JLN Options: VIX Trader Betting $13 Million on 88% Increase in Fear Gauge; ETF Gauges Show ‘Fear Has Taken a Holiday’; J.P. Morgan, U.S. Reach Historic Settlement

Nov 19, 2013

Lead Stories

VIX Trader Betting $13 Million on 88% Increase in Fear Gauge
Nikolaj Gammeltoft – BloombergBusinessweek
An investor bought $13 million in call options on the Chicago Board Options Exchange Volatility Index, betting the gauge will rally at least 88 percent in the next four months.

Videocast: Huge VIX call buying

ETF Gauges Show ‘Fear Has Taken a Holiday’
Brendan Conway – Barron’s
In the last month, investors’ good feeling about the market pepped up. Have a look at ConvergEx strategist Nicholas Colas’ review this morning of options prices for various exchange-traded funds. They’re not just down. They’re down enough for Colas to declare an “extremely high level of investor complacency” out there.

Short-Term Volatility Index’s First Real Time Day
Russell Rhoads – CBOE
[Yesterday] CBOE started quoting the CBOE Short-Term Volatility Index (VXST – 11.80) on a real time basis.  Real time for volatility indexes means an updated quote every 15 seconds.  With the interesting market activity late in the day it was a fun first day to have VXST updating on my screen.

J.P. Morgan, U.S. Reach Historic Settlement
Devlin Barrett and Dan Fitzpatrick – The Wall Street Journal
J.P. Morgan Chase & Co. and the Justice Department Monday agreed to a landmark $13 billion settlement that resolves a number of legal headaches for the largest U.S. bank, clearing the way for a public announcement as soon as Tuesday, according to people familiar with the talks.
**Unless I miss my guess it is the shareholders who will bear the cost of this and the people who work there will still be getting bonuses. I want a job like that. -JB


ISE Gemini Trades 20 Millionth Options Contract
Press Release (ISE)
The International Securities Exchange (ISE) today announced that ISE GeminiTM traded its 20 millionth contract, continuing the exchange’s consistent growth in volume and industry market share since launching on August 5, 2013. ISE Gemini has averaged 2.8 percent equity options market share during the month of November, with average daily volume nearing half a million contracts. 

CME Group digs in on fee increases as brokers protest
Tom Polansek – Reuters
CME Group Inc (CME.O), the world’s largest futures exchange operator, on Tuesday said it will plow ahead with plans to hike fees for traders despite an outcry from customers fuming over higher costs.

Deutsche Boerse not interested in buying Euronext: sources
German stock exchange operator Deutsche Boerse AG has no interest in buying European exchange group Euronext, sources close to the Germany-based group said on Tuesday.

CBOE says it is open to growing within comfort zone
Tom Polansek – Reuters
CBOE, which owns the largest U.S. stock-options market, is interested in new products the company can offer exclusively or semi-exclusively, Chief Executive Ed Tilly said in a webcast of a Keefe, Bruyette & Woods conference in New York.

ICE Remains Committed to Euronext IPO After Liffe Separation
Matthew Leising & Sam Mamudi – Bloomberg
IntercontinentalExchange Group Inc. (ICE) remains committed to spinning off its European equity market division, Euronext, through an initial public offering, according to Chief Executive Officer Jeff Sprecher.

ICE to Buy Singapore Mercantile Exchange for $150 Million
Joyce Koh & Chanyaporn Chanjaroen – Bloomberg
IntercontinentalExchange Group Inc. (ICE) agreed to buy Singapore Mercantile Exchange Pte for $150 million to add commodity futures trading in Asia, where China reigns as the biggest user of everything from energy to metals.

CBOE, C2, CBSX and CFE Trading Schedule For The Thanksgiving Holiday
Press Release

Regulation and Enforcement

Wall Street Pushes Back on CFTC’s Advisory for Overseas Swaps
Robert Schmidt & Silla Brush – Bloomberg
The largest Wall Street banks are mobilizing to fight a new policy by the U.S. Commodity Futures Trading Commission that gives the regulator broader authority in overseas derivatives deals.

Gensler Says Three Swap Market Operators Must Tweak Access Rules
Matthew Leising – Bloomberg
The U.S. Commodity Futures Trading Commission, charged with promoting fairness on the new public markets for swaps mandated by the Dodd Frank Act, is telling three operators they must change their access rules.

MF Global to pay $1.2 billion to former investors
Peter Schroeder – The Hill
The financial derivatives dealer also agreed to pay a $100 million penalty to help settle charges it failed to monitor its activities, misled regulators, and improperly used customer funds to try and keep the company afloat.


The Calm Before a December Storm
Adam Warner – Schaeffer’s Investment Research
What if they just set the S&P 500 Index (SPX) price at the open each day, and then closed it until the next morning … would anyone notice? Until yesterday’s relatively tame reversal, it didn’t seem like they would, as trading ranges have absolutely tanked.

Options Education

“Innovate Or Die.”
Lake Hill Capital Management (via CBOE)
There is extreme danger in the market. The long list of reasons to hedge, insure and transfer risk are extremely compelling. This era of money printing and uncertainty has created all sorts of unknowns. This includes the risk of a painful market decline as much as missing a continued rally.



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