JLN Options: The Most Spectacular Hedge Fund Implosions Of All Time

Sep 4, 2012

Lead Stories

The Most Spectacular Hedge Fund Implosions Of All Time
Linette Lopez, Business Insider
This week, everyone’s talking about John Paulson. The hedge fund manager, known for making a killing off of the housing bubble, was asked to face investors on a call with Bank of America prompted by his fund’s consistent dismal performance.
At least, that’s what it seemed like. Citigroup severed a $410 million relationship with Paulson just last week. The Street is beginning to worry.
http://jlne.ws/OPdoz4

VIXH: Next-Generation Or A Me-Too ETF?
Paul Britt, Index Universe
My colleagues recently provided an overview of the new fund. Today I want to underscore a few key points and then look at performance…
First, the fund will at times take no options position when the VIX—or, more accurately, front-month VIX futures—are very high or very low. Still, the fund’s index has had VIX options exposure over most of the past five years and all of the past three years, according to the CBOE, which runs the fund’s index.
http://jlne.ws/Q1erkJ

At Jackson Hole, a growing fear for Fed independence
Pedro Nicolaci da Costa, Reuters
Increasing political encroachment on the Federal Reserve, particularly from the Republican Party, could threaten the central bank’s hard-won independence and undermine confidence in the nearly 100-year old institution.
That was the pervasive sentiment among economists gathered at the Fed’s annual monetary policy symposium in Jackson Hole, Wyoming. Against the dramatic backdrop of the Grand Teton mountain, many said a closely-contested presidential race has turned the monetary authority into a political football.
http://jlne.ws/QhePJV

Iron ore derivatives volume hit record high in Aug -TSI
Reuters
The volume of iron ore swaps and options cleared globally hit a record high of nearly 18 million tonnes in August, data provider Steel Index said on Tuesday, as sliding prices lifted demand for the hedging tools.
http://jlne.ws/Q17TTs

Gold prices stimulated to five-month high
Kate Gibson, MarketWatch
Gold prices on Monday extended last week’s rise to a five-month high as investors increased their bets that the Federal Reserve would launch another round of monetary easing…
Speculators hiked net long positions in U.S. gold futures and options to a more-than-five-month high in the week ending Aug. 28, according to the U.S. Commodity Futures Trading Commission.
http://jlne.ws/Q1cchr

Stoxx Limited : STOXX launches STOXX+ Global Max Traded 200 Index
Press Release
STOXX Limited, the market-moving provider of innovative, tradable and global index concepts, today introduced the STOXX+ Global Max Traded 200 Index. The new index applies an advanced set of screens to ensure that only the largest and most frequently traded companies worldwide are included, while at the same time offering a wide global diversification.
The STOXX+ Global Max Traded 200 Index is geared towards active trading purposes and has been designed to act both as a proper benchmark for actively managed funds, and to underlie exchange-traded funds and other investable products.
http://jlne.ws/Q1cPrp

Exchanges

Average daily volume of 7.2 million contracts at Eurex Group in August
Press Release
The international derivatives markets of Eurex Group recorded an average daily volume of 7.2 million contracts in August 2012, down from 13.2 million in August 2011.
Of those, 5.1 million were Eurex Exchange contracts (August 2011: 9.1 million), and 2.1 million contracts (August 2011: 4.1 million) were traded at the US-based International Securities Exchange (ISE).
August 2011 saw very high volumes due to turbulences in the eurozone. In total, 117.2 million contracts were traded at Eurex Exchange and 49.1 million at ISE.
http://jlne.ws/Q18Fzy

IntercontinentalExchange to Transition Cleared Energy Swaps to Futures in October
Press Release
IntercontinentalExchange (NYSE: ICE), a leading operator of global regulated futures exchanges, clearing houses and over-the-counter (OTC) markets, today announced that due to the strong preference of our customer base to trade futures as soon as practical, ICE has accelerated its plans to transition cleared OTC energy swaps and options to futures. The transition will now take effect on October 15, 2012.
http://jlne.ws/Q1930Y

Osaka Considers Pricing Change to Boost Volatility Index Futures
Eleni Himaras and Kana Nishizawa, BloombergBusinessweek
Osaka Securities Exchange Co. (8697) is considering offering rebates to customers willing to make a market in futures offering a hedge against swings in the Nikkei 225 Stock Average, according to Matthias Rietig, executive advisor to the board.
The exchange plans to offer maker-taker pricing, which pays the suppliers of bids and offers and charges those executing against them, to boost liquidity and volumes for contracts on the Nikkei Stock Average Volatility Index.
http://jlne.ws/OjcviW

Technology

SunGard’s Stream GMI Adds New Support for Products Traded on Brazil’s BM&FBOVESPA Exchange
Press Release
SunGard has enhanced its Stream GMI clearing and accounting solution with the addition of automated processing of futures, options on futures and options on spots traded on BM&FBOVESPA (BVMF), the Brazilian securities, commodities and futures exchange. The extended coverage helps investment banks, brokerage houses and Futures Commission Merchants outside Brazil better access and trade BVMF’s cleared derivatives market and reduce their operational risk.
Stream GMI has provided support for BVMF’s exchange-traded financial and agricultural derivatives since 2010.
http://jlne.ws/Q15loi

Object Trading adds London Metal Exchange to coverage network
Press Release
Object Trading, an independent provider of direct market access (DMA), has added the London Metal Exchange to its exchange coverage network. Object Trading clients can now access the full range of futures and options contracts for non-ferrous, minor metals and steel traded on the exchange through its full suite of FrontRunner products.
http://jlne.ws/Q0DPHv

Strategy

Follow insider option action to profits
Commentary: Data can show you the way
Guy Cohen, MarketWatch
Mention “insider trading” to most investors and their initial reaction will likely be, “Whoa, that’s illegal.”
However, astute market players know that legal trading by industry associates, corporate officers and financial analysts can also signal significant profit opportunities for “outside” investors.
http://jlne.ws/Q11sQb

EDUCATION

Understanding Volatility and its Effect on Option Prices
Nick Metzger, Daniels Trading
Volatility plays a significant role in the pricing of options. As traders, we must understand and pay close attention to a market’s volatility as we build our option strategies. When we see extreme volatility in a market, we feel an overwhelming sense of uncertainty. The normal psyche of a trader is to react emotionally as markets make sharp moves higher and lower. This emotion and shift of sentiment has a direct relationship to the pricing of options. Traders will bid up the premium on both the call side and put side of that given market.
http://jlne.ws/Q11WWn

Events

28th Annual Futures & Options Expo
Hilton Chicago
720 South Michigan Avenue
Chicago, Illinois
October 30 – November 1, 2012
http://jlne.ws/cf73BN

7th Annual FIA and OIC New York Equity Options Conference
September 12-13, 2012
New York Marriott Marquis
New York, NY
http://jlne.ws/MUvG6T

Managing Risk and Yield in a Low Interest-rate Environment: Options-based and Low Volatility Strategies
Press Release
Three financial experts will discuss the topic ‘Options for Managing Risk and Yield in a Low Interest-rate Environment’ at a panel discussion to be held from 5:00 p.m. to 6:30 p.m. on Tuesday, October 2nd on the fourth floor of the Chicago Board Options Exchange (CBOE), 400 South LaSalle Street, Chicago. The meeting is jointly sponsored by Chicago QWAFAFEW and Chicago PRMIA.
Location:
Chicago Board Options Exchange (CBOE)
400 South LaSalle Street
Chicago, IL 60605
Date:
Tuesday, Oct. 02, 2012
5:00 PM  – 7:00 PM
http://jlne.ws/OPaLgL

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