JLN Options: Still Fearful For Your Gold-Miner Fund? This Worry Gauge Isn’t; Video: The Wall Street Code

Nov 11, 2013

Lead Stories

Still Fearful For Your Gold-Miner Fund? This Worry Gauge Isn’t
Brendan Conway – Barron’s
As you fret about another slump in the gold-mining sector, options traders are doing the opposite.
They’re driving the price of bearish derivatives which profit from gold-mining difficulties down to multi-year lows, and they’re starting to bid up the bullish ones.

Video: The Wall Street Code
Philip Elmer-DeWitt – Fortune
Bodek, a so-called quant (or quantitative analyst) who has held key positions at Hull Trading, Goldman Sachs and UBS, is famous among traders for having broken the Street’s omertà and complained to the Securities Exchange Commission in 2011 — after his own HFT firm, Trading Machines, crashed and burned — about the secret “order types” that allowed rival algorithms to jump the queue and push him out of business.
**Sour grapes or something more? Opinion around here is sour grapes but you be the judge. -JB

Videocast: Calm returns to VIX pits


ISE Announces Highest Daily FX Options Volume, Year-to-Date
Press Release (ISE)
The International Securities Exchange (ISE) today announced that 5,328 Foreign Exchange (FX) Options contracts were traded on Friday, November 8, 2013, the highest FX Options volume, year-to-date.

NYSE Proposes One-Year Pilot Program for Larger Stock Trades
Sam Mamudi – BloombergBusinessweek
The New York Stock Exchange has asked regulators to approve a plan aimed at luring investors seeking to trade in bulk — lots of 500 shares or more.
NYSE Euronext said in a filing yesterday that it wants to start a one-year pilot for a new class of order types using minimum share sizes. Requests to buy and sell stock under the program would be hidden, a characteristic borrowed from dark pools that is designed to keep rivals from front-running orders.
**If you can’t beat ’em (dark pools) then join them. -JB

NASDAQ OMX Introduces New Managed Data Solution Fee Structure for PHLX Orders
Press Release (NASDAQ)
In response to customer feedback and changes in the technical distribution of market data, NASDAQ OMX is continuing to introduce the Managed Data Solution option for additional content. This is an option available to firms looking to simplify market data administration for their clients.

Chi-X Australia plots derivatives expansion
Michelle Price – Financial News
Chi-X Australia, the alternative stock exchange owned by Chi-X Global, is exploring expanding into derivatives as it looks to step-up competition against incumbent rival the Australian Securities Exchange.

SGX forex futures launch signals market evolution
Garima Chitkara – Risk.net
The Singapore Exchange (SGX) is reattempting a launch of its Asian currency futures offering after its predecessor the Singapore International Monetary Exchange failed to attract interest to its first currency futures offering on the dollar, the pound and the Deutschmark in 1984…
The standardised portfolio analysis of risk (Span) model for calculating margins is the leading system for margining futures and options in most exchanges in the world and SGX says the Asian currency futures will be margined using this system as well.


Markets Evolve, as Does Financial Fraud
Peter J. Henning – The New York Times
It is usually the case that there are not new frauds, just new avenues for deception. As the financial world has evolved into a high-speed race to trade assets while investment strategies are kept secret, both regulators and investors face the challenge of finding the fine line between permissible trading and manipulation aimed at generating unfair profits.
**I have enjoyed playing computer games for ages and one thing I learned very quickly was the player community excelled at finding exploits to the games we play.  New angles that ranged from outright against the rules to exceptionally clever ways to sidestep the rules and still be “legal”.  Their inventiveness at coming up with new schemes knows no bounds, making it very difficult for the operators of the game to police everything effectively.  Financial fraud is a different beast to be sure but in this the two are remarkably similar. -JB

Banks consider ban on chat rooms after rigging probe: sources
Jamie McGeever – Reuters
Big banks are considering banning traders from some online chat rooms in response to investigations into alleged collusion between dealers over key financial market benchmark rates, people familiar with the matter said on Monday.
**This is mostly a “cover your ass” strategy on the part of the banks.  Off the top of my head I can already think of a few ways to bypass what the banks are trying to stop if I was of a mind to.  Guess it looks good to regulators that they are doing “something”. -JB

DERIVATIVES: Eurex bemoans slow derivatives rulemaking
Mike Kentz – IFR
The slow pace of swaps rulemaking in Europe could leave the door open for US exchanges to rake in profits at the expense of their European rivals, the chief executive of one of Europe’s leading derivatives exchanges said yesterday.


Wolverine Introduces Hedge Agent Applet for Executed Options
Timothy Bourgaize Murray – WatersTechnology
The new tool, provided through its Wolverine Execution Services (WEX) arm will allow clients on the firm’s trading platform to save resources by automatically calculating hedge quantities based on current delta, and immediately sending out a corresponding hedge upon execution of an options trade.

SuperDerivatives introduces credit options real-time data and analytics
Press Release (via Finextra)
SuperDerivatives, a leading cloud-based financial information, derivatives technology and trade execution provider, has launched a comprehensive market data and analytics package to support the growing demand for credit index options from the buy-side.


Why ICE Holds All the Options
Steven M. Sears – Barron’s
After the pending purchase of NYSE Euronext, the exchange will be the most influential in the field. How to benefit via options.

Leap Secured Options Writing – The Ultimate Safe Investment Strategy
Serge d’Adesky – Seeking Alpha
The Proposition
Wouldn’t it be nice if you could limit your downside risk in the market while having a better than 90% chance of making very high returns? Well, if you are willing to be an active investor – and get down and dirty with options – you can.
***DA: If only I had a dollar for every story about how premium selling is free money. Now THAT would be a nice return on investment.

Options Education

The Gamma Problem for Straddles, or Why VIX Futures Are Necessary
The Options Insider
One of the frustrating things about buying straddles is that the more correct you are, and the more quickly you are proven correct, the more quickly your position loses the ability to profit from volatility. A straddle opened as a bet on volatility quickly becomes a simple long/short bet on the underlying asset: straddles run out of gamma too quickly.



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