JLN Options: VIX Getting Scary Low; Speculators Slash Bullish Gold, Silver Futures, Options Positions — CFTC; Euro Option Volatility Hits the Lowest Level Since 2007

Nov 18, 2013

Commentary and Insight

Pat Fay

Small Cap Splash: Russell’s Pat Fay talks about CBOE’s latest volatility contract
The CBOE Volatility Index futures, or VIX, has been THE most successful futures contract in recent years. With the VIX posting record volumes this year, the exchange and Russell Indexes say now is the time to launch the Russell 2000 Volatility Index futures or RVX. John Lothian News sat down with Russell Investment’s Pat Fay to talk about RVX and its potential, especially versus other indexes like VIX and the European volatility index VSTOXX. Fay says the appetite for a small cap stock volatility futures is strong, especially among money managers looking to incorporate volatility hedges into their portfolios. “Clients are asking for volatility products,” Fay says. “Folks have taken the opportunity to educate themselves on it, develop strategies, it’s become very popular.”

Watch the video »

Lead Stories

VIX Getting Scary Low – Weekly Market Outlook
Price Headley – CBOE
Though the market may have gotten off to a slow start last week, it certainly finished strong.  All told, the S&P 500 (SPX) (SPY) advanced 1.55% last week, once again hitting record highs.
As has been the case several times in recent months, however, there’s something unsettling about the way the market has marched into new-high territory this time around.

**The above story came out this morning. Since then the VIX has ticked up (see story directly below) but it is still at a 3-month low.  — SR

Volatility Index is Up, ETNs Are Down — What Gives?
Brendan Conway – Barron’s
No, you can’t invest directly in the CBOE Volatility Index – including in the funds and notes whose names bears the index’s “VIX” label. Today’s trading shows what happens when you try. You lose money.
The index itself is ahead by nearly 4% on Monday. But the exchange-traded funds and notes whose names bear a variant of “VIX” are down.

FOCUS: Speculators Slash Bullish Gold, Silver Futures, Options Positions — CFTC
Kitco News (via Forbes)
Speculators slashed their net-long positions in gold and silver futures and options traded on the Comex division of the New York Mercantile Exchange following a steep drop in prices, according to U.S. government data released late Friday.

Euro Option Volatility Hits the Lowest Level Since 2007
Chris Johnson – The Option Insider
Option implied volatility on the euro has finally fallen to the lowest levels since 2007. We recently highlighted the unusual steepness in the term structure (“Fade Steep Contango As EUR/USD Ramps”, Oct. 22), and as expected, the curve has flattened since then from 82% for 3M/1Y options to a recent peak of more than 91% on Nov. 6.

Videocast: Narrow range for VIX

Active but orderly debut for Twitter options
Doris Frankel – Reuters
Trading in options of Twitter Inc was dominated by put volume with a mixture of selling, hedging and speculative activity in an overall orderly debut on the U.S. options market, a week after the social media company’s stock started trading.


CBOE Short-term VIX Index Values Now Disseminated Every 15 Seconds
Press Release (CBOE)
Chicago Board Options Exchange, Incorporated (CBOE) today announced that it has expanded the frequency for disseminating values on its recently created CBOE Short-term Volatility IndexSM (VXSTSM index). VXST index values now are generally disseminated every 15 seconds during the trading day versus once a day previously, allowing traders to track intra-day volatility of the index. 

Regulation and Enforcement

U.S. ‘Aggressively’ Probing Possible Currency Rigging
Tom Schoenberg – Bloomberg
The U.S. Justice Department is “aggressively investigating” possible manipulation of foreign exchange rates by a number of banks, Deputy Attorney General James Cole said.

Pressure to Finish Volcker Rule Quickly
William Alden – Dealbook
The Obama administration has reached a critical stage in its effort to rein in Wall Street, Peter Eavis and Ben Protess report in DealBook. The push to reshape financial regulation hinges on negotiations in the coming weeks over the Volcker Rule, which bans banks from trading for their own gain.


NYSE and Nasdaq Plan to Back Up One Another’s Data Streams
Steve Rosenbush – The Wall Street Journal
The committees that control consolidated data feeds for Nasdaq OMX Group and NYSE Euronext are close to an agreement on a plan to back up one another’s streams, according to people familiar with the matter.


How to Trade Freshly Minted Twitter Options
Tyler Craig – InvestorPlace
Derivative traders rejoiced Friday as option contracts became available for the latest social media darling — Twitter (TWTR). Twitter options rolled out swiftly by historical standards, launching a mere seven days after the blue bird went public. Typically, options exchanges wait until a newly issued stock establishes a track record of healthy daily trading volume to ensure there will be adequate interest in any listed options.

Retail Stocks: Rally Can Continue into Holidays
Steven M. Sears – Barron’s
Retail has led the S&P higher all year; this options trade is a cheap way to profit from further gains.

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