Commentary & Insight

Kurt Oeler

Kurt Oeler of optionMonster Discusses Options Education
MarketsWiki.tv

OptionMonster recently expanded into distance learning and extended their product line with more interactive programs, digital workbooks, and one-on-one mentoring. Kurt Oeler, who was recently promoted to president of optionMonster from vice president and general manager, spoke with JLN’s Sarah Rudolph about the new developments at the company – a division of optionMonster Holdings, Inc. – and the challenges of educating traders about options. According to Oeler, clients need a grounding in the basics before they can apply given options strategies, and some don’t fully understand that it takes a lot of time and practice to really learn all the elements involved in trading options. He also discusses the Najarians’ forthcoming book, “How We Trade Options,” a sequel to Jon Najarian’s book “How I Trade Options.” The new book covers topics such as weeklys and other new options products and also takes a personal approach by recounting some of the Najarian brothers’ journey from the Chicago open-outcry pits to the world of algorithmic trading.

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Lead Stories

Yesterday’s Volatility Bets Today’s Biggest Losers
Brendan Conway – Barron’s
The market is fickle, stocks are up, and bets in favor of market volatility are down. Those are the explanations why the CBOE Volatility Index is plunging 12% at the slightest hint of compromise in Washington.
http://jlne.ws/163m2mh

JPMorgan Clients Roll Bonds as Schwab Options Hedge Default
Daniel Kruger & Alex Barinka – Bloomberg
With the deadline for avoiding a U.S. default looming, investors from Boston to Bangalore are moving to cash, extending the maturities of their short-term Treasury holdings and buying options to help protect themselves should stock and bond prices tumble.
http://jlne.ws/181BXW8

Forex options players wary of dollar as budget deal hopes grow
Julie Haviv – Reuters
Foreign exchange options investors remained cautious on Thursday curbing bets that would profit from a stronger dollar as Washington showed some signs of reaching a temporary deal to reopen the government and avoid a disastrous U.S. default.
http://jlne.ws/19CJsze

Options Traders See High VIX as Short Lived
Kaitlyn Kiernan – The Wall Street Journal
There’s a lot less fear in the fear gauge than meets the eye.
The Chicago Board Options Exchange’s Volatility Index jumped to its second-highest finish of the year Tuesday amid continuing concerns that the Treasury will default on government debt.
But under the hood, options traders have been piling into trades betting that the VIX will soon fall back to recent lows.
http://jlne.ws/19CJVkY

Some Investors Cashing Out on VIX Rise
Chris Dieterich – The Wall Street Journal
With investors staring down the barrel of the U.S. government default, readings on the stock market’s so-called fear gauge have jumped–and trading volume in exchange-traded securities that track the CBOE Volatility Index has surged.
However, many investors are using a rise in the VIX as a chance to cash out.
http://jlne.ws/19CKVp9

Who Knows More: The S&P 500 Options or Financial Pundits?
J.W. Jones – CountingPips
By now the major media outlets have made sure to inform the public that the U.S. government is shut down, or partially shut down depending on your political perspective. Most financial pundits are looking to the recent past for clues about what to expect in the future.
http://jlne.ws/181xPFq
**I for one would put my money on the market. -JB

S&P 500 “breaking bad” on shutdown continuation
Anthony Lazzara – Futures Magazine
The Fed will today release minutes from its Sept. 17-18 meeting, at which officials unexpectedly maintained the pace of its monthly purchases. The VIX gauge has jumped 26% this week and is at the highest level since Dec. 28. Oil tumbled the most in a month and metals slid as the U.S. dollar rose. Obama told reporters in Washington yesterday that the U.S. economy risks a “very deep recession” should Congress not raise the $16.7 trillion debt limit.
http://jlne.ws/181yFlD
**Walter White for Fed chair! -JB

Put volume in iShares Japan ETF hits record on volatility outlook
Doris Frankel – Reuters
Option investors appear to be bracing for more volatility in the Japanese equities market within the next few weeks by trading options in combinations with stock on the iShares MSCI Japan Index fund.
http://jlne.ws/19CJ6IO

Videocast: VIX sees big put selling
optionMONSTER
http://jlne.ws/181DSdl

The ‘worst investment in the world’
Victor Reklaitis – MarketWatch
If you’re thinking about betting on more Washington-induced volatility, keep in mind a few warnings out this week.
Sure, exchange-traded products linked to the CBOE Volatility Index, or the VIX, offer a convenient way to make this type of bet. But they’re considered flawed by some experts, and their recent gains have inspired profit taking.
http://jlne.ws/19CKsTX
**I bet I could think of a few worse investments. -JB

A History of the VIX During Recent Debt Ceiling and Sequestration Battles
Bill Luby – CBOE
Democrats and Republicans have been fighting over budgets and related matters since before any of us were born and while the debate has been heated at times, only recently has the credit of U.S. debt been called into question as a result.
http://jlne.ws/181zlri

Exchanges and Traders Grapple Over HFT ‘Problem’
Peter Chapman – Traders Magazine
Six years after the practice first gained widespread notice, participants, regulators, academics and pundits are no closer to agreeing on whether or not high frequency trading (HFT) is a scourge or a blessing.
http://jlne.ws/1beKtk5

Nasdaq helps buy-side answer HFT issues with algo testing
Richard Henderson – The Trade
An algorithmic testing facility offered by exchange operator Nasdaq OMX aims to let buy-side firms measure the impact of low-latency trading on their own algorithmic trading strategies while also reducing glitches.
http://jlne.ws/181yoPC

Exchanges

IntercontinentalExchange Update on NYSE Euronext Acquisition
Press Release (ICE)
ICE and NYSE Euronext have established a closing date of November 4, 2013 for their previously announced transaction. The November 4, 2013 closing date is predicated upon the receipt by IntercontinentalExchange and NYSE Euronext of remaining European regulatory approvals prior to such date, and may be extended to a later date by further public announcement should any necessary approvals remain outstanding at such date.
http://jlne.ws/181AU8p

Regulation & Enforcement

SEC settles Heinz insider trading case for $5M
Malia Spencer – Pittsburgh Business Times
Rodrigo and Michel Terpins have agreed to turn over the $1.8 million in illegal profits made in call options trades for Heinz (NYSE: HNZ) the day before the company announced the deal. The brothers will also pay $3 million in penalties.
http://jlne.ws/19CK7Rb

SEC launches new website for market analysis
Bob Pisani – CNBC
The Securities and Exchange Commission on Wednesday launched a site on market structure to serve as a central location to share data and research. It’s a gold mine of information on how the market is trading.
http://jlne.ws/181x1QU

Options Education

Options for Earnings: Understanding Pricing Mechanics
Steve Smith – Minyanville
The past few weeks has seen a significant increase in market volatility. Expect it to continue as the incoming  wave of quarterly earnings reports begins to wash across the tape just as the debt ceiling fiasco reaches its denouement.
http://jlne.ws/181Cg3f

A Tip to Increase Your Winning Percentage
Sam Seiden – The Options Insider
Much of the time, the trading articles I write are focused on where to enter a position more than any other topic. This is because it’s the most important part of the trade. If you can’t get your entry correct, meaning low-risk, high-reward, and high probability, the other components of your trade, such as the exit and management, will not work.
http://jlne.ws/181D1sX

Strategy

Debt Ceiling Deal: How to Invest
Steven M. Sears – Barron’s
As the market shoots higher on hints that Congress may decide not to crash the global economy, these options trades should pay off.
http://jlne.ws/1bK8sMl

What kind of fear does a VIX surge indicate?
Wallace Witkowski – MarketWatch
If you’re looking to make money off the fear of other investors and using the so-called “fear index” as a gauge, think again.
Even though the CBOE Volatility Index recently surged to its highest level in more than three months as gridlock continues in Washington D.C., it might not be indicating the fear you’re looking for.
http://jlne.ws/181Fy6m

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