JLN Options: Low Volatility Favors Investors Right Now

Jan 31, 2012

Lead Stories

Low Volatility Favors Investors Right Now
Plus, 2 tricks for using the VIX in your trading
Jan 31, 2012
By Adam Warner, InvestorPlace
News Flash: The CBOE Volatility Index (CBOE:VIX) has had a pretty severe drop these past few months. By some measures, this is as fast as it has ever declined. In fact, the VIX has pared nearly 2/3 of its “value” in less than four months. I use the term “value” loosely, though, as the VIX is not a stock or a commodity or any sort of hard asset. It’s a statistical calculation — essentially a measure of the price investors will pay for portfolio protection. The VIX has no fair value, just simply a market value. And right here, right now — investors have placed a lot less value on that protection than they did just a few short months ago.
Is a Low VIX Cause for Celebration … or Alarm?
So what does a low VIX mean for you? Should you worry that other investors are not all that worried any more? Or should you gain extra confidence now that investors appear to be bubbling with confidence?  http://jlne.ws/ztF4iZ

Brace Yourselves. The Euromoney FX Poll Is Open

By Katie Martin, The Source – WSJ
Last Thursday morning in London an announcement went out over the speaker system of a large bank’s foreign-exchange trading floor.
“OK everyone, the Euromoney poll is now live…” it began. Moments later came the sound of a grown man screaming in mock agony, horribly aware of the pressure he will face in the coming weeks to extract votes from his clients. The scene is likely to have been repeated on every major currencies-dealing floor in the City that day, as banks brace for the biggest annual public-relations (and ego) war at the heart of a global $4 trillion-a-day market. First launched in 1979, the annual poll run by Euromoney magazine has become the de-facto benchmark of banks’ market share–the Oscars of the FX industry. Voting this year closes March 2, and the results are published in May…
Competition is turning to extremes. The head of operations at one large retail FX-trading venue, who didn’t wish to be named, said that this year, one bank sent its global head of foreign-exchange options on an overseas trip to visit him and try and secure his vote–the first time anyone has gone to such lengths.
Largest option buying in equities so far
by David Russell from optionMONSTER
Nearing the halfway mark in today’s session, here are the individual equity names with the most call and put buying on optionMONSTER’s ActionTracker data system.
Thoratec (THOR): More than 5,000 April 32 calls were bought for $1.60 to $1.70 as investors positioned for upside in the stock. THOR fell 4.04 percent to $29.72.


Maple Group and TMX Group Announce Extension of Offer to TMX Group Shareholders to February 29, 2012
TORONTO, Jan. 31, 2012 /CNW/ – Maple Group Acquisition Corporation (“Maple”), a corporation whose investors comprise 13 of Canada’s leading financial institutions and pension funds, and TMX Group Inc. (TSX: X) today announced the extension of Maple’s offer to acquire a minimum of 70% and a maximum of 80% of the shares of TMX Group to 5:00 p.m. (Eastern Time) on February 29, 2012, unless further extended or withdrawn. The Maple offer is part of an integrated acquisition transaction, valued at approximately $3.8 billion, to acquire 100% of TMX Group shares. The TMX Group Board of Directors continues to unanimously recommend that shareholders accept and tender their shares under the Maple offer.

Nasdaq OMX makes clearing house pledge
By Philip Stafford in London
Nasdaq OMX has moved to reassure investors trading on its exchange in Europe that their funds cannot be touched by administrators in the event of a broker default. The transatlantic exchanges operator put the pledge at the heart of an overhaul of its clearing default fund. The group is switching to a member-financed default fund for its Nordic business on March 1 in preparation for sweeping incoming European legislation that will elevate the role of clearing houses in safeguarding the world’s financial system.

NASDAQ OMX had the Lowest Relative Performance in the Specialized Finance Industry
By Mallory Stone in Fast Lane, Financial News Network
Here are 5 stocks in the Specialized Finance industry ranked by performance. We compiled the trading activity from yesterday and then analyzed the industry looking for stocks that were underperforming. This is what we found:
NASDAQ OMX (NASDAQ:NDAQ) ranks first with a loss of 2.65%; NYSE Euronext (NYSE:NYX) ranks second with a loss of 1.81%; and Moody’s (NYSE:MCO) ranks third with a loss of 1.65%.

NYSE-Deutsche Börse merger: Commission veto likely
By Eric van Puyvelde Tuesday 31 January 2012
It seems most likely that on 1 February the European Commission will veto – under the EU’s merger control regulation – the merger between Deutsche Börse and NYSE Euronext. NYSE Euronext groups the New York, Paris, Brussels, Amsterdam and Lisbon exchanges. If the merger took place, Deutsche Börse shareholders would have 60% of the holding, while NYSE shareholders would have 40%. NYSE would become the world’s largest stock market operator in all market activities (cash, derivatives, delivery versus payment, custodial services and market data). Over the last weeks, the leaders of the two financial firms took many steps and made many declarations to demonstrate their determination to see the project through. But the Commission is concerned about overlaps in the stock options sector in Europe and in stock-index futures and interest rates.

Options on Futures

Crude Options Volatility Declines as Futures Slip a Second Day
By Barbara Powell, Bloomberg – Jan 30, 2012
Crude oil options volatility declined after underlying futures fell for a second day as European leaders sparred with Greece over a debt reduction program to keep the region’s financial crisis from spreading.
Implied volatility for at-the-money options expiring in March, a measure of expected price swings in futures and a gauge of options prices, was 27.6 as of 3:30 p.m. in New York, down from 27.7 on Jan. 27.
Crude for March delivery fell 78 cents to settle at $98.78 a barrel on the New York Mercantile Exchange, the lowest settlement since Jan. 20.

Bursa Malaysia Readies New Clearinghouse For 1Q Launch
Written By Jacob Bunge, Dow Jones Newswires
Published January 31, 2012
PALM BEACH, Fla. -(Dow Jones)- Bursa Malaysia Bhd (1818.KU) is preparing to launch a new trade-clearing facility for its derivatives markets that will enable the Kuala Lumpur exchange to offer a broader range of contracts, according to a senior executive.  The firm anticipates the new clearinghouse, built on technology supplied by Korea Exchange, to start operations in the first quarter, said Sree Kumar, general manager of business development for Bur
sa Malaysia. Bringing the new facility online will enable Bursa Malaysia to offer options on crude palm oil, its most heavily traded commodity market, as well as options on the country’s main stock index and new futures contracts denominated in foreign currencies.


Using Options to Play Facebook’s Public Debut
By Steven M. Sears, Barrons.com
The best way to invest in the most-anticipated IPO since Google’s may not be in the stock itself.
Facebook’s expected initial public offering will be hot, but the best trade may be on the company’s options.  Six days after the shares start trading, as specified by options industry trading rules, exchanges will list puts and calls on Facebook’s shares.  Investors can leverage the Facebook stock hysteria by using options — especially bearish put options — to play the stock in what could be the largest initial public offering ever floated on the stock market.  Facebook is expected to reveal the size of the offering when it files papers with the Securities and Exchange Commission in two days. And that will set off a mad dash at exchanges, and especially brokerage firms, as investors jockey to get a piece of the deal.

A Cautious Bet on Riverbed Technology
By STEVEN M. SEARS, Barrons.com
How to use options to profit from even a modest rally in the fallen networking stock.
Pity the investors who went long on shares of Riverbed Technology. The networking-equipment provider’s shares have fallen 20% in the past week following a first-quarter earnings report that disappointed Wall Street.
Analysts who follow Riverbed (ticker: RVBD) have since been locked in a bull-bear debate over the company’s merits. Such disagreement often helps stocks because it blends and balances extreme optimism and pessimism, which can coalesce to create opportunities for stocks to rise.
To better balance the risk, and potential reward, in a fluid market condition, investors should consider an options trade that lets them control Riverbed Technology’s stock for a little bit of money while also limiting the risk.http://jlne.ws/wmoRjo

VIX – Options Volatility Sonar: Tuesday Recap And Amazon Earnings Special
Seeking Alpha
by: Erick McKitterick January 31, 2012
Tuesday, S&P futures traded up very nicely into the U.S. opening bell. The market was off to the races until the consumer confidence number mentioned in yesterday’s article put the brakes on the rally. S&P ETF (SPY), Nasdaq ETF (QQQ) and the Russell ETF (IWM) all put the brakes on as they traded back down to flat to slightly positive. The CBOE Volatility Index (VIX) spiked hard after the abysmal CB consumer confidence number showed a reading of only 61.1 which missed forecasts by a mile at the 68.2 level. This is the worst number miss since August of 2011.


Live Webinar: Trading the New ICE Weekly Sugar, Coffee and Cotton OptionsThursday, February 2
1:30 PM CT/2:30 PM ET
Please join ICE as it presents an overview of its new weekly options on sugar, coffee and cotton futures and a session with Mark Longo of OptionsInsider.com on how you can incorporate these short-dated instruments into your trading.
For information, contact: webinar@theice.com

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past Options Newsletters

Cboe set to launch Amsterdam derivatives exchange

Cboe set to launch Amsterdam derivatives exchange

Observations & Insight OIC 2021: Options Industry Conference Kickoff Looks at State of the Industry John Lothian - John Lothian News Cboe's Henry Schwartz Offers Keen Analysis of Industry Trends Driving Unprecedented Volume The 2021 Options Industry Conference,...

Pin It on Pinterest

Share This Story