Fears of the “fiscal cliff” had ramifications in the VIX and the VIX ETNs, which spiked higher as the equity markets declined.
Trading of put options on Lockheed Martin’s stock jumped in the past week ahead of the surprise news that its incoming chief executive, Christopher Kubasik, had resigned over an affair with a subordinate, Reuters reported, adding that the spike is likely to draw the attention of regulators. Bloomberg reported that about 57,000 puts changed hands on Nov. 9. Kubasik had been groomed to take over the position from Robert Stevens this January. Lockheed was already under scrutiny for a jump in the cost of its F-35 fighter program and is threatened with automatic defense budget cuts if the U.S. goes over the cliff in January, Bloomberg said.
The big options exchange news this week was the CBOE’s suing the International Securities Exchange for “at least” $545 million for patent violation. Reuters reported that the three patents in question cover systems that monitor quote risk and automatically adjust quotes when risk exposure gets too high. The two exchanges have sued each other over intellectual property issues in the past; ISE has sued CBOE for patent infringement in a case that was recently revived, and an Illinois appeals court upheld a ban on ISE from listing S&P500 index options, one of CBOE’s most lucrative products.
NYSE Euronext’s two U.S. options exchanges, NYSE Amex and NYSE Arca, announced that they were the first exchanges to receive SEC approval to expand the listing and trading of their Short Term Option Series program (aka weekly options) from a single week to five consecutive weeks.
The SEC approved the CBOE’s proposed rule change expanding the term for its LEAPS (Long-Term Equity Options Series) to fifteen years. The exchange said the expansion would allow it to offer exchange-traded products that could compete with similar over-the counter products. CBOE said it had received numerous requests from market participants, such as insurance companies offering equity-linked variable annuities, who enter into OTC positions with longer-dated expirations. — Sarah Rudolph