JLN Options: THE OPTIONS INDUSTRY COUNCIL ANNOUNCES DECEMBER OPTIONS VOLUME DOWN 6% WHILE 2011 VOLUME SETS NINTH CONSECUTIVE RECORD

Jan 3, 2012

Lead Stories

THE OPTIONS INDUSTRY COUNCIL ANNOUNCES DECEMBER OPTIONS VOLUME DOWN 6% WHILE 2011 VOLUME SETS NINTH CONSECUTIVE RECORD
CHICAGO (January 3, 2012) – The Options Industry Council (OIC) announced today that 320,324,954 total options contracts were traded in December, which is a 6.12 percent decrease compared to December 2010 volume of 341,207,420 contracts. Total options trading volume for 2011 came in at 4,562,748,194 contracts, surpassing last year’s record by 17.02 percent when 3,899,068,670 total options contracts were exchanged. Equity options volume was 4,224,604,529 contracts, 17.01 percent higher than the 3,610,436,931 contracts traded the previous year. Trading volume in 2011 marks first time volume topped 4 billion contracts in a single year and the ninth consecutive year of annual record volume.
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VIX Drops Below 200-Day Moving Average
January 3rd at 7:44am by Paul Weisbruch, Street One Financial
The CBOE Volatility Index was poised for a lower open on Tuesday as the S&P 500 futures jumped about 2% before the bell.
Heading into the New Year’s holiday last week, overall volumes in the marketplace tapered off significantly with little evidence of any year end window dressing, as it appears that most institutional investors simply sat on the sidelines altogether.
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New Year to Test Muted ‘Fear Gauge’
WSJ.com
By CHRIS DIETERICH And BRENDAN CONWAY
Don’t be fooled by the options market’s best-known sentiment gauge, the Chicago Board Options Exchange Volatility Index, which finished the year close to its sleepiest readings in months. A look under the hood reveals investors who trade options remain wary that sluggish economic growth and efforts to shore up the euro zone’s finances could continue to roil stocks in 2012.
Options prices can be used to judge market anxiety since they force investors to weigh how much they should pay to hedge stock portfolios against declines in the market. When people are spooked, they pay higher prices, in this case for options on the Standard & Poor’s 500-stock index that drive the volatility index.
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Traders On The Move
Patty Kevin-Schuler, vice president of sales and marketing at BOX Exchange, was named a two-year term governor by the Security Traders Association. Schuler, a 25-year veteran, is also the 2011-2012 president of the Security Traders Association of Chicago. The appointment is effective Jan. 1, 2012.
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Exchanges

Eurex sees derivatives trade up Tuesday 3rd January 2012, 3:28am
Derivatives trading platform Eurex saw 2.8bn contracts traded in 2011, an increase of seven per cent on 2010’s level, it said yesterday. More than 11m contracts were traded on average each day, up from 10.4m per day in 2010, as both the amount traded on the Eurex Exchange and those traded on the International Securities Exchange rose. Equity index derivatives were the biggest single market, accounting for almost a billion annual contracts. Eurostoxx 50 derivatives such as futures and options were the most popular products, with 408.9m futures contracts traded. The product seeing biggest growth was Eurex KOSPI, a Korean stock exchange index product, which jumped to 17.4m contracts from 166,000 in 2010.
http://jlne.ws/vCjB09

Eurex enjoys bumper year of trading
By Tom Osborn, MarketWatch
Trading on Deutsche Boerse’s derivatives and repo platforms rose strongly during 2011, according to annual figures published by the German exchange operator ahead of an EU competition commission ruling on its planned merger with NYSE Euronext /quotes/zigman/421745/quotes/nls/nyx NYX +4.87% . Trading on Eurex, Europe’s largest derivatives exchange, was up almost across the board. Fixed-income derivatives trading, which included flagship futures on German government debt, was particularly impressive, rising by 9.7%.
Trading in equity derivatives proved the one sour spot, with the value traded in single stocks falling by 12.9% amid thinning liquidity in cash trading on the back of the as the troubles in the euro zone. However, trading in equity index futures – which allow buyers to take a position on the future level of an index and are often used as a hedge against falling markets – rose by 18.5%, wiping out the fall in single name contracts.
The International Securities Exchange, Deutsche Boerse’s U.S. options trading platform, enjoyed growth of 4.4%, as U.S. derivatives trading remained buoyant.
http://jlne.ws/wN6Qdi

BATS Captures One-Fourth of European Stock Trading
January 3, 2012
Tom Steinert-Threlkeld
BATS Global Markets said its two electronic exchanges accounted for one-fourth of stock trading across Europe in December. The two venues, BATS Europe and Chi-X Europe, accounted for 25.4 percent of all trading for Europe in December, BATS said. That is compared to 22.6 percent a year ago.
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ISE Reports Business Activity for December and Full Year 2011
NEW YORK, January 3, 2012 Press Release
Average daily volume for the full year 2011 was 3.1 million contracts, an increase of 4.4% over 2010.
ISE is the third largest equity options exchange in 2011 with market share of 19.1%, excluding dividend trades.
Dividend trades make up 14.3% of industry volume in December 2011 and 4.7% of total industry volume for 2011.
The International Securities Exchange (ISE) today reported average daily volume of 2.3 million contracts in December 2011, a decrease of 10.6% over December 2010. Total options volume for the month was 47.8 million contracts.  Average daily volume for full year 2011 was 3.1 million contracts, an increase of 4.4% over 2010. Total volume for the year was 778.1 million contracts. ISE was the third largest U.S. equity options exchange in 2011 with market share of 19.1%*.
http://jlne.ws/y4mKr9

CBOE Holdings: Daily Trading Volume Averages Record 4.8 Million Options Contracts in 2011
— CBOE Volume Tops One Billion Contracts for Fourth Straight Year
— CBOE Futures Exchange Record Volume Up 174% from 2010
CHICAGO, Jan. 3, 2012 /PRNewswire/ — CBOE Holdings, Inc. (NASDAQ: CBOE) today announced record 2011 options trading volume of 1.20 billion contracts for the Chicago Board Options Exchange (CBOE) and C2 Options Exchange (C2), combined, compared to 1.12 billion contracts in 2010. Average daily volume (ADV) in 2011 reached a new all-time high of 4.78 million contracts, an eight -percent increase from 2010 ADV of 4.44 million contracts.
The year 2011 marked CBOE’s fourth consecutive year of one-billion-plus contract trading volume.
CBOE Futures Exchange (CFE) trading volume achieved a new all-time high of 12.0 million contracts in 2011, surpassing the 4.4 million contracts traded in 2010 by 174 percent. CFE’s record trading activity was propelled by robust volume in CFE’s flagship product, futures on the CBOE Volatility Index (VIX). During CFE’s record-setting year, nearly every major trading metric at the exchange achieved a new all-time high.
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December 2011 Total Options Ma
rketshare by Exchange, from the Options Clearing Corporation:

AMEX – 13.60%
BATS – 2.34%
BOX – 3.25%
CBOE – 22.04%
C2 – 1.21%
ISE – 14.93%
NSDQ – 3.92%
NYSE Arca – 12.29%
OMX PHLX – 26.42%

December 2010 Total Options Marketshare:
AMEX – 10.66%
BATS – 1.22%
BOX – 2.62%
CBOE – 24.61%
C2 – 0.72%
ISE – 16.41%
NSDQ – 4.39%
NYSE Arca – 11.08%
PHLX – 28.30%

December 2011 Equity Options Marketshare:
AMEX – 14.53%
BATS – 2.51%
BOX – 3.49%
CBOE – 16.78%
C2 – 1.26%
ISE – 15.92%
NSDQ – 4.20%
NYSE Arca – 13.14%
OMX PHLX – 28.16%

December 2010 Equity Options Marketshare:
AMEX – 11.32%
BATS – 1.30%
BOX – 2.78%
CBOE – 20.10%
C2 –0.76%
ISE – 17.25%
NSDQ – 4.67%
NYSE Arca – 11.75% PHLX – 30.05%

OCC Cleared Contract Volume Reached 4.6 Billion Contracts in 2011 for Record Year
CHICAGO (January 3, 2012) OCC announced today that total cleared contract volume in 2011 reached 4,600,955,949 contracts, a 17 percent increase over the 2010 volume of 3,925,686,805 contracts. 2011 marked the ninth consecutive year of record volume for OCC and the first time cleared contract volume surpassed 4 billion contracts.
OCC ended the year with 322,408,712 cleared contracts in December, a 6 percent decrease from the December 2010 volume of 344,206,175 contracts. Options: Exchange-listed options trading in December reached 320,324,954 contracts, down 6 percent from December 2010. Average daily options volume in 2011 was 18,106,144 million contracts, roughly 2.6 million contracts per day more than the daily average in 2010. OCC cleared 4,562,748,194 total options contracts in 2011, a 17 percent increase over 2010’s annual cleared volume of 3,899,068,670 contracts.
http://jlne.ws/ACzMn0

Regulation

The Outer Limits of Insider Trading
By PETER J. HENNING, NYTimes.com
Potash Corporation investors gained when a buyout bid failed.David Stobbe/ReutersPotash Corporation investors gained when a buyout bid failed.
Most insider trading cases start out with suspicions about well-timed transactions that prove to be lucrative once information becomes public about a company. Bringing a successful enforcement action requires more than just suspicious trading, however, because the government must have evidence that a trader acted on material nonpublic information and not just that the person made a particularly prescient investment. A recent decision in the United States District Court in Chicago dismissing civil insider trading charges filed by the Securities and Exchange Commission highlights how difficult it can be to bridge the gap between suspicious trades and securities fraud.
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Strategy

Banking on a New Year’s Bounce for Financial Stocks
By STEVEN M. SEARS, Barrons.com
Savvy investors can use options to position for short-term gains in banks and other financial stocks.
A burnt child loves the fire.
That famous Oscar Wilde quote comes to mind as financial stocks surge higher on the first trading day of the New Year amidst cautiously bullish options-trading patterns.
Investors, many of whom were burnt by bad bank-stock bets last year, seem to believe that America’s financial Frankensteins, including Bank of America (ticker: BAC) and Citigroup (C), will do in 2012 what they failed to do in 2011: advance. But since there is no substantive reason to believe 2012 will be better for the financial sector than 2011 — even though Barclay’s is apparently telling clients that the risk of not owning U.S. banks is greater than the risk of owning them – some investors are using options to game the system.
By buying call options that expire between January and March, savvy investors are positioning themselves to benefit the financial sector’s expected surge while carefully controlling their risks. By midday Tuesday, almost 19,000 January 14 calls traded on the Select Sector Financial (XLF). More than 38,000 of Bank of America’s January $6 calls traded. J.P. Morgan’s (JPM) January $35 calls traded more than 3,800 contracts.
http://jlne.ws/xffmPG


Buy-Write Is the Right Buy By STEVEN M. SEARS, Barrons.com
The simple strategy known as the “buy-write” or “covered call” was proven in 2011 to make a silk purse from a sow’s ear
The passage of time doesn’t necessarily equate with change. The issues that loomed over the market and global economy at the start of 2011 still persist at the start of 2012 like a virus impervious to antibiotics.
It is true America didn’t fall into an economic abyss, nor Europe into its own financial quagmire. But the year ends, as it began, with hopes that the long shadow of a financial crisis that began in 2007 will lift, and happier days will arrive.
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Options trading: When to use a spread
Phil McDonnell, The Globe and Mail
TheStreet Tuesday, Jan. 03, 2012
I often utilize option strategies that lean toward selling options. There are some very simple advantages to this. First a selling strategy gives us favorable theta decay. The time erosion works in our favor. It is a lot easier to predict that there will be 31 days in January than it is to predict the direction of the market. January is guaranteed to have 31 days but stock direction is never guaranteed.
http://jlne.ws/weD6Eu

Technology

GFI Group to provide Hap Capital with FENICS Professional
New York hedge fund chooses GFI market-leading system for FX Options
New York, January 3, 2012 – New York’s Hap Capital has licensed FENICS Professional™ Pricing and Analytics Tools from GFI Group, Inc. (NYSE: GFIG) for use on Hap Capital’s FX Options Desk in New York City.
Andrew Dexter, Head of FX Options at Hap Capital said, “After evaluating numerous systems for FX Options that cover pricing, risk management, and transaction processing, we decided that GFI FENICSSM was clearly the best choice. Their platform, FENICS Professional, provides us with the accuracy, ease of use and scalability we require to support and grow our business”, and added, ” FENICS’ customer support team provides fantastic training and ongoing support to help us get the most out of the platform and be more efficient.”.
“We are delighted to welcome HAP Capital as a client and to be able to provide them with the tools they need to continue developing their FX options business. Our business has grown significantly during the last few years as we have added new clients from every market segment” said Richard Brunt, Global Head of FENICS & Market Data Services at GFI.
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