JLN Options: Tail-Risk Hedges on Volatility Lure Money Even After Stocks’ January Surge

Feb 7, 2012

Lead Stories

Tail-Risk Hedges on Volatility Lure Money Even After Stocks’ January Surge
By Alexis Xydias, Bloomberg
Funds that profit from swings in stock prices are attracting record amounts from investors as money managers seek protection from extreme volatility, even as equities have their best start to the year since 1994.
The JPMorgan Macro Hedge U.S. Source Exchange-Traded Fund aims to rise during market stress and generate returns even if stocks gain, the New York-based bank said in a press release today. The Nomura Voltage Mid-Term Source ETF attracted $165 million in January, its best month for inflows since its inception in 2011.
“There’s been strong demand for volatility-linked products from a very broad client range,” said Mohamed Yangui, London- based head of equities product development and structuring at Nomura Holdings Inc. (8604), whose team developed the Japanese bank’s ETF. “There’s high interest in volatility as an asset class, firstly because the environment remains uncertain, but also because there is now an attractive entry point.”  http://jlne.ws/zM6UxU

Crude Options Volatility Rises as Oil Futures Fall in New York

By Barbara Powell – Feb 6, 2012 2:40 PM CT
Crude oil options volatility rose as underlying futures fell for the sixth time in seven sessions. Implied volatility for at-the-money options expiring in March, a measure of expected price swings in futures and a gauge of options prices, was 26.9 as of 3 p.m. in New York, up from from 26.6 on Feb. 3.
“There was very light volume today,” said Michael Truscelli, a broker at Paramount Options Inc. in New York. “We’re still stuck in a short trading range.”
Crude for March delivery fell 93 cents, or 1 percent, to settle at $96.91 a barrel on the New York Mercantile Exchange. The 30-day range for the contract is $95.44 to $103.74.
February 7, 2012: Index, ETF option volumes near midday
Chris McKhann | optionmonster.com
Total option volume tops 5 million contracts so far today as puts dominate the equity index and ETF contracts, optionMONSTER’s data systems show.
The SPDR S&P 500 Fund (SPY) has 721,000 options traded, including 482,000 puts. The CBOE Volatility Index (VIX) is next up with 228,000 contracts, 209,000 of which are calls. The S&P 500 Index (SPX) options, from which the VIX is derived, trade 158,000 times with 132,000 puts. The iShares Emerging Markets Fund (EEM) is the only other ETF to break the 100,000 mark, with 105,000 options traded. Contracts are evenly split between calls and puts.


The Golden Toilet Marches On, Inspires Calls for Development Reform in Chicago
By Kari Lydersen, In These Times
Tomorrow (February 8), Chicago residents will promenade into Mayor Rahm Emanuel’s office with the golden toilet that many credit for the announcement last week by the CME Group that it will forgo $33 million in tax increment financing (TIF) funds awarded by the city in 2010 to rehab bathrooms and build a fitness center at the Chicago Mercantile Exchange.
The labor-community group coalition Stand Up! Chicago and the Grassroots Collaborative, which is organizing tomorrow’s march, count it as a victory that the CME Group will not collect the funds, which a CME spokesman said were never actually accepted or received. Now residents are demanding that the $33 million be spent on creating jobs and community services in the low-income and working-class neighborhoods that the TIF program was meant to serve.
http://jlne.ws/zfQNpzForbes Earnings Preview: NYSE Euronext
Expectations have dropped for NYSE Euronext‘s (NYX) fourth quarter results in the month leading up to the company’s earnings announcement slated for Friday, February 10, 2012. The consensus analyst estimate has dropped from 57 cents a share to the current estimate of earnings of 49 cents a share.
What to Expect:
Analysts are estimating a 6.5% increase from the year-ago quarter, when NYSE reported earnings of 46 cents per share.

February 2012 InBOX
This is the February issue of InBOX, your news source from inside the BOX Options Exchange. This monthly publication will provide convenient summaries of recent developments at BOX.


Industry opposes CTT proposal on commodity futures, options
By S Ronendra Singh, Financial Chronicle (India)   
Feb 07 2012 , New Delhi
Commodity transaction tax (CTT) a levy on commodity futures and options, is unlikely to be imposed in the forthcoming budget as industry bodies mounted pressure against it saying this would depress the market where the volumes are falling. Industrial bodies such as Assocham, Ficci, The Delhi Bullion and Jewellers Welfare Association and Commodity Participants Association of India (CPAI) have written letters to the finance minister Pranab Mukherjee raising concerns against the proposal to impose CTT on transactions in the commodity exchanges.


Nasdaq Increases Cabinet Power, Access and Bandwidth in Colo Site
Wall Street & Technology
The exchange will offer Super Cab, a cabinet providing up to 17 killowats to operate and cool trading equipment, and will soon roll out 40 Gigabyte connectivity to its US markets and data feeds.
Today Nasdaq OMX is announcing two new access services—Super Cab and 40 Gigabit Client Connectivity as part of a strategy to provide its customers with the highest cabinet power, fastest speed and highest bandwidth available in the exchange’s colocation facility. Super Cab is a cabinet with maximum of 17 kilowatts of power that can be used by customers to run their trading equipment in the exchange’s Cartaret, N.J. data center. Previously, the highest kilowatt cabinet was 10, which Nasdaq OMX said is higher than the rest of the industry now offering up to eight kilowatts.


Getting the Most Out of a Rallying Stock Market
By STEVEN M. SEARS, Barrons.com
Investors can take advantage of falling options prices to improve returns.
When VIX is low, it’s time to go. When VIX is high, it’s time to buy.
Many traders use that market adage on the Chicago Board Options Exchange’s Volatility Index (VIX) to calibrate options and stock trading decisions. When VIX is low, as it is now on a relative basis in the midst of a rallying stock market, it means that investors are basically complacent. At such times history shows the stock market is poised for a short-term correction. That’s because investors are often too bullish about the near future so they spend much of their money buying stocks. When that happens, stocks often decline because investors have little money left to make additional purchases.
http://jlne.ws/yhs8tgA Bar May Be the Place to Understand Markets: Buchanan
Mark Buchanan, Bloomberg February
7, 2012
The aftermath of the Lehman Brothers Holdings Inc. bankruptcy in 2008 was a scary time: One measure of stock-market volatility, known as the VIX or the “fear index,” reached a peak daily closing price of more than 80, compared with about 18 today. Scarier is the knowledge that we’ll be there again sometime. That’s how markets go: Unexpected chaos is the rule.

*Game theory and volatility

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