JLN Options: VIX Rises a Record Eighth Day as Europe Concerns Increase

Apr 10, 2012

Lead Stories

VIX Rises a Record Eighth Day as Europe Concerns Increase
By Joanna Ossinger and Nikolaj Gammeltoft, Bloomberg
The Chicago Board Options Exchange Volatility Index (VIX) advanced for a record eighth day as surging Spanish and Italian bond yields intensified concern about the European debt crisis. The gauge known as the VIX, which measures the cost of Standard & Poor’s 500 Index options, rose 9 percent to 20.51 at 1:10 p.m. New York time today. The S&P 500 fell 1.4 percent.
Spanish bonds dropped as Economy Minister Luis de Guindos declined to rule out a rescue for the nation. Concern over Europe coupled with a report showing less U.S. job creation than economists projected has sent the S&P 500 down 4 percent in five days, heading for the biggest loss since November.
http://jlne.ws/Hzodmy

S&P 500 Correlation Bets Increase as VIX Rebounds 22%
By Cecile Vannucci and Nikolaj Gammeltoft, Bloomberg – Apr 9, 2012 6:13 PM CT
Options traders are speculating the lockstep moves in U.S. equities that punished investors last year are on the way back as the benchmark volatility gauge posts its longest streak of increases since 2003. The Chicago Board Options Exchange S&P 500 Implied Correlation Index rose 14 percent in nine trading sessions to 66.64 yesterday, rebounding from a 10-month low and posting the biggest gain since August, data compiled by Bloomberg show.  http://jlne.ws/HyvKml

VIX On Pace For Record Eighth Straight Gain; Time to Fret?
By Steven Russolillo, WSJ.com
Don’t look now, but the stock market’s fear gauge has quietly been creeping higher over the last week and a half. The CBOE Volatility Index, commonly known as VIX, has risen for seven straight days through Monday’s close, the longest consecutive streak in nearly nine years
http://jlne.ws/HIcShT

Financial News: Banks Staff Up In Equity Derivatives
WSJ.com
By Tim Cave Of FINANCIAL NEWS
European banks are aggressively bulking up their equities derivatives franchises, in stark contrast to the cuts being made in other business lines, prompted by the prospect of higher margins and growing demand for derivatives products from hedge funds and institutional investors.
Equities derivatives divisions, particularly flow – or high-volume – products such as delta one, are being bolstered by new hires and resources from other areas, such as cash equities, where margins have been hit be fierce competition and thin trading volumes.
Banks including UBS, Citi and Nomura have all told Financial News they are making new hires into the business. Jason Barron, global head of equity derivatives at UBS, said: “It is easy to be optimistic [about equity derivatives]. Overall, we see it as a growth area and are continuing to hire into the business.”
http://jlne.ws/Hy0bfT

TVIX’s Time To Shine?
With stocks extending their losing streak in bloody fashion today, some traders are once again warming up to and extolling the virtues of volatility exchange-traded products such as the iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX [FREE Stock Trend Analysis]). VXX is up almost 7% today and over 13% in the past week.
Thirteen percent in a week sounds good, but one controversial volatility ETN would have something to say about that. The VelocityShares Daily 2x VIX Short-Term ETN (NYSE: TVIX) is up more than that today alone and Tuesday’s TVIX surge comes on the heels of an almost 10% jump on Monday.  http://jlne.ws/IJsz8L

Nasdaq Illiquid-ETF Idea To Sort ‘Wood From The Trees,’ Tabb Says
Barrons.com By Brendan Conway
ETFs that barely trade are coming back into the spotlight, this time because exchanges are trying to expand the number of tools at their disposal to foster more trading. In the latest idea, Nasdaq OMX Group (NDAQ) has asked regulators for permission to free ETF issuers to pay market makers directly for the service of making spreads narrower and liquidity greater. Read the filing here.
But as the Tabb Group’s Miranda Mizen notes in a curtain-raising study of the idea, it may unintentionally speed the separation of ETFs that are here to stay from the ones that probably won’t ever draw many investors.
http://jlne.ws/I0DNYS

Exchanges

Increasing Numbers of Investors Are Leveraging Volatility with VIX® Options and Futures from CBOE
(CBOE Press Release)
The market “fear gauge” is being used as a risk powertool to help diversify and protect portfolios
CHICAGO, Ill., April 10, 2012 /PRNewswire via COMTEX/ — Increasing numbers of investors are turning to VIX® volatility index options and futures to manage risk and capitalize on market volatility. VIX® options and futures are traded exclusively on the Chicago Board Options Exchange (CBOE) and CBOE Futures Exchange (CFE). In 2011, a total of 98 million VIX® options contracts traded at CBOE, an increase of 57% versus 2010, while total volume for VIX® futures at CFE was 12 million contracts traded, up 174% from the prior year.
http://jlne.ws/IeGmFU

INSTITUTIONS
ROSENBLATT SECURITIES LAUNCHES LISTED OPTIONS TRADING
(Press Release) Tuesday, April 10, 2012
Boutique Institutional Broker Hires Veteran Four-Person Team
NEW YORK, NY, April 10, 2012 – Rosenblatt Securities is pleased to announce its entry into the listed options business. The firm has hired a four-person options sales, trading and strategy team, led by Gary Wishnow, Managing Director, Derivatives Sales & Trading. Joining Wishnow at Rosenblatt are: Steven Williams, Chief Derivatives & ETP Strategist; Fabian Amezaga, Vice President, Derivatives Sales & Trading; and trading clerk Matthew Stoeber.
http://jlne.ws/HxjNRI

Options on Futures

A Breakdown of the new OIL VIX Contract
Posted on 4/10/2012 in Trading & Technology by Mark Sebastian, The Options Insider
I have to admit, there are very few traders that are as excited as me that the CBOE is relaunching options and futures on GVZ and OVX. While I like VIX, I think it has some flaws to it that possibly make the product more difficult to use as a hedge:
http://jlne.ws/ItTMS3

Regulation

SEC readies vote on circuit-breaker replacement
thetradenews.com
On 4 April, the US Securities and Exchange Commission (SEC) announced, after several extensions, that it would finally decide whether to approve a new volatility-mitigation plan for the US equities market by 31 May. The new mechanism would replace the current single-stock circuit breakers for securities in the S&P 500 and Russell 1000 indices and certain exchange-traded funds (ETFs) sets to expire on August 11, or sooner if the new plan is implemented prior to the deadline.
http://jlne.ws/HZUlNw  

Events

THE OPTIONS INDUSTRY COUNCIL ANNOUNCES INVESTOR EDUCATION DAY IN NEW YORK CITY APRIL 21
CHICAGO (April 10, 2012) – The Options Industry Council (OIC) today announced its next Investor Educ
ation Day (IED) for 2012 taking place in New York City on April 21. Options are an ideal tool for a variety of investors and market conditions. The popular, and free, all day options education program is taught by experienced instructors from the various options exchanges and OIC professionals. This event is the second of four IEDs OIC is hosting in various cities across the country to help investors develop their knowledge and ability to responsibly trade options.
http://jlne.ws/IIiAAt 

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