JLN Options: Why There's No Such Thing as 'Easy Money'; Investors favour weekly FX options amid macro uncertainty; Speed Traders Meet Nightmare on Elm Street With Nanex

Nov 26, 2013

Lead Stories

Why There’s No Such Thing as ‘Easy Money’
Adam Warner – Schaeffer’s Investment Research
On the subject of real tweets from real investors, I give you this:
    “Easy to make money in options market when implied volatility is this low. Volatility might be the cheapest asset class.”

Investors favour weekly FX options amid macro uncertainty
Euromoney Magazine
Data from the Chicago Mercantile Exchange (CME), the world’s largest regulated FX options market place, show that average daily volume of options contracts is up nearly 50% year-on-year, with 60,300 contracts equivalent to $8.3 billion trading each day.

Speed Traders Meet Nightmare on Elm Street With Nanex
Michael P. Regan – Bloomberg
The nemesis of Wall Street’s high-frequency traders operates out of an apartment-sized office above the Bliss Salon — manicure/pedicure $45 — on Elm Street in the Chicago suburb of Winnetka.
**The Nanex Order Routing video is strangely hypnotizing. -JB

Videocast: Big VIX call buying in April

Top 50 Brokers of 2013: Bruised and battered, but coming back strong
Ginger Szala, Michael McFarlin – Futures Magazine
Five years is a long time. Think about it: In 2008, the financial markets were in upheaval, still reeling from the failure of Lehman Brothers and the infamous bail-out of the too-big-to fail firms. Since that time the U.S. Congress wrote and passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, mandating that the various regulatory agencies put in place rules that would stem some of the bad behavior that happened during the financial crisis. A lot, it seems, can change in five years.

Why a handful of banks may have unfair advantage in the US$20-trillion gold market
Bloomberg (via Financial Post)
Every business day in London, five banks meet to set the price of gold in a ritual that dates back to 1919. Now, dealers and economists say knowledge gleaned on those calls could give some traders an unfair advantage when buying and selling the precious metal.

Here’s why Wall Street has a hard time being ethical
Chris Arnade – The Guardian
A new report finds 53% of financial services executives say that adhering to ethical standards inhibits career progression at their firm. A former Wall Street trader describes why.
**Depressing but not surprising. -JB


CBOE to List Options on CBOE Russell 2000 Volatility Index Beginning December 3
New Product Offers Volatility Trading on Premier Measure of Small-Cap U.S. Stocks
CBOE Press Release
Chicago Board Options Exchange, Incorporated (CBOE ) today announced that it will list options on the CBOE Russell 2000 Volatility Index (ticker: RVX) beginning Tuesday, December 3.  The CBOE Russell 2000 Volatility Index (RVXSM Index) is an up-to-the-minute market estimate of the expected 30-day volatility of the Russell 2000 Index (RUT), calculated using real-time bid/ask quotes of RUT options that are listed on CBOE.

ISE Gemini Completes Fourth Successful Product Rollout
Press Release (ISE)
ISE Gemini announced today that it has completed the rollout of 302 additional products, representing the fourth successful product rollout since launch. ISE Gemini now lists 996 total products and has an equity options market share of 2.9 percent through the month of November, excluding dividend trades.

Executive Departures Send Ripples Through Exchange Industry
Bradley Hope – The Wall Street Journal
NYSE Euronext and Nasdaq OMX, once the stalwarts of equity trading, are rushing to stay relevant as nimble competitors from outside the established cities of New York and Chicago accumulate market share.
So it should come as no surprise that two senior executives from the largest stock exchanges are on their way out.

CME alters some natgas, oil settlement prices due to glitch
CME Group on Tuesday said it had changed the contract expiration price of 10 New York Mercantile Exchange energy products and related instruments settled between May and October due to a technical glitch.

Analysis: U.S. exchanges grapple for solutions to trading glitches
Herbert Lash – Reuters
U.S. security exchanges are feverishly working in the wake of August’s Nasdaq trading halt to reinforce a market that too frequently seems to succumb to technology glitches, but these efforts are unlikely to rectify all the weak spots.

CME Group Announces Sale of NYMEX Building to Brookfield Office Properties
Press Release (via MarketWatch)
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the sale of the NYMEX Building located at One North End Avenue to Brookfield Office Properties.
Brookfield will buy the 15-story, half million square-foot office building for $200 million. As part of the sale, CME Group will lease back the lower 222,000 square-feet of space in the building for a 15-year term, including the NYMEX Trading Floor as well as office and trading floor support space.

Regulation and Enforcement

SEC aims to loosen rules on foreign broker-dealers in U.S., official says
U.S. securities regulators are looking to loosen rules for foreign-broker dealers acting in the U.S. on a cross-border basis. The change would come in the wake of new policy being adopted to implement derivatives cross-border rules under Dodd-Frank. The reform was outlined by John Ramsay, Acting Director, Division of Trading and Markets of the Securities and Exchange Commission (SEC).

Hedging and the Volcker Rule
Philip McBride Johnson on why semantics have delayed the implementation of the Volcker Rule and how 1000 pages could be condensed to just four points.

CFTC Fines Firm, Trader $400,000 for Alleged Oil Futures Manipulation
Michael Calia – The Wall Street Journal
The Commodity Futures Trading Commission on Monday said it fined a trader and his former firm a combined $400,000 over alleged attempts to manipulate crude-oil futures.


Go With The Flow (For Now) – Weekly Market Outlook
Price Headley – CBOE
Even with the rough start, the bulls managed to do what they’ve been doing so well for months now… find a reason – any reason – to keep on buying.  Thanks to renewed optimism on Thursday and Friday, the market managed to fight its way to yet-another record close last week.

Capitalizing on ECB policy easing with options spreads
James Ramelli – Futures Magazine
With the ECB signaling there could be more policy easing in the future, the market reacted by breaking the Euro currency future’s (CME:E6Z13) win streak and sending prices lower by 0.70%. The announcement also sent the Euro sharply lower against the Yen. The move lower ended the bull run from the previous week as the ECB announced their consideration of a plan that would lower benchmark rates in the Eurozone to -0.1% with the intention of increasing lending and spurring the still sluggish economy.

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