JLN Options: Options Trading Isn’t Dead: Future Growth Will Occur When Investors Refocus on Equity Markets

Jul 20, 2012

Lead Stories

Options Trading Isn’t Dead: Future Growth Will Occur When Investors Refocus on Equity Markets
Andy Nybo, Tabb Group
Options volumes may be down along with the equity markets, but the buy side’s increasingly sophisticated use of options strategies and growing investments in supporting technology point to big things for the market.
Global equity markets are under stress — for good reason. Many observers consider the markets to be broken, with structural inequities that favor professional investors over the uniformed. Add to that slowing global growth, continued political uncertainty and new regulations that threaten to indelibly shift market structure, and you can explain today’s depressed U.S. equity trading volumes, which are off nearly 14 percent in 2012.

ETF Worry Gauges Are Plummeting — Maybe Now You Should Worry
Brendan Conway, Barron’s
Investors who trade in the options market keep close tabs on “implied volatility,” which is the worry premium baked into put and call contracts.
This premium has been falling across the market for weeks now. But it fell like a stone over the last week week for several key exchange-traded funds. When investors let their guard down, that’s when a contrarian starts to think about putting his own guard up.

Investors head for ‘big cap’ America
Michael Mackenzie and Arash Massoudi, The Financial Times
Euro crisis, Spanish bailout, America’s sputtering recovery and the threat of a hard landing in China. You name it, Wall Street has weathered it. The unexpected twist of the summer is the resilience of the US stock market…
The shadow cast by the eurozone crisis over US equities has faded, too. Alan Ruskin, strategist at Deutsche Bank, says that the S&P 500 is playing catch-up as the “tail risk” of a collapse in the value of the euro as measured by the relationship between options has eased since May. This is echoed by the slumbering level of implied equity volatility as measured by the CBOE’s Vix, sitting below 16.

Hedge fund industry assets sink as performance ebbed in second-quarter
Katya Wachtel, Reuters
Even though investors put a net $4.1 billion into hedge funds in the second quarter of 2012, it was not enough to offset performance losses at many funds that resulted in total industry assets shrinking.

Swap Market, Like Libor, Is Vulnerable to Manipulation
Jesse Eisinger, Dealbook
The rate-manipulation scandal has demonstrated that banks will collude with one another for their own benefit.
Banks didn’t report the rate at which they were borrowing from other institutions. They could report a made-up rate that, not surprisingly, turned out to serve their economic interests at the time.
So, it might come as a worry that there is another, multitrillion-dollar market — the credit-default swap market — that operates under a similar principle.

OptionMonster Daily Volatility Report with Jamie Tyrrell of Group1 Trading:


Volatility Just Ain’t What It Used To Be
Howard Gold, Seeking Alpha
Investors are terrified of volatility. Turn on the television, pick up the paper, log on to the Internet, and you’ll hear about how scared people are of the wild gyrations in stock prices. It’s just one more reason retail investors have abandoned the market like the plague.
The only problem is, it isn’t true.
Sure, the headlines show the Dow Jones Industrial Average gaining and losing hundreds of points at a clip. But on a percentage basis, that’s not very much.

No one believes in this market
Commentary: We’re still bullish and here’s why
Lawrence G. McMillan, Marketwatch
As you may be aware, we’ve been bullish on the broad stock market since shortly after the early June lows.
Our bullishness was initially based on some severe oversold conditions, and also on what we felt was a massive bearish outlook among traders. Since then, the market, as measured by the Standard & Poor’s 500 Index (US:SPX) has gained over 100 points, but there is still plenty of pessimism to go around. Very few traders are believers in this rally. As a result, we continue to view the situation as bullish.

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

Pin It on Pinterest

Share This Story