Lead Stories

Short-Term VIX Soars on Ukraine Fears
Kaitlyn Kiernan – The Wall Street Journal
Investors are preparing for a rocky week ahead, but the market’s so-called fear gauge shows they don’t see volatility sticking around long.
The Chicago Board Options Exchange Short-Term Volatility Index, which measures expectations for volatility over the next nine days, rose nearly twice as much Monday as the regular Volatility Index, the CBOE’s widely watched 30-day anxiety gauge. That divergence comes as investors prepare for additional fallout in U.S. stocks should military action in Ukraine escalate in the days ahead, but shows that they are less concerned about the longer-term consequences of the crisis.
**I was a child growing up during the Cold War and I am feeling a mostly forgotten but familiar chill creeping in. -JB

VIX Traders Bet on Rising Volatility After Year of Calm: Options
Nick Taborek and Callie Bost – Bloomberg
Options (VIX) tied to gains in the benchmark gauge for American stock volatility reached the highest prices in six years last week, reflecting bets that the calm prevailing in equities for the last year won’t last.

Market buying calls on options
Andrew Wilkinson – Futures Magazine
January and February have delivered a strong start for traded option volumes. A record high for stocks at the start of January followed by a deep, yet short-lived contraction in equity valuations, brought about a genuinely fearful surge in the CBOE volatility index. The return to additional volatility should be seen as a welcome sign for investors.

Buffett Derivatives: back in black
Dan McCrum – FT Alphaville
The Berkshire Hathaway annual report released on Saturday is full of information for Buffett watchers, but for those fascinated by the very large put options sold by the great Sage of Omaha, turn straight to page 47.
As of the end of 2013, and as predicted by our good friend Pablo Triana at the Esade Business School, fair value for the put liabilities of $4.7bn is now less than the $4.9bn of premium Berkshire received for writing the options.

Equity Volatility Jumps Most in Two Years in Europe on Ukraine
Corinne Gretler and Trista Kelley – BloombergBusinessweek
Stock-market volatility benchmarks soared, with the European gauge rising the most in two years, as Ukraine’s escalating conflict with Russia sparked losses in equities around the world.
The VStoxx Index, a measure of expected swings in the Euro Stoxx 50 Index, rose 28 percent to 21.49 as of 3:21 p.m. in London.

Investing Insights: You-kraine And Investments
JJ Kinahan – Forbes
One measure to keep an eye on during the Ukrainian uncertainty is the Chicago Board Options Exchange (CBOE) Volatility Index. It’s back in the mid-teens after a spike to 21.48 a month ago (figure 1). The VIX, known as the market’s “fear gauge,” has remained relatively subdued. In fact, it remained little moved on some higher stock days (all-time highs, remember?) that would typically drive VIX lower. Can it really hold this low as investors grapple with the Ukrainian situation? Let’s see.

Yellen Tames Bond Traders With Volatility to Pre-Taper Level
Liz Capo McCormick and John Detrixhe – BloombergBusinessweek
When it comes to monetary policy, Federal Reserve Chair Janet Yellen is doing all she can to ensure there’s little difference between herself and Ben S. Bernanke. The bond market is taking notice.


Cleartrade Exchange and China Beijing Equity Exchange sign accord
Simon Osborne – The Trade
Singapore’s Cleartrade Exchange (CLTX) and Beijing-based China Beijing Equity Exchange (CBEX) have signed a memorandum of understanding, which agrees to share information and develop joint projects.  The shared initiatives are likely to centre on derivatives/futures within the commodity space.

CBOE Holdings Reports February Volume
Press Release (CBOE)
CBOE Holdings, Inc. (NASDAQ: CBOE) reported today that February trading volume for options contracts on Chicago Board Options Exchange (CBOE) and C2 Options ExchangeSM (C2SM) and futures contracts on CBOE Futures ExchangeSM (CFE)  totaled 113.51 million contracts. Average daily volume (ADV) was nearly six million contracts, a 37-percent increase from February 2013 and a three-percent increase from January 2014.

VIX Futures Average Daily Volume Sets New Record In February
Press Release (CBOE)
The CBOE Futures Exchange, LLC (CFE) today reported  that average daily volume (ADV) in futures on the CBOE Volatility Index (VIX Index) and total exchange-wide ADV at CFE reached record levels in February 2014.  Also during the month, the exchange launched trading of futures on the CBOE Short-Term Volatility IndexSM (VXSTSM).
VIX Futures

OCC Announces Cleared Contract Volume in February Rose 8%
Press Release (OCC)
OCC announced today that total cleared volume in February reached 350,507,077 contracts, an 8 percent increase from the February 2013 volume of 325,237,351 contracts. OCC’s year-to-date total cleared contract volume is up 8 percent in 2014 with 746,102,697 contracts.

The Options Industry Council Announces February Options Volume Up 7 Percent
Press Release (OIC)
The Options Industry Council (OIC) announced today that 344,908,034 total options contracts were traded in February, which is up 7.47 percent compared to last year when 320,943,312 contracts were traded.
Average daily volume came in at 18,153,055 contracts, 7.47 percent more than the 16,891,753 contracts last February. Year-to-date volume stood at 734,729,169 contracts, 7.73 percent more than last year’s 682,014,933 contracts.

Regulation and Enforcement

Obama Said to Trim Budget Request for Struggling Swaps Regulator
Silla Brush – Bloomberg
President Barack Obama is set to seek a $280 million budget for the U.S. Commodity Futures Trading Commission that, while more than the commission currently gets, is lower than his previous request for an agency that has said it lacks the resources to fully oversee markets, according to people with knowledge of the matter.


Cybersecurity Concerns Force Boards to Rethink Risk Oversight
Press Release (NYSE)
Experience in overseeing the growing threat of cybersecurity risk is one of the key attributes boards will look for when appointing their next new corporate director, according to the 11th annual What Directors Think survey, a comprehensive report on boardroom trends.
The survey, which was released by NYSE Governance Services, a trusted source on governance, risk, ethics and compliance practices, and global, senior executive search firm Spencer Stuart, highlights the elusive nature of cyber risk, with 20% of directors lacking confidence in their board’s understanding of the many facets of it.

TT Awarded “Best Trading and Execution Technology” at the Inaugural CTA Intelligence Service Awards
Press Release (TT)
Trading Technologies International, Inc. (TT), a global provider of high-performance professional trading software, received the award for “Best Trading and Execution Technology” at the inaugural CTA Intelligence Services Awards in New York last Thursday.

SunGard Named Best Options Trading Platform Vendor and Best Broker-Dealer for Algorithms in Wall Street Letter Institutional Trading Awards
Press Release (via BobsGuide)
SunGard has been named “Best Options Trading Platform Vendor” and “Best Broker-Dealer – Algorithms” in the 2014 Wall Street Letter Institutional Trading Awards for its Front Arena solution and Fox River Execution Solutions, respectively. The award winners were announced at the Wall Street Letter’s third annual Institutional Trading Awards, hosted by Mark Mardell, North American editor for BBC News, on February 25 in New York City.


How to Play “Fortress America”
Steven M. Sears – Barron’s
I’m highlighting three trades that monetize this Fortress America theme, a bunker mentality prevalent among investors that’s driving more cash to U.S. shores and U.S. causes at the moment.
**Seems to be a theme today. -JB

Russian bear triple play
Andrew Wilkinson – Futures Magazine
While stocks around the world are slumping in response to Russia’s military moves in the Crimea, at least one stock is on the move higher as a result. However, the Direxion Daily Russia Bear 3x ETF (Ticker: RUSS) is a leveraged play on bad news in the fortunes of the nation’s listed stocks.

Is There ‘War Premium’ in the Volatility Markets?
Adam Warner – Schaeffer’s Investment Research
…If it seems like there’s rising unrest in two or three spots around the globe every week, that’s because that’s probably true. On some level, the market ignores them either right from the get-go or a week into it when it’s clear that it isn’t leading to anything that’s going to wildly shake up U.S. retail spending. But now we have Ukraine and … well, it’s certainly possible there’s major freak-out potential here.

Options Education

Volatility Trading Digest – Index Disharmony
The Options Insider
Without any help from the weather, after several anxious weeks, without fanfare the S&P 500 Index finally broke out above the seemingly impenetrable barrier at 1850.84, putting an end to concerns about a potential Head & Shoulder Top pattern we have been carefully following. This should mean all is clear for the uptrend to resume. However, index divergences are suggesting the need for further investigation. While adding our other indicators to the mix helps a little to make the bull case, we remain somewhat cautious.


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