JLN Options: New Study Compares 25-Year Performance of Options Strategy Benchmarks to Traditional Indexes

Feb 15, 2012

Lead Stories

New Study Compares 25-Year Performance of Options Strategy Benchmarks to Traditional Indexes;COMPARES VOLATILITY, RETURNS AND PREMIUM INCOME
CBOE Press Release
CHICAGO, Feb. 14, 2012 /PRNewswire/ — The merits of using options-based strategy benchmark indexes to construct a diversified portfolio is the subject of a new study — “An Analysis of Index Option Writing for Liquid Enhanced Risk-Adjusted Returns” – released today by investment-advisory firm Asset Consulting Group.
The study, commissioned by Chicago Board Options Exchange (CBOE), evaluates the performance of four key options strategy benchmark indexes: the CBOE S&P 500 BuyWrite Index (BXM), CBOE S&P 500 PutWrite Index (PUT), CBOE S&P 500 2% OTM BuyWrite Index (BXY) and CBOE S&P 500 95-110 Collar Index (CLL) against more “traditional” stock and bond indexes. The study provides an assessment of options-based strategy benchmark index performance over a 25-year period.
http://jlne.ws/x4BJ0o

CME warns of Volcker rule impact on Treasuries
By Telis Demos in New York, The Financial TimesThe CME Group has warned that the proposed Volcker rule could impede the primary dealer system used by the US Treasury to sell government debt.
In a comment letter filed this week, Craig Donohue, chief executive of CME, the US’s largest futures market, wrote that the Volcker rule’s exemption for US Treasury debt did not go far enough by failing to extend to the use of Treasury derivatives such as futures and options contracts.
http://jlne.ws/wAr5CP
Nasdaq OMX, BATS, CBOE Websites Flooded by AttacksFebruary 15, 2012
Reuters
Websites belonging to the Chicago Board Options Exchange as well as exchange operators Nasdaq OMX Group and BATS Global Markets were attacked by hackers at the start of this week, causing ongoing disruptions for those trying to use the sites, spokespersons for the companies said on Tuesday.
Only the banner carrying the logo at the top of the web page for http://jlne.ws/xXglOd was visible during repeated attempts to access Nasdaq’s site on Tuesday afternoon. Trading in Nasdaq-listed stocks has not been affected, however. A Nasdaq OMX Group spokesman confirmed that it had been suffering a denial-of-service attack (DOS) since late on Monday but said they had not located the origin of the attack and were unable to say when it would be resolved.
http://jlne.ws/w5GOYCVIX call spread sticks out in quiet trading XE.com
Option trading on the CBOE Volatility Index is relatively quiet after the February futures and options contracts ceased trading on Tuesday. The settlement occurred on Wednesday morning. Meanwhile, the VIX rose 8.09 percent to 21.12 as the S&P 500 index fell 0.35 percent on concerns over Greece’s bailout. The February settlement value for the index is 20.44, below 23.64 at the January expiration, but significantly higher than the 30-day statistical volatility of the S&P — which has fallen to just 8.8 percent, said WhatsTrading.com options strategist Frederic Ruffy. In all, about 150,000 calls and 55,000 puts traded in the VIX options pit by early afternoon on Wednesday.
http://jlne.ws/yEx5qy

Exchanges

CBOE to List Futures on Brazil, Oil Volatility IndexesBy Nina Mehta and Jeff Kearns – Bloomberg
CBOE Holdings Inc. (CBOE), owner of the largest U.S. venue for equity derivatives, will list futures and options tracking volatility indexes on Brazilian stocks and crude oil, according to a statement on the exchange’s website.
http://jlne.ws/y7jKVa

Nymex oil traders go back to the floor
FT.com
By Gregory Meyer in New York
It was like old times. For a few minutes this week, the capacious floor of the New York Mercantile Exchange was again the beating heart of the US oil market.
At about 2:08pm on Monday, exchange owner CME Group unexpectedly halted oil trading on Globex, its electronic platform through which 99 per cent of US crude futures traded on Nymex now change hands. It was 22 minutes before settlement, typically one of the busiest times of day. The official closing price would be based on what transpired on the floor. At a time when many fear algorithms are running the show, floor traders responded with amazing speed. Some ran over from the oil options pit, while others abandoned desks upstairs, flashed coded name tags and began trading the old-fashioned way. “They were a little bit rusty on their bid and offering skills,” Peter Donovan, a floor broker at Vantage Trading, told me.
http://jlne.ws/wQYiAP

TMX CEO says BSX should aim high
By Jonathan Kent, Bermuda International Business
Feb 15, 2012
Bermuda has all the ingredients necessary to be an offshore leader in capital markets and should aim high for the future. That is the view of the Bermuda Stock Exchange’s newest board member, Thomas Kloet, the chief executive officer of the TMX Group. Mr Kloet attended his first board meeting on Monday, following TMX’s purchase of a 16 percent stake in the BSX, a deal announced last December. TMX Group, a $3.3 billion Canadian listed company, which recorded revenue of $673 million last year, owns and operates the Toronto Stock Exchange, the seventh large exchange in the world. It also has a majority interest in Boston Options Exchange (BOX) and owns Natural Gas Exchange (NGX) a leading North American exchange for the trading and clearing of natural gas and electricity contracts.
http://jlne.ws/yTUfvr
TMX Group Inc : TMX Group acquires over 90% of Razor Risk Technologies
February 14, 2012 (TORONTO) and February 15, 2012 (SYDNEY) – TMX Group Inc. (TMX Group) (TSX:X) is pleased to announce that its wholly-owned subsidiary TMX Australia Pty Ltd (TMX Australia) has received acceptances of its takeover bid in respect of 91.2% of the shares in Razor Risk Technologies Limited (Razor) (ASX:RZR). The minimum acceptance condition of 90% has been satisfied; as a result, TMX Australia has freed the takeover offer from all bid conditions. Razor has appointed TMX Australia’s nominees, Brenda Hoffman, Michael Ptasznik, Sharon Pel and Mark Licciardo to join Ellis Bugg on the Razor board of directors. Andrew Wood, Ralph Pickering, Simon Yencken and Jane Yulie have retired from the board.
http://jlne.ws/w0eYPL

CME Group Inc. Names Slate of Director Nominees
CHICAGO, Feb. 15, 2012 /PRNewswire via COMTEX/ — CME Group today announced its slate of candidates for election to serve on the company’s board of directors. CME Group shareholders will vote for directors at the company’s annual meeting to be held Wednesday, May 23, 2012.  The Class A and Class B shareholders voting together will elect seven candidates to the board. Additionally, the Class B-1 and Class B-2 shareholders will each elect a candidate to the board.
http://jlne.ws/zwjCFN

Regulation

Board member charged with fraud
BY TODD SHIELDS, Northbrook Star
Updated: February 14
A Glenbrook School District 225 school board member and Northbrook resident faces federal charges that he profited more than $17 million from improperly trading shares. The U.S. Securities and Exchange Commission alleged Jeffrey Wolfson and his brother, Rober
t Wolfson, sold borrowed shares in hopes of profiting from declining prices. Called naked short selling, while the transaction is legal, SEC rules require sellers to locate shares to borrow before selling them short, according to a SEC release. Naked short selling also occurs without borrowing the securities to make delivery.
If Wolfson violated SEC rules, he could be ordered to repay the gains plus a fine and be barred as a registered broker-dealer, according to the SEC.
He has been an active member of the Chicago Board Options Exchange since 1980.
http://jlne.ws/w0D4CY

Technology

TradeStation to Exhibit New Platform Updates at the International Traders Expo in New York
PLANTATION, Fla., Feb 15, 2012 (GlobeNewswire via COMTEX) — TradeStation, the award-winning broker-dealer and futures commission merchant, will unveil updates to TradeStation 9.1, the latest, most powerful version of its award-winning trading and analysis platform, at the New York Traders Expo on February 19-22, 2012, at the New York Marriott Marquis. This four-day event is an opportunity for attendees to experience firsthand the many advanced new features of the TradeStation 9.1 platform while interacting with TradeStation training specialists and account executives.
TradeStation will showcase its all-new OptionStation Pro options trading and analysis platform. Designed with the help of active options traders, OptionStation Pro contains such advanced features as interactive 3-D position graphs; advanced order-entry technology to trade options spread strategies; configurable spread-specific options chain views and dynamic options pricing and Greek calculations.
http://jlne.ws/zLBYj9

Strategy

Be Fearful When Others Are Greedy
By STEVEN M. SEARS, Barrons.com
Use options to put Buffett’s axiom in practice and protect stock profits.
Warren Buffett has famously said the secret to successful investing is being greedy when others are fearful and fearful when others are greedy. The axiom is simple, yet difficult for most to follow. It requires doing the opposite of the market mob when stock prices are surging and nary a cloud darkens the sky. Now, is such a time when shrewd investors should be fearful and think about using options to reduce risk and lock in profits.
http://jlne.ws/x8JnbQ
The American Spectator
The Spectacle Blog : Derivatives of Derivatives
By Ross Kaminsky
For those of you interested in the nuts-and-bolts of financial markets…
It’s been an insane few days at work for me, as I’ve been trading, with something quite unlike success, the VIX. The VIX is the CBOE Volatility Index, and you can trade futures or options on it.
So, stay with me here for a minute:
The Standard and Poor’s 500 index is essentially a derivative, derived as it is from the capitalization-weighted prices of its 500 underlying stocks. Options on the S&P 500 are derivatives of the S&P 500. The VIX index which measures the implied volatility of options on the S&P 500 is a derivative of those options. However, there is no way to trade the VIX index directly. VIX futures and options are derivatives of the VIX index. (There are also ETFs like the VXX which buy a time-weighted mix of VIX futures, and are themselves derivatives of VIX futures, and there are options on those ETFs! I’m trading those a little bit too. VXX and other VIX-related ETFs have had massive volume in recent days, with VXX alone trading over 45 million shares on Tuesday…more than the total number of VXX shares outstanding as the product has been a popular short-term trading vehicle.)
Therefore, this insane products that I’m trying to trade are basically a 4th or 5th or 6th derivative of the stock market.
http://jlne.ws/wNPrlD

Three Things You Should Know About VIX ETFs
ETF Trends
February 15th at 1:35pm by Tom Lydon
Volatility-linked exchange traded funds that follow VIX futures such as ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY) have shown signs of life recently on rising trading volume following the steady descent from October. A leveraged exchange traded note, VelocityShares Daily 2X VIX Short Term ETN (NYSEArca: TVIX), has seen volume spike in a volatile week. These volatility-linked products rise when investors are seeking protection in options markets from stock pullbacks. However, it’s critical to remember they track VIX futures contracts, rather than the spot price. The CBOE Volatility Index, or VIX, is a widely monitored indicator for implied future volatility. Volatility ETFs can be used by traders to hedge portfolios or speculate on market weakness.
http://jlne.ws/AlBNLo

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