OBSERVATIONS – STATISTICS – COMMENTARY
Yesterday’s most actively traded options – from the OIC:
VIX May Still Be Too High: Chart of the Day
The stock-market volatility gauge known as the VIX may be too high even after dropping to a five- year low, according to Adam Warner, an option trader and contributor to Schaeffer’s Investment Research.
The CHART OF THE DAY illustrates how Warner reached his conclusion: by comparing the VIX, or the Chicago Board Options Exchange Volatility Index, with the SPDR Standard & Poor’s 500 exchange-traded fund’s volatility during the previous 10 trading days.
Trading volumes fell significantly in 2012, says WFE
The World Federation of Exchanges’ (WFE) annual survey of global markets found that while the global market capitalization increased 15.1% in 2012 , the volume of all products traded on WFE member exchanges fell significantly. According to worldwide statistics compiled by the WFE, the value of Electronic Order Book (EOB) share trading was down 22.5%, and the number of derivative contracts traded on-exchange decreased by 20%.
High Frequency Trading: Clear and Present Danger?
Adam Shapiro, Fox Business
Which sounds more risky: driving a race car 200 miles per hour on the Massachusetts Turnpike, or trying to trade stocks from your home computer while competing against high frequency trading (HFT) — the kind of trading performed by sophisticated trading firms every day — which is known to execute trades within one millionth of a second?
** Relevant to this story we posted our video on HFT Rules: Rules for the Algo Highway yesterday. For those that didn’t see it have a look. –JB
CME Group seeks feedback on nearly non-stop grain trade
Tom Polansek, Reuters
The Chicago Board of Trade on Tuesday launched a survey asking customers whether it should shorten the nearly non-stop electronic trading cycle for grains and hinted that executives had grown less concerned about competition from rival IntercontinentalExchange.
It’s Time for Sensible Regulation of Derivatives
Martin Neil Baily and Aaron Klein, Yahoo Finance
The beauty of a pendulum is that once set in motion it can swing predictably forever. The difficulty is getting it to return to the middle. This seems to be the problem with regulation of derivatives.
‘Robin Hood’ Trading Tax Nudged Forward in Europe
James Kanter, The New York Times
A hotly contested tax on financial trades took a big step forward on Tuesday when European Union finance ministers allowed a vanguard of member states to proceed with the plan.
** Whether or not the tax is a good idea is certainly debatable but calling it a “Robin Hood” tax is needless hyperbole. –JB
Priced out of the swaps market
The Trade News
Why does the buy-side need to reassess the way it trades derivatives?
It’s all about trading costs. The new swaps era is beginning to become reality in the US and Europe and will hike costs for buy-side firms that typically use OTC derivatives to hedge their exposures.
Gazing Into ‘Dark Pools,’ the Tool that Enables Anonymous Insider Trading
Tom Winter, NBC News
While federal authorities aggressively pursue individual insider stock trading cases — including an ongoing investigation of Wall Street titan Steven A. Cohen’s SAC Capital hedge fund — financial regulators remain years away from being able to peer into “dark pools,” the high-tech mechanism that insiders use to conduct secret, advantageous transactions.
Deutsche Boerse Not Losing Sleep About ICE as Trading Rival
Bloomberg (via Traders Magazine)
The chief executive of Deutsche Boerse said he’s not worried by the prospect that IntercontinentalExchange will become an equities and derivatives powerhouse, if it succeeds in its plan to acquire the operator of the New York Stock Exchange.
Rolls-Royce CFO Issues Derivatives Regulations Warning
Andrew Sawers, CFO
European regulatory measures designed to make the financial system safer don’t actually eliminate risk, they simply move it to nonfinancial companies, warns Mark Morris, the finance chief for Rolls-Royce, the British aero-engine maker. And there could be a negative impact on the economy, he says.
How to Capitalize on the Collapsing VIX
You have plenty of choices, but few work
Daniel Putnam, InvestorPlace
What to do about the VIX? That’s the question on traders’ minds after the volatility index plunged 1.11 points to 12.46 on Friday, bringing it to a level last seen in mid-2007.
Volatility: A Sophisticated and Potentially Pricey Portfolio Tool
Gordon Rose, Morningstar
Exchange-traded products (ETPs) offering exposure to equity market volatility have been attracting substantial interest from investors.
According to Morningstar’s asset flow data, volatility-linked products saw EUR 318 million net inflows during 2012. Of this sum, EUR 65 million was invested in the Source JP Morgan Macro Hedge US TR ETF (MHUU) during the final three months of 2012.
Killing Spiders: Better Options Than The S&P 500 ETF
Chris DeMuth Jr., Seeking Alpha
Over the years, I have had a lot of people ask me for advice regarding their personal investments. My thoughts on the subject stem from a simple truth: most attempts to beat the market fail.
** Note: If you do not like pictures of actual big, scary spiders do not click on that link. –JB