Lead Stories Traders Dump Bank Options in ‘Epic Proportions’
Kaitlyn Kiernan, The Wall Street Journal
Financial firms such as J.P. Morgan Chase JPM & Co. and Bank of America Corp. BAC took a beating Wednesday after President Barack Obama‘s win, leading option traders in a popular exchange-traded fund to flee failed election bets “in epic proportions.”
“It’s fairly obvious people were using XLF as a vehicle to try to take advantage of a Romney win in the presidential election,” said Brian Overby, senior options analyst at online brokerage TradeKing. “This morning, traders bailed in epic proportions at the open, just trying to salvage what they could get.”
http://jlne.ws/TNqFxz SEC Approves 15-year Options for the CBOE
Press Release (SEC)
On July 24, 2012, the Chicago Board Options Exchange, Incorporated (“Exchange” or “CBOE”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)1 and Rule 19b-4 thereunder,2 a proposed rule change to increase the maximum term for Long-Term Equity Options Series (“LEAPS”) to fifteen years.
http://jlne.ws/STNHCV (PDF)
***The CBOE says that expanding the term for LEAPS to fifteen years would allow it to offer exchange-traded products that could compete with similar over-the counter products. –SR
Prudential Records $618 Million Loss on Derivatives
Zachary Tracer, BloombergBusinessweek
Prudential Financial Inc. (PRU), the second-largest U.S. life insurer, swung to a loss in the third quarter as derivatives weighed on results.
The net loss of $618 million compares with a profit of $1.59 billion a year earlier, Newark, New Jersey-based Prudential said today in a statement.
http://jlne.ws/RllOBw Russian Hedging Costs Soar as Obama Fight Spurs Swings
Halia Pavliva, Bloomberg
Options traders are demanding more protection against swings in Russian stocks over the next six months after U.S. President Barack Obama’s re-election sent oil tumbling and heightened concern developed nations’ efforts to shore up economies will reduce demand for riskier assets.
http://jlne.ws/RlqtUa Futures trading on CBOE volatility index briefly halted
Reuters (via Chicago Tribune)
Trading of all futures products on the CBOE Futures Exchange, including contracts for the CBOE Volatility index, was briefly halted on Wednesday due to technical problems, according to exchange operator CBOE Holdings Inc.
http://jlne.ws/TNr1Ec Trading Firms Could Save $1T with ‘One-Pot’ Margining
Gregory Bresiger, Traders Magazine
Firms can pick up a trillion dollars in savings on their trading in over-the-counter derivatives, with a new form of calculating the collateral they have to maintain…
The practice, more formally known as portfolio margining, allows firms to keep on hand only enough capital to meet the ‘net risk’ of all the positions they hold in swaps and other derivatives, such as options.
http://jlne.ws/Rlq7gc Hedge funds decline in October, says HFRI
Kenneth Heinz, HedgeWeek
Hedge funds posted the first monthly decline in five months in October, as uncertainty over the outcome and impact of US political elections and the ongoing European sovereign debt and banking crisis increased financial market volatility and further reduced investor risk tolerance.
http://jlne.ws/RlmoPG Volatility index not signaling panic: analyst
Kate Gibson, MarketWatch
“The VIX is not always the greatest predictor of markets, but it’s surprising how subdued it is,” said Frederick, who that added the gauge’s limited rise could signal “a short-live pullback” for equities.
http://jlne.ws/RlmCX8

Strategy

Using Options To Forecast Share Price
Mark W. Bertolin, Seeking Alpha
Options Used To Forecast Share Price
The market action today with the Dow Jones Average down 257.19, the Nasdaq down 64.3 and the S&P 500 down 27.69 it is difficult to find any good news to focus on. On days like today I use the downturn to research which companies decline at a faster pace than the index they are represented by, and also those that were impacted less than the market. I also research option pricing and behavior.
http://jlne.ws/Rlo3ol

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