JLN Options: Options Markets are Being Overly Sensitive

Apr 30, 2013

Lead Stories

Options Markets are Being Overly Sensitive
Jared Woodard, Condor Options
One of the most important market signals over the last five years has been the slope of the VIX futures term structure. In quiet, bullish markets, short term option premiums are significantly lower than longer-dated implied volatility; when risk scenarios roil markets, the term structure flattens and then steepens in the other direction.

Derivatives Help Mask Equities Pain at NYSE Euronext  
Tim Cave, The Wall Street Journal
Jeff Sprecher, ICE chief executive, has obviously done his homework.
When he made his bid for NYSE Euronext NYX +0.14% in December, he said the Liffe franchise, the exchange’s derivatives business, was the driving factor. The cash equities markets in Paris, Amsterdam, Brussels and Lisbon, not so much.

S&P 500 Climbs to Record on Home Sales, Stimulus Optimism
Lu Wang and Whitney Kisling, BloombergBusinessweek
U.S. stocks rose, with the Standard & Poor’s 500 Index advancing to a record high, as pending sales of homes climbed amid optimism central banks will maintain stimulus plans.

VIX Advances Despite Positive Data
Wall Street Sector Selector
VIX advances despite a new record high close for the S&P 500 and some better-than-expected economic news.

CBOE Says ‘Fully Confident’ Software Bug Resolved
Jacob Bunge, Dow Jones Newswires (via Fox Business)
The Chicago Board Options Exchange is “fully confident” that it has addressed the software bug that shut down trading on the largest U.S. stock-options market for half of Thursday’s session, according to a notice sent to traders late Monday.

CBOE’s Systems Preparation for After Hours Caused Outage
Nina Mehta & Nikolaj Gammeltoft, Bloomberg
CBOE Holdings Inc. (CBOE) said preliminary work in preparation for reconfiguring its computer systems caused the April 25 malfunction that shut the Chicago Board Options Exchange for three-and-a-half hours.

‘Corrupted data’ caused CBOE outage, Trade Alert says; CBOE mum
Doris Frankel and Ann Saphir, Reuters
A corrupt data file that disrupted the Chicago Board Options Exchange’s ability to telegraph what contracts could be traded led to the market’s half-day outage last Thursday, according to an options data provider briefed by a CBOE staff member.

EBS to Rein In High-Frequency Traders  
Ira Iosebashvili, The Wall Street Journal
Foreign-exchange platform EBS is considering new limits on high-frequency trading.
EBS, which is owned by ICAP PLC, is planning changes to how it processes orders to buy and sell currencies. EBS says the changes would eliminate certain advantages for the fastest traders. 


New ‘biscuit break’ at CBOT confuses some traders
Reuters (via Chicago Tribune)
A recent change in the trading day start at the Chicago Board of Trade has confused some traders and left others to remain on the sidelines as the opening burst has been split into two parts.

NYSE Euronext launches the SME marketplace 
Press Release (NYSE)
Aware of the challenges facing businesses in search of funding, NYSE Euronext (NYX) is beefing up its strategy and resources for small and medium-sized companies (SMEs) by launching a subsidiary dedicated to these businesses on 23 May 2013.

NYSE Euronext Announces First Quarter 2013 Financial Results
Press Release (NYSE)
NYSE Euronext (NYX) today reported net income of $126 million, or $0.52 per diluted share, for the first quarter of 2013, compared to net income of $87 million, or $0.34 per diluted share, for the first quarter of 2012.  Results for the first quarter of 2013 and 2012 include $8 million and $31 million, respectively, of pre-tax merger expenses and exit costs.

ICE trims U.S. grain trading hours, follows CME cut
Tom Polansek, Reuters
IntercontinentalExchange said on Monday that it will reduce its electronic U.S. grain trading hours in response to customer feedback, following in the footsteps of arch-rival CME Group.


Happy birthday, Web! Public Internet turns 20
Fox News
Happy birthday, world wide web!
In 1989, Tim Berners-Lee developed a technology to help physicists in universities and institutes around the world share information. On April 30, 1993, the European science agency CERN — where Berners-Lee worked — officially made Berners-Lee’s W3 software public domain, letting the public at large access it.
Yadda yadda yadda: Facebook, Instagram, Twitter and the rest.
**The title is a bit misleading.  The World Wide Web turns 20 today.  The public internet is older by several years and what that came from is far older (back when it was run by the government). -JB


How to Profit During a Golden Slumber 
Steven M. Sears, Barron’s
With the metal likely to trade in a narrow range in coming months, investors should sell both puts and calls on a gold ETF.

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