JLN Options: Options Week in Review

Nov 29, 2012

Some interesting news from CBOE: The exchange will begin disseminating values tomorrow for a new benchmark index, the CBOE Low Volatility Index, which is designed for investors who want to invest in lower-volatility assets, and is a blend of the CBOE S&P 500 BuyWrite Index and the CBOE VIX Tail Hedge Index. It is only a benchmark thus far; the exchange is not currently offering any futures or options on the index.

In another surprising announcement from the CBOE, the exchange will transition its SPXpm product from C2, its relatively new all-electronic platform, to CBOE’s hybrid trading platform, which offers both electronic and open outcry trading. This will enable pit traders to trade the SPXpm options, which are settled in the afternoon. The original SPX options, which are settled in the morning, will continue to trade in open outcry. C2 will continue to offer options on a number of stocks.

According to Futures Magazine, the sale of 24 tonnes of gold on COMEX yesterday was a “carefully crafted” trade made by a well-known $14 billion U.S. fund which had made an unusually large purchase of gold puts prior to the sale of the gold. The gold sale drove the prices down, and the put strategy enabled the fund to profit from a downward spike in prices.

The VIX and other measures of market volatility suggested that people are not as afraid of the fiscal cliff as they may have been. The VIX has been at historically low levels.

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