Lead Stories

VelocityShares CIO on VIX
Johanna Bennett – Barron’s
When the man credited with creating the “fear index” offers harsh words for the investment products that have sprung up around the Vix, Wall Street takes notice. Also to be expected, some pundits have taken issue with Robert Whaley’s recent remarks.
On Friday, my colleague Brendan Conway reported in this very blog that Whaley claimed to be “shocked” and “appalled” at the makers of exchange-traded funds and notes built around the index, and signaled out the instruments’ high carry costs and complex construction as dangers.

Arcanum profits from volatility with equity index options
Paul Gleeson – Risk.net
For many investors and managers, volatility is to be avoided. For Arcanum Asset Management, on the other hand, volatility is the fuel that drives its performance engine.
Arcanum Asset Management harnesses volatility through systematic trading of equity index options – accurately by writing short-dated, out-of-the-money calls and puts on equity index options on the FTSE 100 Index and the Eurostoxx 50.

PUT Index Rose 1510% (with Lower Volatility) Over 28 Years
Matt Moran – CBOE Options Hub
Now that we have passed the halfway point of 2014, one might ask for an update on performance of indexes relating to volatility-selling strategies highlighted by the BlackRock paper. The price data history for both the PUT and BXM indexes begins on June 30, 1986, and so we now have 28 years of price history for these indexes.

Videocast: Hedging long weekend

CBOE Plans to List Options on GoPro, Inc. (GPRO)
Press Release (CBOE)
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that the Chicago Board Options Exchange (CBOE) plans to list options on GoPro, Inc. (ticker symbol: GPRO) for trading beginning on Monday, July 7, 2014, contingent upon GPRO meeting new option listing criteria, and the OCC accepting CBOE’s certification that the stock meets CBOE’s listing criteria.
GoPro, Inc. develops and manufactures wearable and gear mountable cameras and related accessories. The company’s products are designed for use in activities ranging from action sports to professional videography.
CBOE will announce an official start date for GPRO options when the OCC confirms CBOE’s certification.


OCC Announces Cleared Contract Volume in the First Half of 2014 Declined 1%, Fifth Year Above 2 Billion Contracts
Press Release (OCC)
OCC announced today that total cleared contract volume reached 327,922,056 in June, an 11 percent decrease from the June 2013 volume of 367,660,030 contracts. OCC’s year-to-date cleared contract volume is off 1 percent from 2013 with 2,117,001,407 contracts, marking the fifth consecutive year that first half cleared volume reached 2 billion contracts.
Options: Exchange-listed options trading volume reached 321,358,397 contracts in June, down 11 percent from June 2013. Year-to-date total options volume is down 1 percent compared to the first half of last year with 2,083,091,200 contracts. Year-to-date average daily options trading volume is 16,799,123 contracts, 1 percent lower than 2013.

The Options Industry Council Announces Options Volume Dips 1.4 Percent in First Half of 2014
Press Release (OIC)
The Options Industry Council (OIC) announced today that 321,358,397 total options contracts exchanged hands in June, which is 11.03 percent less than the previous June when 361,180,257 contracts were traded.
While record low volatility has had an impact on trading, in an unusual pattern for June, volume was higher than May, up nearly 2 percent. Year-to-date volume stood at 2,083,091,200, just off of the 2,112,336,178 contracts traded in the same period last year by 1.38 percent. This marks the fifth consecutive year first half trading volume has surpassed 2 billion contracts. Average daily volume for the month was down 15.26 percent with 15,302,781 contracts exchanged compared to last June’s 18,059,013 contracts.

CBOE Holdings Announces Date Of Second-Quarter 2014 Earnings Release And Conference Call
Press Release (CBOE)
CBOE Holdings, Inc. (NASDAQ: CBOE) will announce financial results for the second quarter of 2014 before the market opens on Friday, August 1, 2014.  A conference call with remarks by CBOE Holdings, Inc. senior management will begin at 7:30 a.m. Central Time (CT). 
A live audio webcast of the conference call, and the presentation that will be referenced during the call, will be available on the Investor Relations section of CBOE’s website at http://ir.cboe.com under Events & Presentations. The presentation will be archived on the company’s website for replay.  In addition, participants may listen to the live conference call via telephone by using the dial-in numbers listed below.

BOX Price Improvement Activity for June
Press Release (BOX)
In the month of June, price improved contracts on BOX Options Exchange (“BOX”) averaged 287,807 per day, which represented a 54% increase over the same period last year. Price improvement versus the prevailing NBBO for contracts submitted via BOX’s price improvement auction, PIP, averaged $479,037 per day, while total savings to investors this month was $10.1MM. With this, BOX has saved investors over $516 MM since its inception in 2004. Overall average daily trading volume on BOX in the month of June was 415,359 contracts, which represented an 11% increase over the same period last year.
http://jlne.ws/VD8VtR (PDF)

Interactive Brokers Group Reports Brokerage Metrics for June 2014
Press Release (via WSJ)
Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported its Electronic Brokerage monthly performance metrics for June.

Regulation and Enforcement

House Hypocrisy on Insider Trading
NY Times
It was quite the ballyhooed reform of Capitol Hill ethics — an explicit ban on insider trading by members of Congress and their aides enacted two years ago in a bipartisan wave of approval by the Senate and House.
Now comes the hard part: enforcement. A legitimate attempt by the Securities and Exchange Commission has been rebuffed by the House with elaborate constitutional contentions. “Repugnant to public policy” is how the chamber’s legal office huffily described the commission’s reasonable subpoenas seeking information from the House Ways and Means Committee and a staff member.

Goldman Fined $800,000 by Finra Over Dark-Pool Pricing
Michael J. Moore – BloombergBusinessweek
Goldman Sachs Group Inc. (GS:US) was fined $800,000 by the Financial Industry Regulatory Authority for failing to have procedures in place to ensure clients in its dark pool got the best price while trading stocks.
More than 395,000 transactions were executed in the New York-based bank’s Sigma X pool at an inferior price to the national best bid and offer from July 29 to Aug. 9, 2011, Finra said today in a statement. Stock venues in the U.S. are obliged to price trades at the NBBO or better.


What This Rare Reading May Be Spelling for Markets
Adam Warner – Schaeffer’s Investment Research
Mind if I ask SKEW a question?
What’s SKEW? I don’t know, what’s SKEW with you?
… OK, sorry, no more horrible jokes.
I bring up SKEW because as the Chicago Board Options Exchange (CBOE) notes, we’re seeing lots of it right now.
This past Friday (June 20) the CBOE SKEW Index rose to 143.26, its highest level since Oct. 16, 1998.
Actually, what is SKEW you ask? Well …



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