JLN Options: Some volatility ETPs are ‘disaster’

Apr 23, 2012

Lead Stories

Some volatility ETPs are ‘disaster’
By Chris Flood, FT.com
Some exchange-traded products linked to volatility are “a disaster”, according to the co-creator of the Vix index, the principal measure of US stock market volatility.
Sandy Rattray, chief investment officer of Man Systematic Strategies, part of Man Group, the world’s second-largest hedge fund manager, said exchange-traded products that invest in volatility futures could be “catastrophically expensive” for investors.
http://jlne.ws/IzBa0v
Technology Volatility Rises to Year High Versus VIX By Nikolaj Gammeltoft and Cecile Vannucci, Bloomberg
Apple (AAPL) Inc.’s slump and forecasts from Intel Corp. (INTC) and Qualcomm Inc. (QCOM) that trailed analyst estimates are driving risk perceptions for technology shares to a one-year high versus the Standard & Poor’s 500 Index.
The Chicago Board Options Exchange NDX Volatility Index, which tracks equity derivatives on the Nasdaq-100 Index, is 16 percent higher than the S&P 500 options gauge known as the VIX, the biggest premium since March 2011, according to data compiled by Bloomberg. The Nasdaq measure has retreated 3.9 percent from the 11-year high reached on April 2, while Apple lost 9.9 percent over the past nine sessions.
http://jlne.ws/HWi1F0

SunGard Adds TOM MTF Connectivity to Valdi Market Access Trading PlatformPress Release
London, UK – April 23, 2012 – SunGard’s Valdi Market Access service now provides access to TOM MTF, a multilateral trading facility located in Amsterdam, Netherlands, facilitating member participation on this new trading platform. TOM MTF offers trading in shares, derivatives and exchange-traded funds.
The Valdi Market Access service delivers connectivity to markets worldwide on a Software-as-a-Service* (SaaS) basis, via the SunGard Global Network (SGN). The direct market access service helps exchange members and their clients trade on electronic markets from any SGN-connected application. It is fully managed by SunGard, helping reduce infrastructure and support costs.
http://jlne.ws/Jly0N4

Largest option buying in equities so far optionMONSTER
Nearing the halfway mark in today’s session, here are the individual equity names with the most call and put buying on optionMONSTER’s ActionTracker data system.
Bank of America (BAC): About 55,000 May 7 puts traded, mostly for $0.10, as investors seek protection on the stock. BAC fell 1.20 percent to $8.26.
http://jlne.ws/IazLf1

U.S. Stock Options With Biggest Changes in Implied Volatility By Bloomberg News
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/JlJikz

Exchanges

CBOE Holdings Announces Date for 2012 Annual Meeting
CHICAGO, April 23, 2012 /PRNewswire/ — CBOE Holdings, Inc. (Nasdaq: CBOE) today announced that its 2012 Annual Meeting of Stockholders is scheduled to be held at 9:30 a.m. Central Time, on Thursday, June 14, 2012, in the fourth floor lounge of the Chicago Board Options Exchange (CBOE), 400 S. LaSalle Street, Chicago, Illinois. A live audio webcast of the meeting will be available on CBOE’s website at www.cboe.com under Investor Relations, Events & Presentations. The presentation will be archived on the company’s website for replay.

CSE gets SEBI approval for NSE F&O Moneylife Personal Finance site and magazine
Kolkata: The Calcutta Stock Exchange (CSE) has received market regulator SEBI’s approval to begin derivate trading to enable its members to trade on NSE’s F&O (futures and options) platform, reports PTI.
“We have received SEBI (Securities and Exchange Board of India) approval for F&O trading on NSE platform,” CSE sources said.  CSE had received permission to offer NSE trading platform in cash segment to its member in December 2011.
http://jlne.ws/I9rsog

Technology

Global Investment in Sell-side Market-Data Distribution Technology Climbs to $3.6B in 2012, Says TABB
Sees Three-Year 4.5% CAGR Based on Growth in FX, Derivatives and Commodities and the Asian Markets’ Move toward Automation
NEW YORK and LONDON, April 23, 2012 – According to new research from TABB Group, a battle is brewing within today’s institutional investment market data marketplace. The “need for speed” is in direct conflict with the “need to save” as cost versus performance becomes an issue for many of today’s largest market data users.
While there is no doubt that speed is important in trading today’s equity markets, market participants need to ensure that their investment in speed gets them more than just a solitary solution for a single platform, explains Alexander Tabb, a TABB partner and author of the report, “Market Data Acceleration: More than Just Speed.” “This is where the question of hardware acceleration versus software acceleration comes into play and which solutions provide the greatest bang for your buck. It’s also why the demand for market data acceleration is driving the global investment in sell-side, market-data distribution technology in 2012 to $3.6 billion.”

Strategy

What On Earth Happened to Trading Volume?
Things are worse now than they were after the great crash of 1987 and the dot-com bust of 2000, so how can traders find profits in a low-volume, low-volatility market?By Stephen Ehrlich, CEO of Lightspeed Financial, Inc.
Advanced Trading
Volume is the lifeblood of active traders. It’s the ocean in which market transactions are completed easily, quickly and without slippage. Sufficient volume provides traders the ability to move quickly in and out of securities without delay. Volatility and volume generally move in the same direction, with higher volumes usually combining with higher volatility and vice versa. Unfortunately, traders are currently facing a low-volatility, low-volume stock trading environment.
http://jlne.ws/IhBM8k

Betting Against Fads in the Fund IndustryBy Lewis Braham, BusinessweekImitation, the saying goes, is the sincerest form of flattery. In the financial services industry, it’s often flattery that investors could do well without: A crush of similar products in a niche market is often a sign to run in the opposite direction. A recent example is volatility funds. In January 2009, Barclays Global Investors launched the iPath S&P 500 VIX Short-Term Futures exchange-traded note (ETN) so investors could profit from moves of the volatility index. Stocks were near the trough of one of the worst bear markets in history, and volatility was off the charts. For frightened investors eager to hedge portfolios, a fund tracking the aptly nicknamed “fear index” seemed to fit the bill. http://jlne.ws/Ii3RfL

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