JLN Options: Options Week in Review Jan. 24, 2013

Jan 24, 2013

President Obama nominated Mary Jo White, a former federal prosecutor, to be the next chairwoman of the SEC, and renominated Richard Cordray as director of the Consumer Financial Protection Bureau, the New York Times Dealbook reported. Obama was quoted as saying “You don’t want to mess with Mary Jo.” White and Cordray are expected to use their prosecutorial expertise to continue implementing the Dodd-Frank Act.

Finra is examining options firms after options exchanges fined Goldman Sachs $6.75 million last year for improperly submitting stock options orders over a six year period, the Wall Street Journal reported. The agency is looking into whether orders from broker-dealers were sent to market with coding that identified them as “customer” orders and thus given priority of execution at some exchanges. The customer designation also sometimes allowed firms to avoid paying market maker fees charged by some exchanges.

The VIX dropped to a five-year low, but Barrons’ Brendan Conway pointed out that it could go even lower. He suggested comparing actual stock market volatility (day to day swings in the S&P 500) with what the VIX measures, which is the cost of insuring your stock portfolio against volatility. He also mentioned options-watchers Bill Luby and Adam Warner’s posts on the fall in that ratio. The VXX is down 28% in 2013, and the ProShares Ultra VIX Short-Term Futures ETF and the TVIX ETN are down about 50% in 2013, according to Barrons. Tyler Craig at Investorplace opined that a low VIX isn’t bearish and that it is unlikely to remain under the 20 level for very long.

And the S&P 500 crossed the 1,500 level for the first time since December 2007, although Apple stock dropped $63.51 in heavy trading.

Trading in options that profit if Treasury yields rise rose before the House voted to suspend the U.S. debt limit for four months. Most of the volume was in puts, which result in a profit if the underlying futures price falls, Bloomberg reported.

Boston Options Exchange (BOX) is asking regulators to allow them to trade “jumbo” contracts on the SPDR S&P 500 ETF Trust, (SPY), the most active ETF. The contracts would be based on 1,000 shares of the SPY.

The World Federation of Exchanges‘ annual survey found that trading volume on all the products traded by its member exchanges fell significantly. The number of derivative contracts traded on exchanges fell by 20% in 2012.

EU finance ministers allowed a group of its member states to go ahead with a tax on trading stocks, bonds, and derivatives, which could bring in billions for the governments of struggling European economies but is complicated by opposition from Britain.

JLN Options began going out as a daily newsletter rather than a weekly. It is also available as an online blog at www.jlnoptions.com.  But you knew that.

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