Mar 1, 2012

Lead Stories

CHICAGO (March 1, 2012) – The Options Industry Council (OIC) announced today that 349,463,168 total options contracts changed hands in February, 1.34 percent less than the 354,214,236 contracts traded in February 2011. Average daily trading volume in February was 17,473,158 contracts, 6.27 percent lower than the 18,642,854 contracts in the same year ago period. Year-to-date volume for February stood at 684,863,167 contracts, which is 6.53 percent lower than the 732,694,742 contracts traded at the same point last year.

CHICAGO (March 1, 2012) – OCC announced today that total cleared contract volume in February reached 351,702,360 contracts, representing a 2 percent decrease from the February 2011 volume of 357,275,834 contracts. OCC’s year-to-date total contract volume is down 7 percent from 2011 with 688,925,298 contracts.
Options: Exchange-listed options trading volume reached 349,463,168 contracts in February, a 1 percent decrease from February 2011. Equity options volume fell 3 percent from the previous February with 323,293,320 contracts. Index options trading rose 18 percent from February 2011 with 26,169,848 contacts. Average daily options volume for the month of February was 17,473,158 contracts.

CBOE Tweaks Electronic S&P Options Market To Spur Growth
–CBOE adds incentives, longer-dated contracts to SPXpm market
–Tweaks come as all-electronic S&P 500 options market slow to grow
–CBOE biggest U.S. options exchange operator by volume, OCC says
CBOE Holdings Inc. (CBOE) on Thursday rolled out changes to its new market in electronic stock-index options, which has been slow to grow since its launch last fall. The Chicago Board Options Exchange parent tweaked the way trades in electronic S&P 500 options are assigned and listed a slate of longer-dated contracts, aiming to lure more investors to a product seen as one of CBOE’s biggest growth opportunities.
The so-called SPXpm option is a 21st-century version of CBOE’s nearly 30-year-old options on the S&P 500 stock index, which are the Chicago-based market operator’s most heavily traded products, bringing in $129.4 million worth of fees last year. Those options remain traded almost entirely on CBOE’s physical trading floor and beyond the scope of many electronic trading groups, prompting CBOE to formulate a new version of the instruments tradable on its automated exchange, C2.

Exchange-Traded Swaps Volume Surged 11 Percent in 2011
The increase may have been caused by rampant volatility, a potential driver of demand for instruments that are often used as a hedge, according to Mexican Derivatives Exchange CEO Jorge Alegria.
By Justin Grant, Advanced Trading, March 01, 2012
The number of derivatives contracts traded on exchanges climbed 11 percent last year in the wake of often extreme volatility in the global marketplace, according to data compiled by the World Federation of Exchanges. The WFE said more than 24 billion derivatives contracts were traded on exchanges across the world last year, up from 22 billion a year earlier. The WFE, which conducts an annual survey of the derivatives market, said 11.9 billion futures contracts and 12.9 billion options contracts were traded a year ago.
Interactive Brokers Group Reports Brokerage Metrics for February 2012
Press Release
GREENWICH, Conn. — Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported its Electronic Brokerage monthly performance metrics for February.
Highlights for the month included:
449 thousand Daily Average Revenue Trades (DARTs), 5% higher than prior year and 7% higher than prior month.
Ending customer equity of $28.3 billion, 18% higher than prior year and 4% higher than prior month.
Ending customer margin loan balances of $8.2 billion, 1% higher than prior year and 11% higher than prior month.
Ending customer credit balances of $18.8 billion, 19% higher than prior year and 7% higher than prior month.
192 thousand customer accounts, 17% higher than prior year and 1% higher than prior month.
537 annualized average cleared DARTs per customer account.

Volatility ETFs Often Own All VIX Futures
By Dave Nadig and Gene Koyfman, Index Universe | March 01, 2012
When TVIX halted creations last week, it caused a lot of people to look at this tiny little corner of the ETF market.
With just 14 products and a bit more than $2.5 billion in assets, it’s easy to dismiss it. In fact, on these very pages, we’ve been quoted talking about how the VIX products are largely irrelevant for most investors. We stand by that assessment. VIX—an index of the implied volatility in the S&P 500 options market—is a curious beast. It isn’t the actual volatility of the S&P 500; that’s a number that’s easy to calculate. At the time of this writing, the trailing 30-day volatility of the S&P 500 was 8.58 percent. What that actually means is that 66 percent of S&P 500 returns for a one-year period should fall between +/- 8.58 percent of a mean return.


CME Group and MGEX Announce the Launch of MGEX-CBOT Wheat Spread Options
CME Group Press Release
CHICAGO and MINNEAPOLIS, March 1, 2012 — /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace and MGEX, a Designated Contract Market and Derivatives Clearing Organization, today announced the launch of MGEX-CBOT Wheat Spread Options to begin trading on March 26. These contracts are listed with, and subject to, the rules and regulations of CBOT. MGEX-CBOT Wheat Spread Options are unique hedging tools based on the price differentials between hard red spring wheat futures listed on the Minneapolis Grain Exchange, Inc. (MGEX) and soft red winter wheat futures on the Chicago Board of Trade (CBOT), which are the result of fundamental supply and demand factors and varying protein levels between these two distinct classes of wheat.
NYSE Begins Metals Mini-Options

By: Zacks Equity Research
On Monday, NYSE Euronext Inc. (NYX) announced that its futures exchange in the U.S. – NYSE Liffe – has successfully launched its mini-sized options on gold and silver futures contracts. NYSE Liffe is the former London International Financial Futures Exchange, which trades coffee, sugar, cocoa and wheat futures. Moreover, the options on NYSE Liffe U.S. 33.2 ounce (oz.) mini gold and 1,000 oz. mini silver futures contracts provide traders flexibility by offering multiple trading strategies. Such option contracts should enable NYSE to enhance its risk management efficiencies, thereby strengthening the fundamentals and liquidity of the futures market for precious metals.

CBOE Holdings Reports February 2012 Trading Volume
— CBOE and C2 Volumes Increase 12% and 20%, Respectively,
from January
— CFE and VIX Futures Post Second-Busiest Month in History
CHICAGO, March 1, 2012 /PRNewswire/ — CBOE Holdings, Inc. (NASDAQ: CBOE) today reported that February trading volume for options on the Chicago Board Options Exchange (CBOE) and C2 Options Exchange (C2), combined, totaled 101.5 million contracts. February’s average daily volume (ADV) was nearly 5.1 million contracts, a 12-percent increase from January 2012 ADV of 4.5 million contracts, and a one-percent increase from February 2011 ADV of five million contracts.

February is Second Most-Active Trading Month in CBOE Futures Exchange History
Volume Increased 70% Over 2011, Two New Contracts Launched During Month: CBOE Brazil ETF Volatility Index and a Radar Logic Real Estate Index
CHICAGO, March 1, 2012 /PRNewswire/ — The CBOE Futures Exchange, LLC (CFE) today announced that February 2012 was the second most-active trading month in CFE history as volume totaled 1,340,780 contracts, an increase of 70 percent from the 789,734 contracts traded in February 2011. Average daily volume (ADV) at CFE during February 2012 was 67,039 contracts, the second-highest ADV ever, and up 61 percent from the 41,565 contracts traded per day a year ago. February’s total trading volume trailed only the 1.8 million contracts traded in August 2011.

Options on Futures

CME Group, Bank of China may collaborate CBS News
CHICAGO — Financial exchange operator CME Group Inc. and the Bank of China are considering a potential collaboration with one another. The companies said Thursday that they signed a memorandum of understanding to share information on topics such as marketing, training and education. The companies will also concentrate on future business opportunities facilitating cross-border trading in commodities futures and options.
Oil Options Volatility Drops for Fifth Day as Crude Gains
By Ksenia Galouchko, Bloomberg – Feb 29, 2012 2:56 PM CT
Oil options volatility declined for the fifth day as crude fell after government data showed U.S. supplies rose to a five-month high and on expectations that the Federal Reserve won’t take new action to bolster the economy. 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 28 as of 2:06 p.m. in New York, down from 29.4 yesterday and the lowest level for the contract.


Nasdaq OMX’s N.J. Liquidity Center Offers Fastest Route to Brazil Exchange
By Ivy Schmerken, Wall Street & Technology
Nasdaq OMX’s Cateret, N.J., colocation facility now boasts round-trip latency of just 107 milliseconds from the New York markets to Brazil.
As the arms race for ultralow-latency trading moves overseas, exchanges are connecting their U.S. liquidity centers to other markets to expand their global reach and pull in customers. In December, Nasdaq OMX established what it says is the lowest latency route from its colocation facility in Carteret, N.J., to Brazil’s stock and futures exchange, BM&F Bovespa. The new trade route, provided by Perseus Telecom, boasts round-trip latency of just 107 milliseconds, nearly 2 milliseconds faster than the next fastest route from the New York metro area to Brazil, according to Nasdaq OMX.
Portware Names Eskandar as Chief Executive
John D’Antona Jr., Traders Magazine Online News, February 29, 2012
Trading solutions provider Portware has hired Liquidnet alum Alfred Eskandar as its new chief executive, effective today.
The firm has made other changes, too. Chief operating officer Scott DePetris was given an expanded role and he is also its new president. Portware founders Eric Goldberg and Ary Khatchikian will chair a newly formed board of directors. Eskandar reports to them. …
“We’ll be growing our presence in global equities, foreign exchange, options and futures,” DePetris said. Portware also will consider exploring opportunities in the fixed-income markets in the next 12 to 24 months, he added, but declined to say which sectors.


Should You Buy Pimco’s Total Return ETF?
It may be the biggest ETF launch since SPY.
In March, fixed-income management firm Pimco plans to launch an exchange-traded fund version of its flagship Total Return Mutual Fund (PTTRX). The ETF will be actively managed by Pimco founder and PTTRX leader Bill Gross, often hailed as the best mutual fund manager in the world. If successful, the ETF could change how active funds are perceived in ETFs….Buried inside those 300 pages is one kind of holding that most mutual fund investors rarely think about:derivatives. According to the prospectus, Gross and his team can invest “without limitation” in derivatives for PTTRX, including options, futures or swaps. ETFR ‘s review of the holdings suggest that PTTRX uses derivatives primarily for two reasons:1) to adjust interest-rate exposure; and 2) to hedge against credit risk.
March 1, 2012: VIX higher but shows unusual action
Chris McKhann, optionmonster.com
The CBOE Volatility Index ended yesterday up 2.62 percent to 18.43 as the S&P 500 gave up ground, but the action was a bit unusual. The VIX hit its session low shortly after the open at 17.53 and suddenly spiked up to 18.75. It then retested that morning low before climbing into the close. But most interesting was its muted response and lower high into the close as the S&P 500 pushed to its low of the day. The SPX finished down 0.47 percent to 1365.68.
Apple Options Traders: Beware Of ‘Special’ Dividends
Seeking Alpha
Bloomberg ran an article a couple of days ago on the possibility that Apple (AAPL) might pay a dividend. They said,
The company is likely to declare a quarterly dividend of about $2 a share before the year is out, according to data compiled by Bloomberg. The projections are based in part on the dividends paid by other large technology providers, including Microsoft Corp. (MSFT) and International Business Machines Corp. (IBM) I guess it could be $2 per share. But I have absolutely no idea why what Microsoft and IBM did years ago would have anything to do with what Apple might do today
But I also ran into this,
Apple may choose to make a one-time distribution, rather than making a quarterly payment, said Doron Nissim, a professor of accounting at Columbia Business School in New York. A single payout would leave investors less vulnerable to subsequent increases in taxes on dividends, while also removing the risk to Apple’s stock price if they someday were to end the dividend, he said.
As a shareholder, a one-time distribution, or “special” dividend is the option I prefer least. But options traders could be taken by surprise if it does happen – especially if the special dividend is some odd amount, like $38.75 or something.
Here’s why: When a company issues a cash distribution like that, option strikes are adjusted accordingly.

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