JLN Options: SEC Probes CBOE’s Compliance

Mar 2, 2012

Lead Stories

SEC Probes CBOE’s Compliance
By JACOB BUNGE, WSJ.com
U.S. regulators are investigating the parent of the Chicago Board Options Exchange, examining the company’s oversight of its markets and traders.
CBOE Holdings Inc. officials are cooperating with the investigation and have initiated a separate internal review of compliance with U.S. securities laws, the Chicago firm said in a regulatory filing.
Representatives of CBOE and the Securities and Exchange Commission declined to comment on whether the investigation was related to a specific issue or if it represented a more routine review of compliance functions. CBOE hasn’t been accused of any wrongdoing.
http://jlne.ws/A4rSkp

Exchange-Traded Derivatives Growth Slowed on Commodities
Bloomberg By Matthew Leising – Mar 2, 2012
The growth in global exchange-traded derivatives slowed to 11 percent last year as Chinese commodity trading dropped by almost a third.
While almost 25 billion futures and options traded on regulated exchanges in 2011, up from 22 billion contracts the previous year, the expansion lagged a 25 percent growth rate in 2010, the World Federation of Exchanges said in a statement yesterday. The slowdown stemmed from a decrease in commodity trading, said Peter Clifford, deputy secretary general at the Paris-based association that represents 54 stock, options and futures exchanges worldwide.
“That’s why the overall rate is a slower pace,” he said in a telephone interview today. Chinese commodity trading dropped by 32 percent last year, compared with 2010, he said. The WFE will release more details on the trading in April, it said in the statement.
http://jlne.ws/x3akMn

Oil Options Volatility Increases as Crude Advances to $110
Bloomberg By Ksenia Galouchko
Oil options volatility rose for the first time in six days as crude climbed over $110 a barrel for the first time since May after a report of an explosion on a pipeline in Saudi Arabia.
Implied volatility for at-the-money options expiring in April, a measure of expected price swings in futures and a gauge of options prices, was 29.7 as of 4:30 p.m. in New York, up from 27.7 yesterday. Calls were 54 percent of the volume. Implied volatility for 25-delta calls, which gain 25 cents for each $1 rise in futures, was 30, up from 27 yesterday.
http://jlne.ws/w7l3Ia
U.S. Stock Options With Biggest Changes in Implied Volatility
By Bloomberg News – Mar 2, 2012 10:30 AM CT
The following are the U.S. stock options that had the biggest percentage changes in implied volatility from the previous trading day as of 11:30 a.m. in New York. This {OSCH } search was limited to options that are more than 10 days from expiration, have trading volume of at least 200 contracts and have strike prices within 5 percent of the underlying security’s price. http://jlne.ws/yWa8Ba

Exchanges

Options Exchange Market Share for February 2012Courtesy of the OCC

February 2012 Total Options Marketshare:
AMEX- 13.63%
BATS- 2.85%
BOX- 3.75%
CBOE- 27.67%
C2- 1.38%
ISE- 15.32%
NSDQ- 4.93%
NYSE Arca- 9.98%
OMX PHLX- 20.48%

February 2011 Total Options Marketshare:
AMEX- 13.43%
BATS- 1.98%
BOX- 2.73%
CBOE- 26.04%
C2- .80%
ISE- 17.21%
NSDQ- 4.96%
NYSE Arca- 10.91%
PHLX- 21.93%

February 2012 Equity Options Marketshare:
AMEX- 14.67 %
BATS- 3.08%
BOX- 4.05%
CBOE- 22.26%
C2- 1.46%
ISE- 16.39%
NSDQ- 5.33%
NYSE Arca- 10.75%
OMX PHLX- 21.99%

February 2011 Equity Options Marketshare:
AMEX- 14.27%
BATS- 2.12%
BOX- 2.91%
CBOE- 21.46%
C2- .85%
ISE- 18.15%
NSDQ- 5.29%
NYSE Arca- 11.63%
PHLX- 23.32%

ISE Reports Business Activity for February 2012 NEW YORK, March 1, 2012
ISE was the second largest equity options exchange in February with market share of 17.8%, excluding dividend trades.
Dividend trades made up 8.0% of industry volume in February 2012.
The International Securities Exchange (ISE) today reported average daily volume of 2.7 million contracts in February 2012. This represents a decrease of 16.6% compared to February 2011. Total options volume for the month was 53.5 million contracts. ISE was the second largest U.S. equity options exchange in February with market share of 17.8%*.
http://jlne.ws/wIs1bQ

CBOE February Trading Volume Off 0.4%; Market Share Climbs
WSJ.com
CBOE Holdings Inc.’s (CBOE) average daily trading volume of options at its namesake exchange slipped 0.4% in February compared with a year earlier, while its market share rebounded.
February’s average daily options volume of 4.84 million contracts fell from 4.86 million a year earlier, but was up from 4.32 million in January.
CBOE’s market share of total U.S. options-industry volume in February was 27.7%, up 1.7 percentage points from a year earlier and up 2 points from the month before.
http://jlne.ws/xhGLav

Strategy

Best hedge now? Volatility MarketWatch By Jeff White
Worried that the market may abruptly reverse after all these recent gains? Wondering about an appropriate hedge just in case it does?
It is likely that we will see a turnaround – even if it is only temporary, and what better time to remind ourselves of that potential than now when in the midst of what feels like a market which may never go down again. That can be a dangerous feeling. The fact is though, it has been an impressive run and may not be done just yet.
http://jlne.ws/vZNtUU

The quest for the perfect tail risk solution Risk.net
Tail risk has become a hot topic as nervous investors seek assurances and product creators try to second-guess what the governments and the financial markets may throw at them next. Hannah Collins investigates the strategies and products on offer to cope with the need to take view on an uncertain future
Tail risk, broadly defined as the risk of an asset moving more than three standard deviations from its current price, has typically been associated with the fear of future loss. But the concept of tail risk has taken a new direction since the beginning of the year, with some market participants now labelling the potential of missing the “rebound of the century” as a tail risk.
“When talking about tail risk, most investors are thinking about a Lehman Brothers story with the whole market going to the ground,” says Stephane Mattatia, Paris-based head of global equity flow at Société Générale. “But over the past few weeks, some investors have been saying that the major risk is not a new crash but being under-invested and missing a big rally.”
SocGen has responded to these fears by selling upside calls across well-known indexes, in particular on the Euro Stoxx 50 and the Euro Stoxx Bank Price Index. For many, though, tail risk hedging remains the attempt to protect portfolios against sharp market drops, and is a tricky affair. Not only is there no single, perfect hedge, but with increasing volatility across markets, the cost of obtaining protection from dramatic market moves can be high. Buying put options, for example, a traditional tail risk hedging strategy, has become very expensive.
http://jlne.ws/w2XjMy
Apple VIX Rises As Apple Rises? Won’t Be Fooled Again
Seeking Alpha In my last article on the “Apple VIX,” I made a prediction that it would fall well be
low 30.
Boy was I wrong. It went way over 30, at least as of Thursday’s close. But I was following conventional wisdom that it should fall as the stock rises. Sure there’s excitement (or maybe fear) brewing over Apple’s next product announcement, but there’s always some rumor or news pending on Apple. It’s not like it’s earnings season or anything.
http://jlne.ws/wcvBZb

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