JLN Options: Weekly stock futures hoping to follow success of weekly options; No, Your ETF Doesn’t Track the VIX Volatility Index — and Here are the Numbers; For NYMEX traders, making money has 'never been harder'

Jun 17, 2014

Lead Stories

Weekly stock futures hoping to follow success of weekly options
Daniel P. Collins – Futures Magazine
OneChicago, an equity finance exchange, is launching a listing of weekly futures products with next-day settlement to each day of the week.
The first weekly futures products will launch on Friday June 20 on four exchange traded funds (ETFs) based on the S&P sector funds and on Apple(NYSE:AAPL) stock futures.
http://jlne.ws/1nbbARm

No, Your ETF Doesn’t Track the VIX Volatility Index — and Here are the Numbers
Brendan Conway – Barron’s
The idea of owning assets whose prices gain when stocks drop has plenty of allure. Just don’t think buy-and-hold investors can do it using exchange-traded funds and similar trading vehicles tied to market volatility.
Volatility or VIX ETFs and ETNs are built to track futures-market indices. Those products’ long-term returns deviate notably from the CBOE Volatility Index itself, with prices which have fallen in some cases 90% or more over their lifetimes — a contrast to the VIX index, which is mean-reverting.
http://jlne.ws/1lBwADU

For NYMEX traders, making money has ‘never been harder’
Alex Rosenberg – CNBC
For traders on the floor of the New York Mercantile Exchange, the demise of commodity volatility this year only adds insult to the injury done by electronic trading. Save for a sharp reaction to the recent news out of Iraq, moves in crude oil and gold have been incredibly muted this year, and options prices have slid lower as little volatility has been expected. And that leaves veteran floor traders searching new strategies—and very often reminiscing about the good old days.
http://jlne.ws/1jww7yz

Insurance firms look to time their volatility hedging
Blake Evans-Pritchard – Risk Magazine
Market volatility is at its lowest level since the financial crisis – but should insurers be preparing for the inevitable return to a more volatile environment? Blake Evans-Pritchard reports
The Chicago Board Options Exchange Market’s Volatility Index (Vix), which tracks expected market volatility on the S&P 500, suggests that stock swings have been particularly low over the past 12 months (see graph).
http://jlne.ws/1nNx5ec

Binary Options Trading Volumes in Japan Drop 41.5% in May
Victor Golovtchenko – Forex Magnates
During the month of May combined volumes at GMO Click Securities, Traders Securities, IG Securities, JFX, YJ FX, Hirose FX and FX Trade Financial have totaled $674.6 million. This is a substantial drop from April, when the number was 41.5% higher. The drop in volumes remains consistent with the trend in the Japanese Forex trading volumes during the month of May.
http://jlne.ws/1lw5yzg

Videocast: Eve of VIX settlement
optionMONSTER
http://jlne.ws/1lBwuvY

Trader Who Called Markets ‘Rigged’ Tempers His Critique
William Alden – The New York Times
Bradley Katsuyama, chief executive of the stock trading upstart IEX Group, made waves on Wall Street by playing the part of a disruptive innovator who said he believed the markets were “rigged.”
But he adopted a softer tone on Tuesday in testimony prepared for a hearing before the Senate Permanent Subcommittee on Investigations. Mr. Katsuyama, who rocketed to prominence after being featured in Michael Lewis’s recent book “Flash Boys,” voiced more measured criticisms of the market and defended the regulatory status quo.
http://jlne.ws/1lP03dJ

Regulation and Enforcement

BATS CEO calls for reasoned market structure reform
The Trade USA
Any changes to the US equity market structure should be as a result of deliberate and data-driven studies instead of a knee-jerk response to a current Wall Street best seller, according to industry members speaking before the US Senate today.
The Senate’s Permanent Subcommittee on Investigations hearing, ‘Conflicts of Interest, Investor Loss of Confidence, and High Speed Trading in US Stock Markets’, is taking place this morning, seeking industry feedback on how to restore confidence to US equity markets.
http://jlne.ws/1jwvtRA

Study Asserts Startling Numbers of Insider Trading Rogues
Andrew Ross Sorkin – NY Times
There is often a tip.
Before many big mergers and acquisitions, word leaks out to select investors who seek to covertly trade on the information. Stocks and options move in unusual ways that aren’t immediately clear. Then news of the deals crosses the ticker, surprising everyone except for those already in the know. Sometimes the investor is found out and is prosecuted, sometimes not.
That’s what everyone suspects, though until now the evidence has been largely anecdotal.
http://jlne.ws/1jwwkBI

FIA highlights concerns over MiFID liquidity definition
John Bakie – The Trade
Determining whether OTC derivatives are liquid enough to be subject to MiFID II’s ‘trading obligation’ is likely to be a major sticking point in development the regulation, according to the Futures Industry Association (FIA) Europe.
In the latest in a series of special reports on MiFID II, FIA Europe highlighted some of the key issues arising from the first discussion paper on implementing the new directive, including a lack of detail on new trading venues.
http://jlne.ws/UIKACi

Technology

TMX Group launches TMX Quantum XA on Toronto Stock Exchange
Press Release (via The Wall Street Journal)
TMX Group today announced the successful launch of its award-winning, high performance equity trading engine, TMX Quantum XA(TM) on Toronto Stock Exchange. “We have reached a major milestone in our technology history,” said Brenda Hoffman, Senior Vice President, Group Head of Information Technology, TMX Group. “We are very proud to have set this organization on a bold new technology path and delivered the best trading platform in the world.”
http://jlne.ws/1nNvBQZ

Strategy

Protect Portfolios from the World’s Woes
Steven M. Sears – Barron’s
Following the ISIS insurgency in Iraq and ahead of the Federal Reserve’s key policy meeting this week, options-trading patterns are showing signs of caution.
That’s been reflected in the purchase of inexpensive call options on the CBOE Volatility Index (VIX). The trading pattern either anticipates a short-term volatility spike and stock-market correction or represents a simple rebalancing of the risk of owning stocks while the cost of protection is near historic lows.
http://jlne.ws/1vE2hQp

Taking Advantage of Low Volatility
Should you swap stock ownership with long calls?
Adam Warner – Schaeffer’s Investment Research
I’m not so sure VIX will keep declining, but that’s simply because there’s really not much more it can do on the downside. We’ve already seen a 10 full. Even with realized volatility under 5, it’s entirely possible we’ve seen the VIX just about bottom.
But I do think there’s a good chance it hovers in this general area for a while, save for the randomly timed blips up that we see a few times a year.
http://jlne.ws/1nbC8lo

Options Expiration Week Hardly An Automatic Downer For Stocks
Rocky White – Forbes
This coming Friday is the third Friday of the month, meaning that equity options expire. Also, it’s a triple-witching expiration week, so stock index futures and stock index options expire as well. Some even throw in the fact that single-stock futures expire too and refer to it as quadruple-witching.
Let’s take a look at what expiration week has meant in the past for stocks. Also, I specifically look at CBOE Volatility Index (VIX) expiration weeks, which still happen just once a month (though other volatility-based contracts like the iPath S&P 500 VIX Short-Term Futures ETN (VXX) trade weekly options).
http://jlne.ws/1nNzfu6

 

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