JLN Options: Vix in demand; What It Would Take To Get Real Volatility (& The VIX) Rising Again; Big Mac Bulls Savoring McDonald’s Shares for Buybacks

May 20, 2014

Lead Stories

Vix in demand
Andrew Wilkinson – Futures
Reading the CBOE exchange tape, one investor appears to have paid 63-cents for 20,000 June expiration call options with a 16.0 strike price while at the same time selling the same volume of 20.0 strike calls for 26-cents expiring in the same contract month. Floor sources say the buyer has interest to pay the net 37-cents for more of the same combination, but the bearish tone to Tuesday’s trading is pushing the spread wider.

What It Would Take To Get Real Volatility (& The VIX) Rising Again
Wallace Witkowski – BigTrends
Investors are becoming more accustomed to holding firm during market drops, making it more likely that it will take a true “black swan” event to usher in a return to stock volatility.
After a near 30% run-up in the S&P 500 Index (SPX) (SPY)  in 2013, many strategists were calling for a return to volatility in 2014. Instead, the CBOE Volatility Index (VIX) (VXX) has generally held to low levels, with the occasional spike past 20, just like in 2013.

Big Mac Bulls Savoring McDonald’s Shares for Buybacks
Joseph Ciolli – Bloomberg
McDonald’s Corp. (MCD) is enticing equity investors with the prospect of bigger dividends and buybacks, and options traders are digging it.
The shares have rallied 7.2 percent since early March when Chief Financial Officer Pete Bensen said the company may look to borrow money to repurchase stock. Bullish bets are more expensive than bearish ones for the first time ever, according to data on three-month contracts compiled by Bloomberg. Calls make up the eight contracts with the highest ownership.

VIX in the mix: calm before a share storm?
David Potts – The Age
Financial advisers are always harping on about the trade-off between reward and risk. If they didn’t they’d probably get a ‘‘please explain’’ from the corporate watchdog.
Risk isn’t just about a stock going belly up. It’s also about volatility – the more a share price fluctuates, the riskier an investment it is.

Videocast: VIX futures declining

Wall Street Taking Aim at a ‘Good Harbor’ Selloff?
Brendan Conway – Barron’s
Smallcap stocks are sharply lower today. The S&P 500 and other stock indexes are down, but by notably less. Why?
Believe it or not, some traders are blaming Wall Street’s attempts to front-run a single portfolio manager.

ICAP’s new London SEF targets OTC derivatives
Elliott Holley – Banking Technology
The new London-based ICAP SEF is registered with both the US Commodities Futures Trading Commission, and the UK’s Financial Conduct Authority. Unusually, it is classified both as a SEF – a US designation – as well as an MTF, the European version, allowing it to take advantage of both US and European liquidity.
ICAP has also reorganised to bring its US and European entities together so that they can be treated as a single entity for legal purposes.


The Options Industry Council Signs Content Sharing Agreement With The Shanghai Stock Exchange
Press Release (OIC)
The Options Industry Council (OIC) announced today that it has entered into a content licensing agreement with The Shanghai Stock Exchange (SSE) to create an educational program for financial professionals and investors in China. The terms of the agreement were finalized in April and mark the first time a content licensing agreement for OIC has been executed with a financial institution in mainland China.

NADEX appoints former CME compliance expert as CEO
Andrew Saks-McLeod – LeapRate
North American Derivatives Exchange (NADEX) has appointed a new Chief Executive Officer, Timothy McDermott.
Mr. McDermott was appointed this month to the senior executive position having spent the last six years at NADEX in the capacity of General Counsel and Chief Regulatory Officer.

London Stock Exchange in Exclusive Talks to Buy Russell Investments
Chad Bray – The New York Times
The London Stock Exchange moved closer on Tuesday to buying Russell Investments, saying it was in “exclusive discussions” to potentially acquire the owner of the Russell 2000 stock market index.

Exchange sector underperforms broad market
Lauren Schmidt – Futures
Keefe, Bruyette & Woods’ (KBW) first quarter 2014 wrap-up and trend analysis for U.S. exchanges indicated that double digit earnings-per-share (EPS) growth across U.S. exchanges was driven by stronger volume and acquisitions.  
EPS grew an average of 17%, mainly due to IntercontinentalExchange’s(NYSE:ICE) acquisition of NYSE Euronext.

Regulation and Enforcement

Wall Street regulator may release rules on data collection plan this summer
Suzanne Barlyn – Reuters
A formal proposal for a controversial rule that would beef up oversight of securities brokerages could be ready as early as this summer, the head of Wall Street’s industry-funded watchdog said on Monday.
The plan, known as the Comprehensive Automated Risk Data System, or CARDS, would require firms to submit vast quantities of data to the Financial Industry Regulatory Authority (FINRA) in an ongoing stream.

House bill gives CFTC less funding than it wants
Erik Wasson – The Hill
The Republican majority on the House Appropriations Committee released a bill Monday that gives the Commodity Futures Trading Commission $62 million less next year than President Obama requested for the agency partly responsible for implementing Wall Street reform.
The CFTC’s $218 million budget for fiscal 2015 is a $3 million increase from current funding, but the increase is targeted at information technology improvements. The White House has long argued that the CFTC needs much higher funding to implement the Dodd-Frank financial overhaul, but House Republicans have refused to provide the full level of funds every year since the 2010 law passed.
***JB: ““We, the unwilling, led by the unknowing, are doing the impossible for the ungrateful. We have done so much, for so long, with so little, we are now qualified to do anything with nothing.” ~Anonymous

Wall St. watchdog probing 170 instances of possible algorithmic abuses
Suzanne Barlyn – Reuters
Wall Street’s self-regulator is cracking down on abusive trades made on the basis of mathematical algorithms and currently has some 170 ongoing investigations into the subject, its chief said on Monday.

Statement the euro interest rate derivatives case
European Commission – STATEMENT/14/166   20/05/2014
The Commission is sending today its statement of objections to three large international banks – Crédit Agricole, HSBC and JPMorgan Chase. This is a further key step in our investigations into cartels in the financial sector.
In the context of the same investigations, the Commission already imposed fines totalling EUR 1.7 billion in December 2013 on eight international financial institutions. This amount included a 10% reduction for these companies, because they had agreed to settle the case with the Commission.


Tips on Trading VIX Options
Examining ways to play the VIX as it drifts lower
Adam Warner – Schaeffer’s Investment Research
We all know the market’s churning and the CBOE Volatility Index (VIX) is drifting. So, how should you play VIX options?

Are VIX ETFs Right For You?
David Fabian – NASDAQ
Fear and greed are powerful motivators on Wall Street. They often dictate investment decisions that would otherwise lead to more carefully structured research or opportunistic timing. While greed is often manifested in momentum stocks or use of leverage, the fear side of the spectrum can be summed up with the CBOE Volatility Index (VIX).

A Rare Opportunity To Profit From Volatility
Aristofanis Papadatos – Seeking Alpha
This year the market has recorded new all-time highs and has been consolidating around them for almost 3 months, which is a very healthy technical behavior. Nevertheless, thanks to the record levels and the imminent elimination of Fed’s support, many investors have started to feel nervous and are looking for a way to mitigate their potential losses from an imminent correction.

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past Options Newsletters

Pin It on Pinterest

Share This Story