JLN Options: Traders Gobble Up Apple Options After Cook’s Big Reveal; S&P 500 Short-Term Contracts See Trading Volume Jump; F&O volumes plunge as VIX sinks to new low

Sep 11, 2014

Observations and Insights

Steve Brodsky, CEO, Spot Trading – My LIFFE: Markets Then and Now

“I know this is the most dynamic industry out there…the creative renewal in this industry is like no other.”

During a time when LIFFE was battling for the Bund futures contract, Steve Brodsky, CEO of Spot Trading, remembered sitting in a meeting with Deutsche Börse and talking about how electronic trading was going to become a game changer for the marketplace. Those in the meeting proceeded to laugh. Today, electronic trading has become dominant in the financial industry, and the way futures contracts were traded changed significantly. Brodsky highlights the rise of electronic trading, from its unsure beginnings to today’s world, where high frequency trading has caught the attention of the financial industry and media. Brodsky also discusses the effects of regulation and gives his prediction of what the market structure of the future may look like.

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Lead Stories

Traders Gobble Up Apple Options After Cook’s Big Reveal
Saumya Vaishampayan, The Wall Street Journal
Traders have been stampeding to the options market to grab a slice of the Apple AAPL +0.39% pie.
About 2.97 million Apple Inc. options changed hands on Tuesday, the day of the company’s widely watched unveiling of its new product line. The volume was a new record for Apple and marked the company as the most actively traded in the options market that day, according to Trade Alert.

S&P 500 Short-Term Contracts See Trading Volume Jump
By Callie Bost, Bloomberg
In a market where stock volume is evaporating, volume in short-term options is surging.
A daily average of 309,000 contracts on the Standard & Poor’s 500 Index (SPX) that expire weekly have changed hands in the first four days of September, about 72 percent more than a year ago, according to data from CBOE Holdings Inc. The contracts made up 53 percent of all those traded on the index on Sept. 5, when the last U.S. jobs report was released.

F&O volumes plunge as VIX sinks to new low
By Biswajit Baruah, Economic Times (India)
MUMBAI: As market volatility, reflected in the NSE India VIX, trades near an all-time low of 12.9 per cent, derivatives market participants find it tough to execute trades with option prices showing little movement, making many F&O strategies futile.

Newfield Exploration attracts bearish spread trading
By Saqib Iqbal Ahmed, Reuters
Bearish spread trading rose in oil and gas producer Newfield Exploration Co for a second day in a row on Thursday, indicating some traders in the options market are worried about the stock trading lower in coming months.
The September-December put spread at $45 strike on Newfield Exploration traded 7,756 times at a cost of 40 to 50 cents per contract, on Thursday.
Options volume is at 7.5 times the norm, with 27,000 puts and 169 calls traded on Thursday, according to Trade Alert data.

London Funds Use Scotland Vote to Maximize Opportunities
Traders Taking Negative Bets on Sterling or Stocks Linked to Scotland
Laurence Fletcher, The Wall Street Journal
Scotland’s potential exit from the United Kingdom is creating trading opportunities for some canny London hedge funds.
With the outcome of next week’s referendum now the top worry for many European managers, funds have been taking positions ranging from negative bets on sterling or stocks linked to Scotland, to protection against a possible equity market decline.

VIX below 13 as equities rebound
Chris McKhann, optionmonster.com
The major equity indexes reversed morning losses to finish higher yesterday, pushing the CBOE Volatility Index back below the 13 level.
The S&P 500 gained 7.25 points, or 0.36 percent, to 1995.69. It was as low as 1993 in the morning before regaining ground. Resistance is at the index’s all-time intraday high of 2011, with support at 1980.
The Nasdaq 100 jumped 33.09 points, or 0.81 percent, to close at 4094.97. That is just barely off its 13-year closing highs of the last two weeks as made up all of the losses from Tuesday. The NDX has some resistance at the intraday high of 4110 and support at 4000.


CME Group Appoints Cees Vermaas As Managing Director And CEO Of CME Europe Limited
LONDON, Sept. 11, 2014 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace, today announced that it has appointed Cees Vermaas as Managing Director and CEO of CME Europe Limited, its London-based derivatives exchange, effective 2 January 2015.

Regulation and Enforcement

CBOE and C2 in Discussions on Regulatory Services Agreement With FINRA
CBOE Press Release via CNN Money
CBOE Holdings, Inc. (NASDAQ: CBOE) today announced that Chicago Board Options Exchange (CBOE) and C2 Options Exchange (C2) are in discussions with the Financial Industry Regulatory Authority (FINRA) on a potential agreement for FINRA to provide certain regulatory services to the CBOE and C2 options markets.
CBOE Holdings, Inc. logo.
Negotiations are ongoing, and there is no assurance of a final regulatory services agreement. If terms are reached, a regulatory services agreement could potentially be finalized within the next few months, after consultation with CBOE’s regulator. The potential regulatory services agreement is not expected to have a significant impact on CBOE’s financial results.


Nasdaq system to boost PSE operations
Philippine Daily Inquirer
MANILA, Philippines–A visiting top executive from New York-based Nasdaq OMX Group sees its proprietary trading technology putting the Philippine Stock Exchange—which will adopt this new platform by mid-2015—in a good position to widen its offering of asset classes in the future.
Adena Friedman, president of Nasdaq OMX’s global corporate, information and technology solutions, also said in an interview with Inquirer during her visit to the PSE on Monday, that this platform had routing and network capability to support seamless cross-border trading of securities if and when PSE joins the Southeast Asian trading linkage.


Tempting Fate With VXX Options
By Scott Nations at ETF.com
Any ETF that expresses its mandate by buying futures is facing an uphill battle—mostly because any ETF that expresses its mandate by buying futures is invariably headed downhill.
The need to repeatedly roll from one futures contract to the next futures contract and the inherent contango—the phenomena wherein longer-dated futures contracts are more expensive than nearer-dated futures contracts—means that futures-based ETFs are slowly nibbled away.

Interesting Ford Put And Call Options For October 31st
Investors in Ford Motor Co. (NYSE: F) saw new options begin trading today, for the October 31st expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the F options chain for the new October 31st contracts and identified one put and one call contract of particular interest.

Goldman Recommends This Time Warner Trade
By Steven M. Sears, Barron’s
After rejecting a Fox takeover bid, the media company has something to prove next month.
On Wall Street, corporations are defined as having one purpose: making money for shareholders.
When a corporation turns down a big takeover offer, management must credibly demonstrate to investors that a plan exists to create value that equals, and preferably exceeds, the spurned takeover offer.
Time Warner (ticker: TWX ) now finds itself in such a situation, having rejected a takeover bid by 21st Century Fox ( FOXA ). Next month the media company will host its first analyst day meeting in four years, and management must persuade investors that it has a growth plan.

Market Myopia
Timothy Edwards in VIX Views
As investors, we necessarily rely on history.  How we analyse that history is particular to each investor – some will look for technical patterns, some at fundamental data, still others will build quantitative models.  But all of us need data, and history is our only source.

Options Education

Alibaba – Premiering Soon at CBOE
By Marty Kearney, CBOE Options Hub
We don’t have to wait “One Thousand and One Nights” for the Alibaba IPO.  We have seen several reports about Alibaba (BABA is the expected stock symbol) being priced on Thursday September 18th and shares trading Friday, September 19th.  When all is finalized we will be back to confirm everything, but this is a good time to review the listing process for options at CBOE and other exchanges.

Dealing with Volatility
Brandon Wendell, Options Insider
The strong rise in price in the equity markets and the subsequent increase in volatility are enough to make even the most experienced investor dizzy.
When the markets become increasingly tumultuous, investors should focus on several things: remaining calm, preserving capital and seeking high quality opportunities. Familiarizing yourself with the right analysis techniques can prepare you to be on the right side of the markets even when these seemingly random news items occur.


TMX Group Kicks Off Trade Canada U.S. Roadshow in Chicago
TORONTO, Sept. 11, 2014 /PRNewswire/ – TMX Group today launched its 2014 U.S. campaign in Chicago with a conference event to discuss issues of impact in Canadian capital markets.
The four-city Trade Canada tour will bring industry experts and U.S.-based participants together with TMX Group executives to gain valuable insights into Toronto Stock Exchange and TSX Venture Exchange, and Canada’s derivatives market, Montréal Exchange. Each event will feature equities and derivatives sessions with panel discussions focused on sharing the Canadian perspective on key current industry topics including high frequency trading, market structure issues and the evolving regulatory landscape.
The Trade Canada tour continues with events scheduled in New York on September 17, 2014, Boston on October 21, 2014 and San Francisco on October 30, 2014.

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