JLN Options: Using Exchange-Traded Volatility Notes? Be Prepared to Spend Money, Be Wrong; Brent options trading disrupted by Ice expiry date shift

Oct 14, 2013

Commentary and Insight

John Lothian News Launches New Comprehensive News Website
JLN Announces JLN Financials; Sarah Rudolph Named Managing Editor of JLN

John Lothian News (“JLN”) is pleased to announce the launch of an eponymous comprehensive news website, johnlothiannews.com. The new site will combine content from all previous JLN news sites and MarketsWiki.tv into a single dynamic multimedia news portal, displaying all JLN original content, newsletters, commentaries, stories, videos and interviews.

JLN is also pleased to announce the launch of JLN Financials, a new newsletter that will replace JLN Interest Rates, JLN FX and parts of JLN Metals. JLN Financials coverage will include interest rates, FX, indices and gold.

Additionally, John Lothian News is pleased to announce the promotion of Sarah Rudolph to the position of managing editor. Also, Doug Ashburn will take on the title of vice president of John Lothian News in addition to his role as editor-at-large.

The johnlothiannews.com site was designed by Ryan Lothian, the chief marketing officer of John J. Lothian & Company, Inc. The new site replaces our old sites, johnlothiannewsletter.com, jlnoptions.com, jlnfx.com, jlnmanagedfutures.com, jlnmetals.com, jlnevironmental.com, jlninterestrates.com and marketswiki.tv.

Each of the JLN newsletters will have its own landing page in the new site, with its current unique domain pointing to a unique subject related page. Additionally, we are adding unique subject related landing pages for Technology/HFT and Regulation.

The new johnlothiannews.com site will highlight the breadth of original content produced by the John Lothian News team, some of which will continue to be incorporated into MarketsWiki and MarketsReformWiki


Lead Stories

Using Exchange-Traded Volatility Notes? Be Prepared to Spend Money, Be Wrong
Brendan Conway – Barron’s
Buying an exchange-traded fund or note to profit from a stock-market decline, or big swings in the market? Hold on a second. There’s a lot more going on in these trading vehicles than “profit from volatility.”

Brent options trading disrupted by Ice expiry date shift
Alexander Osipovich – Risk Magazine
Proposals to ensure convergence between futures and physical Brent cause firms to avoid trading long-dated options.

Doomsday Scenarios, Continuted: It’s the Volatility of the VIX that Is Our Signal
Ophir Gottlieb – The Options Insider
So let’s walk along the string that looks to a catastrophe. Downgraded US debt –> defaults on outstanding debt. Then what? Will the country have a shutdown government forever?
My best bet would be no.

The VIX of the VIX of the VIX
Adam Warner – Schaeffer’s Investment Research
If you think the CBOE Volatility Index (VIX) has made same big moves lately, what do you say we go a little second derivative? Here’s the VVIX, the index that applies the VIX methodology to the VIX options board in order to proxy the implied volatility (IV) of VIX options (click the chart to enlarge).

Videocast: Playing the debt crisis

Volatility on the Potomac
Steven M. Sears – Barron’s
The mini-détente between House Republicans and the White House over the debt ceiling likely ensures six-weeks of erratic movement in the options market.
**The movie version will star Steven Segal and Chuck Norris saving the economy. -JB

Volatility Decline Evokes Kospi Rally of 2010
Sharon Cho – Bloomberg
The last time share-price swings in South Korea fell this low versus peers in emerging markets was May 2010, when the Kospi index surged 28 percent in 12 months.

Thanks for Nothing, D.C.! Gold Investors Forced to Go Without CFTC Reports
Brendan Conway – Barron’s
The shutdown in Washington means investors don’t get one of their usual glimpses at money managers’ precious metals moves. The D.C. deadlock prevents the Commodity Futures Trading Commission from issuing its weekly commodity-futures commitments-of-traders reports.

High-frequency traders: Market friend or foe?
Barbara Shecter – Financial Post
A report on high-frequency trading published this week by respected U.S. market consultant TABB Group says that despite the hard work of Canadian regulators, balancing benefits with the challenges of this new breed of lightning-fast trader remains a “work in progress.”



CBOE Delays Extended VIX Trading Due to Government Shutdown
Nandini Sukumar – Bloomberg
CBOE Holdings Inc. (CBOE:US), the largest U.S. options exchange operator, delayed the start of extended trading of its volatility futures because the U.S. government shutdown is preventing regulators from approving its plans.

NYSE CFO to Depart as ICE Deal Nears
Jacob Bunge – The Wall Street Journal
Michael Geltzeiler, NYSE’s CFO since 2008, will assume the same position with the ADT Corp.ADT +1.68%, a home security company, according to an announcement from ADT early Monday.


Regulation and Enforcement

CFTC commissioner outlines automated trading approach
Richard Henderson – The Trade
Greater use of data and a focus on the impact of high-frequency trading (HFT) are key to the Commodity Futures Trading Commission’s (CFTC) approach to new automated trading rules, one of its commissioners has said.

U.S. watchdog readies tighter new commodity limits rule
Douwe Miedema – Reuters
The U.S. derivatives regulator is finishing a new rule to curb speculators with large positions in commodity markets that is in parts tougher than the previous version, two sources with direct knowledge of the plan said.


Options Education

What Indicators?
Brandon Wendell – The Options Insider
As a follow-up to a discussion I had about watching economic indicators, I decided to spend some more time discussing the ways that a trader could use the technical indicators to screen for trading opportunities.



Is It Time For Low Volatility Funds?
Given the recent volatility of the market, investors could be getting a little seasick. Luckily, there are a variety of new ways for the average retail investor to “smooth out” their ride over the short term.

Get Ready to Buy Fear
Steven M. Sears – Barron’s
If the GOP continues to insist that health care changes accompany any increase in the debt ceiling, expect a sale in the stock market. Here’s how to shop.


John Lothian Newsletter

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CEO, Trading Technologies

Past Options Newsletters

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Seeing red: tricky times in the markets

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