JLN Options: NYSE Receives Credible Cyber Threat Against Website

Apr 26, 2012

Lead Stories

NYSE Receives Credible Cyber Threat Against Website
Fox Business
The New York Stock Exchange has received a credible threat to disrupt its external website as part of an apparent cyber attack attempt against a number of U.S. exchanges, FOX Business has learned…
In addition to NYSE, the group claims it will put “into a profound sleep” the websites of the Nasdaq Stock Exchange, BATS, the Chicago Board of Options Exchange (CBOE: 26.66, +0.28, +1.06%) and the Miami Stock Exchange.
http://jlne.ws/Ic0bSj

Scramble on Apple option positions
By Vivanne Rodrigues and Arash Massoudi in New York, FT.com
Active trading in equity options written on Apple was focused on the chances of its shares staying above $600 for the next month, with solid volume seen in contracts that will become profitable should the stock reach a new record high. Shares in Apple jumped as much as 10.3 per cent on Wednesday to a high of $618 in the wake of its fiscal second-quarter earnings report that easily surpassed expectations, allaying market fears that the world’s largest company by market value was facing a slowdown from its stellar growth rates.
http://jlne.ws/I4rJ8z

CME Cutting Staff, Moving Operations to Ireland
Tommy Fernandez, Securities Technology Monitor
Facing lower revenue as a result of calmer markets and growing operations costs, the Chicago Mercantile Exchange said in a earnings call conference that it has reduced its headcount by 35 to 2,702, will cut even more jobs via a “voluntary incentive plan,” and will also move some operations to its new facility in Belfast, Ireland.
http://jlne.ws/Is6Q6w

CME Group Cuts Staff, Plans ‘Exit Incentive Plan’
CME Group, whose first-quarter profit missed Wall Street expectations, said Thursday it has cut staff and plans more slimming this year as it tries to reduce costs and shore up income.
By Reuters CHICAGO, April 26 — CME Group Inc, whose first-quarter profit missed Wall Street expectations, said Thursday it has cut staff and plans more slimming this year as it tries to reduce costs and shore up income.
“We continue to look for efficiencies wherever we can,” Chief Financial Officer James Parisi said on a conference call.
http://jlne.ws/IHxYjo

CBOE Oil Volatility Index falls to five-year low
NEW YORK (Reuters) – The Chicago Board Options Exchange’s Oil Volatility Index fell to its lowest level in nearly five years on Thursday at 24.99 percent. The index represents implied volatility in U.S. crude oil futures and is a mathematical measurement of traders’ perceptions of risk in the oil markets. The index is based on trade in the U.S. Oil Fund, which is invested in the U.S. crude oil futures market on the New York Mercantile Exchange over various months, but heavily weighted towards the prompt month.
http://jlne.ws/Ic6OBo

Wipro Treasurer: May Increase Use Of Currency Options Due To Recent Rupee Volatility
WSJ.com
By Sudeep Jain Of DOW JONES NEWSWIRES
MUMBAI (Dow Jones)–Wipro Ltd. (507685.BY), India’s third-largest software exporter by sales, may increase the use of options in its hedging book given the volatility in the Indian rupee over the past few months, a senior executive said. The comments from Manoj Jaiswal, corporate treasurer and head of investor relations, give a glimpse of the company’s hedging strategy that currently is predominantly focused on forward contracts.
Currency options give the holder the right, but not the obligation, to buy or sell a particular currency at a predetermined price during a specified period. That makes options more flexible, especially at times of high exchange-rate volatility, than forwards, which are obligatory.
http://jlne.ws/JtgvKE

ETFs: Industry’s death greatly exaggerated The Globe and Mail
Last year wasn’t kind to the exchange-traded fund industry. ETFs — baskets of stocks and other assets that resemble mutual funds but trade throughout the day on stock exchanges — used to be praised for their low cost and simplicity, since they generally tracked established indexes.
Yet, new funds were widely ridiculed last year for appealing to an ever-narrower base of investors and piggy-backing on the latest trends (leveraged bets on the CBOE volatility index, anyone?). And the enormous losses caused by an alleged rogue trader at UBS were pinned to the use of exotic “synthetic” ETFs, putting the entire industry on the defensive for offering products that were too complex and, well, money-losers.
http://jlne.ws/Ij7J6X
U.S. Stock Options With Biggest Changes in Implied Volatility
Bloomberg
http://jlne.ws/IruEX8

Exchanges

UPDATE: CME’s CEO Transition Moves Up As Profit Slumps 42% – WSJ.com
–CME moves up transition to new CEO Gill
–First-quarter profits fall 42% on slower trading, tax adjustment
–Average daily trading down 11% from prior-year period
By Mia Lamar and Jacob Bunge Of DOW JONES NEWSWIRES
A “formal handoff” of chief executive duties at CME Group Inc. (CME) is likely to take place before the futures exchange company’s annual shareholder meeting next month, current CEO Craig Donohue said Thursday.  Donohue said his successor, current CME President Phupinder Gill, has already taken on some responsibilities and will move into the position well ahead of the year-end transition outlined when Donohue announced his retirement in mid-March.
“This will be my last earnings call,” Donohue said Thursday on a conference call with analysts. CME is slated to hold its annual shareholder meeting May 23.
http://jlne.ws/KfcIjR

CME Group 1Q Net Falls 42% On Year-Ago Tax Boost, Trading Slump
DOW JONES NEWSWIRES
CME Group Inc.’s (CME) first-quarter profit slumped 42% as it faced comparison with a year-earlier period that was boosted by a tax adjustment and quieter trading volumes. Like its fellow exchanges, the world’s largest futures market operator grappled with slower trading in the first quarter as more investors headed for the sidelines of stock and derivatives markets in the U.S. and Europe. Average daily volume at CME totaled 12.3 million contracts in the first quarter, down 11% from a year-earlier period that hosted exceptionally strong trading volume amid unrest in the Middle East and a natural disaster in Japan.http://jlne.ws/Iry9O5

CBOE listed futures to replicate private swaps
By Hal Weitzman in Chicago and Telis Demos in New York
The owner of one of the US’s biggest options exchanges has struck a deal with a large proprietary trading firm to launch listed futures contracts that replicate privately negotiated over-the-counter equity-based swaps. The move by the futures exchange operated by the Chicago Board Options Exchange and DRW Trading, a Chicago-based trading firm, comes as banks and investors are shifting some OTC derivatives to listed markets, ahead of rules stemming from the Dodd-Frank Act and capital requirements that are making it harder for banks to take on customers’ risk.
http://jlne.ws/I60itK
CBOE Holdings 2011 Annual Report
http://jlne.ws/Kg6HTK
SECP approves regulations for index option contracts at KSE
Tariq Khattak, Pakistan Observer
Islamabad—In line with its efforts to strengthen the capital market in Pakistan by further developing the derivatives market segment and providing investors with more diversified range of investment/hedging alternatives, the SECP has approved the Regulations Governing Index Option Contracts of the Karachi Stock Exchange (KSE). These regulations have been framed in line with best international practices to provide a framework for the launch of trading in cash-settled index option contracts.
http://jlne.ws/Ic89bt

Deutsche Boerse Profit Falls as Trading Volume Declines
Businessweek By Nandini Sukumar
Deutsche Boerse AG (DB1), the German exchange blocked from buying NYSE Euronext by European regulators in February, reported first-quarter profit dropped 31 percent as trading volumes faltered. Net income slipped to 146.2 million euros ($193 million) from 214.1 million euros in the first quarter of 2011, the Frankfurt-based exchange said in an e-mailed statement.
http://jlne.ws/IeSr2J

Regulation

Could Volcker Affect the Russell Rebalance?
James Armstrong, Traders Magazine Online News
Russell Investments begins the process of rebalancing its indexes at the end of next month, and the industry is already starting to wonder if this year’s rebalance will see increased speculative activity, or if the impending Volcker rule will mean less liquidity coming from proprietary trading desks. In the last two years, the Russell rebalance has been relatively orderly on reconstitution day, meaning buys and sells have been able to pair off without too much market dislocation—at least when compared to the large order imbalances seen during the financial crisis. This year’s June 22 rebalance, however, could be affected by the Volcker rule’s requirement that banks divest themselves of their prop desks, according to Phil Mackintosh, global head of trading strategy for Credit Suisse.
“If all other things were equal, I would say this year would probably continue that trend, and the trade would get closer to being matched, but I think Volcker is the elephant in the room,” Mackintosh said.
http://jlne.ws/IsPcBTOPTIONS EDUCATION

Strategy

Profit From Starbucks’ Over-Caffeinated Calls
By STEVEN M. SEARS, Barrons.com
Options market’s giddiness ahead of the earnings report creates profit opportunities.
The options market has the equivalent of a caffeine buzz over Starbucks.
Options on Starbucks (ticker: SBUX) are priced as if the stock will move 6.2%, up or down, Friday in reaction to its fiscal second-quarter earnings report slated to be released after the stock market closes Thursday. For the past eight quarters, the stock has had a median move of 0.9% in either direction in reaction to earnings reports. That the options market is pricing such a radically strong move in the stock is as unusual as finding a goat’s milk latte on Starbucks’ menu.
http://jlne.ws/ItFHm7

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