JLN Options: VIX Normalizes…for Now; A Historical Perspective on Current VIX Levels; The New Face of Big-Cap Technology

Apr 17, 2014

Observations and Insight

Flash Point: Peter Nabicht Talks HFT, Innovation and Misinformation
JohnLothianNews.com

Today’s financial markets can be summed up in three words – global, fast, and complex. But as the market structure evolves, so must the regulatory structure that oversees it. John Lothian News has spoken with several industry experts to create this series on the evolution of financial market structure.

In Part 1, Peter Nabicht, senior advisor of the Modern Markets Initiative, welcomes the public’s interest in high frequency trading in the wake of Michael Lewis’ book “Flash Boys”, but cautions that changes may have unintended consequences.

Watch the video »

Lead Stories

VIX Normalizes…for Now
Mark Sebastian – The Options Insider
Yesterday, the VIX and the VIX curve normalized accross the board.
However, I would not get too excited about a rally.  Yes, the SPX is back near all-time highs, but the NDX and RVX continue to be weak.  Weakness in the NDX and RVX continues to pull down the big cap weighted indexes.
http://jlne.ws/1kEXJ80

A Historical Perspective on Current VIX Levels
Russell Rhoads – CBOE Options Hub
With all the talk about VIX not acting right (I don’t use the word broken) you would think that someone had written a book criticizing the fear index.  My feeling has been that VIX is doing what it is supposed to do and that is measure the implied volatility of index options that are listed on the S&P 500.  In the past sustained higher volatility has been associated with a bearish equity market.
http://jlne.ws/1r2YxUr

The New Face of Big-Cap Technology
Checking in on the price action of the VXN versus the VIX
by Adam Warner, Schaeffer’s Trading Floor Blog
If you spent the first three-and-a-half months of 2014 in a cave … well, first of all welcome back! We knew you were away, so we decided to make sure that SPDR S&P 500 ETF (SPY) didn’t move much for you. It’s up 0.8% in 2014 … nothing to see here, move along.
http://jlne.ws/1r2YCat

High-Frequency Fight Starts in Foreign Exchange
Lucy Meakin – Bloomberg
Foreign-exchange dealers say they have the solution to the high-frequency trades eroding banks’ profits across financial markets.
A currency-dealing platform known as ParFX, established in 2011 by firms from Deutsche Bank AG to Citigroup Inc., was approached last month by banks asking if its technology could be applied to other asset classes, Chief Executive Officer Dan Marcus said.
http://jlne.ws/1eVVp76

Videocast: Huge straddle in VIX
OptionMonster
http://jlne.ws/1r301xN

Bets against FTSE pile up as central bank directions diverge
GulfNews.com
Market bets are growing that Britain’s main stock index, laden with heavyweight exporters, will stall as divergent central bank policies strengthen the pound against the euro.
An economic rebound that is strengthening Britain’s jobs market could prove a mixed blessing for the FTSE 100.
http://jlne.ws/1r318NX

India VIX signals drop in market volatility
My IRIS News
India VIX, a volatility index, dropped on Thursday. It is currently trading at 30.80, down 1.14% from 31.16. It witnessed a high of 31.16 and low of 21.64 after opening at 31.16 (at 12.29 pm).
http://jlne.ws/1r30b8p

Equities extend streak; VIX near 14
Chris McKhann, optionmonster.com
The major equity indexes extended their winning streak to a third consecutive session yesterday, driving the CBOE Volatility Index back near 14.
The S&P 500 climbed 19.33 points, or 1.05 percent, to close at the day’s high of 1862.31. That takes the SPX back to where it started last week, with the index now just above its 20-day moving average. Resistance is at 1880 and support at 1815.
http://jlne.ws/1r30vnK

Shareholders Sick of Phantom Stock Sales
By JACK BOUBOUSHIAN, Courthouse News Service
CHICAGO (CN) – OptionsXpress, an online brokerage, sold $5.5 million of “phantom” Life Partners Holdings shares passed off as genuine company stock, the company and its shareholders claim in court.
Life Partners Holdings Inc., a financial services company, and six of its shareholders sued optionsXpress, CFO Thomas Stern, and one of its top customers, Jonathan Feldman, in Cook County Court.
http://jlne.ws/1r31Nim

Exchanges

The NASDAQ OMX Group has expanded its London business to new, larger premises at Woolgate Exchange, 25 Basinghall Street.
Press Release (via Automated Trader)
The move will bring together all of NASDAQ OMX’s 150+ employees in London, following the 2013 acquisitions of Thomson Reuters’ Investor Relations, Public Relations and Multimedia Solutions businesses and eSpeed, and the launch of the NLX derivatives market.
NLX is NASDAQ OMX’s London derivatives platform for trading interest rate derivatives. In 10 months of operation NLX has achieved a moving average market share in EURIBOR of approximately 10 percent and has attracted 27 participants.
http://jlne.ws/1r2Z7Bk

Regulation and Enforcement

U.S. SEC releases cyber security examination blueprint
Sarah N. Lynch – Reuters
U.S. securities regulators have unveiled a road map that lays out how they plan to make sure Wall Street firms are prepared to detect and prevent cyber security attacks.
The nine-page document, posted April 15, contains examples of the questions Securities and Exchange Commission examiners might ask brokerages and asset managers during inspections.
http://jlne.ws/1r2f8aF

U.S. Senate duo urges Fed clampdown on banks and commodities
Douwe Miedema – Reuters
Two U.S. senators on Wednesday pushed the Federal Reserve to write tough new rules to limit Wall Street’s role in commodity markets, stepping up pressure for a clampdown on some of the country’s largest banks.
http://jlne.ws/1r2ZmfT

How a 56-Year-Old Engineer’s $45,000 Loss Spurred SEC Probe
Kevin Dugan – Bloomberg
Jeff Steckbeck didn’t read the prospectus. He didn’t realize the price was inflated. He didn’t even know the security he read about online was something other than an exchange-traded fund.
The 56-year-old civil engineer ultimately lost $45,000 on the wrong end of a volatility bet, or about 80 percent of his investment, after a Credit Suisse Group AG (CSGN) note known as TVIX crashed a week after he bought it in March 2012 and never recovered.
http://jlne.ws/1j64xHJ

Strategy

Four Bearish Plays For An Overpriced Market
William Baldwin – Forbes
What do you do if the market is 43% overpriced? (The 43% is explained here.)
Go to cash. James Montier, bearish market strategist at money manager GMO, is only 30% invested with his own savings. That’s a bit drastic, but you could lighten up. You could unload some stocks you’re not fond of.
http://jlne.ws/1kF2wq6

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