Wall Street Techs Take Secrets to Next Job at Their Peril
Chris Dolmetsch and Tiffany Kary – BloombergBusinessweek
The plan was for Kang Gao to do his exit interview with Two Sigma Investments LLC, a $21 billion quantitative hedge fund in New York, and jump to Citadel LLC, a rival firm in Chicago.
Gao never got that chance. Unbeknown to him, that final meeting had been recorded for investigators at the Manhattan District Attorney’s Office, and instead, the 29-year-old native of China found himself sitting in a New York City jail. He’s accused of stealing Two Sigma secrets and faces a potential four-year prison term.
http://jlne.ws/1jUzxkH

Strategy

Argentiere’s Gulati Recommends Options on Widening Prices
Meghan Morris – Bloomberg
Deepak Gulati, chief executive officer of hedge-fund firm Argentiere Capital AG, recommends buying options to profit from widening price swings in global indexes.
“Volatility is cheap. You’re getting paid to own protection,” Gulati said today at a panel at the CNBC Institutional Investor Delivering Alpha conference in New York. Argentiere is based in Zug, Switzerland, and has $500 million in assets under management.
http://jlne.ws/1jUzR2S

Options Education

Options Trading Strategy: How to Maximize Profits, Minimize Risk
Lawrence Meyers – InvestorPlace
Every week, I write an article suggesting various strategies for options trading. In my 18 years as an investor, I came to regard trading options as an income-producing strategy. By selling covered calls against long positions I held that were stagnating, I could juice them for 2% – 2.5% premium each month
Then I realized I could sell naked puts against stocks I wouldn’t mind owning, which freed up my capital for other things unless the stock got put to me. I’ve been lucky thus far — by sticking to options trading with stocks I know very well, and whose patterns I have recognized, more than 70% of my personal options trading strategies go unassigned.
http://jlne.ws/1tX2lgH

 

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