JLN Options: Options Traders Discard Safety Net as Stocks Rise

Jan 14, 2013

Lead Stories

Options Traders Discard Safety Net as Stocks Rise
Kaitlyn Kiernan, The Wall Street Journal
In the new year, options traders seem to have settled on a resolution: no more hedging for the worst.
**TD Ameritrade’s Joe Kinahan: “What we know about the government is that they like to push everything to the last minute.”   Uh huh. — SR

FX options clearing analysis in final stages
Joel Clark, Risk Magazine
The GFMA’s global forex division is understood to be close to completion of its analysis of five years of options trading data – a project that is intended to lead to a solution for options clearing.
**Six CCPs – ICE, CME Group, Eurex, Singapore Exchange, LCH.Clearnet and the DTCC – have been meeting to discuss this issue with the GFXC regularly over the past year. LCH.Clearnet completed a similar data collection exercise on a smaller scale in 2010.  — SR

The Stock Market’s Seinfeld Show
Steven M. Sears, Barron’s
At the moment, the VIX is mainly about nothing, although investors, as usual, are placing import on its readings.

Bernanke Is The Biggest Threat To The Stock Market Rally  
Brian Kelly, Seeking Alpha
On Friday, venerable professor Jeremy Siegel was on the Halftime Report to express his view that the stock market was poised to reach record highs. His view is based on the concept of multiple expansion, which is a fancy way to say that investors will pay more for a dollar’s worth of earnings.

Reasons To Be Bullish On Stocks At Five-Year Highs
Rocky White, Forbes
Markets have gotten off to a pretty good start here in 2013. Last week, the S&P 500 Index hit its highest daily close since late 2007. It would be easy to say this market is getting a little overbought, but there are a couple of pieces of option data from the International Securities Exchange (ISE) that should keep you optimistic.

VIX Fiscal Cliff Grows Deeper: Weekly VIX ETF Report
Wall Street Sector Selector
The VIX ETF Fiscal Cliff continued to grow deeper in week 2 of 2013, as the VIX Index dropped 3.40% and the ipath S&P 500 VIX Short Term Futures ETN (NYSEARCA:VXX) lost an additional 3.96%.

Are Exchange System Errors the New Normal in High Speed Markets? 
Ivy Schmerken, Advanced Trading
Technical blips that cause computerized exchanges to go dark or breakdown for a few minutes have become a frequent occurrence lately. Perhaps that’s the reason why Wall Street professionals calmly reacted to the latest event reported by BAT Global Markets, which executed hundreds of thousands of short sale trades at incorrect prices due to a programming bug.


VIX Futures Open Interest Reaches New High of Nearly 450,000 Contracts for Second Straight Day
Press Release (CBOE)
The CBOE Futures Exchange, LLC (CFE) announced that open interest in futures on the CBOE Volatility Index (VIX Index) reached a new all-time high of 438,038 contracts this morning. This morning’s high surpassed the previous high mark of 431,265 VIX futures contracts on September 18, 2012.
On Wednesday, January 2, 2013 and Monday, December 31, 2012, trading in VIX futures set consecutive single-day volume records with 221,323 contracts and 212,800 contracts traded, respectively. For 2012, trading volume in VIX futures set a new annual record with 23,785,806 contracts traded, an increase of 98 percent above the 12,027,955 contracts traded in 2011, the previous record year.

DGCX 2012 Volumes Reach All-Time High of 9.6 Million Contracts  
2012 annual trading volumes on the Dubai Gold and Commodities Exchange ( DGCX ) registered a substantial growth of 137% from 2011 to reach 9,601,553 contracts. The upsurge in 2012 volumes – the Exchange’s highest ever annual volumes since inception – was led by the substantial growth of Indian Rupee and Gold futures.

HKEx Revises Its Plan For Options On CSOP A50 And CAM CSI300 ETFs
Press Release (HKEx)
Hong Kong Exchanges and Clearing Limited (HKEx) has revised its planned options on Hong Kong dollar-traded units of the CSOP FTSE China A50 (CSOP A50) ETF and ChinaAMC CSI 300 Index (CAM CSI300) ETF, two Exchange Traded Funds (ETFs) with A shares as their underlying benchmark, to reduce trading costs. The rollout date has also been revised to Monday, 28 January 2013 from Monday, 21 January.

CBOE, CFE, C2, and CBSX Trading Schedule For the Martin Luther King, Jr. Holiday
Press Release (CBOE)
CBOE Holdings, Inc. (NASDAQ: CBOE) announced the following trading schedule for Chicago Board Options Exchange (CBOE), CBOE Futures Exchange (CFE), C2 Options Exchange (C2), and CBOE Stock Exchange (CBSX) in observance of the Martin Luther King, Jr. holiday:

– Friday, January 18:     CBOE, CFE, C2, and CBSX will have regular trading hours for all products.
– Monday, January 21:     CBOE, CFE, C2 and CBSX will be closed.


Nasdaq Offers Deep Discounts on Co-Locating Order Engines
Laton McCartney, Securities Technology Monitor
Competition to have trading firms locate their order engines under the same roofs as exchanges’ matching engines has ratcheted up with Nasdaq OMX’s announcement that it is offering a discounts of up to 50 percent for new “co-located” cabinets ordered in the first quarter of this year.


3 Ways to Make the VIX Work for You
Jon Markman, Trader’s Advantage (via InvestorPlace)
You may have read about the S&P 500 Volatility Index (CBOE:VIX) in the aftermath of the fiscal cliff deal. The so-called “fear index,” which moves inverse to the S&P 500, made a record 39% slide downward in just two days. Now that it’s piddling along in a low-fear range, it’s time to go along our merry ways and forget about the VIX until the debt ceiling (re)debate next month, right?

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