NOTE: The JLN Options Newsletter will not be published on Monday, September 2, in observance of the Labor Day holiday. To all our US readers, have a great and safe Labor Day. (As long as we’re on about it, everyone else have a great and safe weekend as well.) We will be back on Tuesday.
VIX Shows Fear Ramps Up Ahead of Holiday
Kaitlyn Kiernan – The Wall Street Journal
When it comes to the market for protective index options, long, holiday weekends typically involve a cut-and-run mentality that leads the market’s so-called fear gauge lower.
But with the U.S. preparing to take action in Syria, the Chicago Board Options Exchange’s Volatility Index is moving toward the highs of 2013.
S&P; 500 index ends worst month since May 2012
Angela Moon – Reuters
U.S. stocks fell in a thinly traded session on Friday, with the S&P; 500 index recording its steepest monthly drop since May 2012 as investors held off making large bets before a long weekend with the situation in Syria still uncertain.
EM stress prompts investors to turn to options
Robert Mackenzie Smith – FX-Week
The ongoing pressure on emerging market (EM) currencies has continued this week, with foreign exchange investors putting on significant positions in six- to 12-month put options to protect themselves against the ongoing weakness in key EM currencies.
Avoid the VIX Trap; Too Many People Are Expecting Volatility
Matt Nesto – Yahoo Finance
Like an angry bear that’s been prematurely awoken from hibernation, the CBOE Volatiltiy Index (^VIX, VXX) has come roaring back to life lately and is suddenly the hottest mover in an otherwise jittery market place.
The VIX – It’s Not Really Much Of A ‘Fear’ Gauge
Cullen Roche – Seeking Alpha
Every time the market starts to dip a little bit the media starts going on and on about the Volatility Index which is widely reported as the “fear gauge.” In case you’re not familiar with the Volatility Index (aka, the VIX), it’s the implied 30-day volatility of the S&P; 500. But there’s two sides to the volatility coin. And the VIX doesn’t only represent the implied downside volatility, it just measures the implied volatility.
8 Reasons This Sell-Off Is More Than Your Average Correction
Jesse Felder – Seeking Alpha
Now that stocks have finally started to pull back from record highs investors are probably asking themselves, ‘is this a standard correction or something more than that?’ I believe we are in the process of forming a major top and here’s why:
Analysis: Girding for battle as electronic derivatives trading revived
Karen Brettell – Reuters
The $300 trillion privately traded U.S. derivatives markets could be on the verge of the biggest change in their 30-year history if investors embrace new electronic trading platforms that would reduce the market dominance of large banks.
Ageing systems limit North American buy-side offerings
Jessica King – The Trade
More than four of five North American asset managers rely on complex workarounds to support derivatives trading through aging middle- and back-office systems, a poll has found.
Large Hedge Funds Kick Algo Tires, Tabb Says
Peter Chapman – Traders Magazine
According to a recent survey by Tabb Group, 79 percent of large hedge funds query their brokers about their algos. Of the smaller hedge funds, only half bother to ask.
REGULATION & ENFORCEMENT
European CCP rules stricter than US, says Eurex Clearing chief
Luke Clancy – Risk Magazine
Thomas Book, chief executive of Eurex Clearing, says it remains to be seen whether the standards for central counterparties set in Europe will be matched around the globe
Hedging Risk in Take-Over Stocks
Dan Passarelli – The Options Insider
There is plenty of talk and rumors about a possible take-over in BlackBerry Limited (BBRY). That being said, let’s look at an made-up example of a take-over and a way to use options to capture the possible move. A $50 stock is rumored to be taken out at $55. Looks like a nice spec trade right?
Clearing up misconceptions
Chris McKhann – optionMONSTER
Options trading appealing for many reasons we have outlined in previous columns, but there are number of common misconceptions that either deter would-be traders or draw in others for the wrong reasons. Today we will begin an occasional series on these issues.
Misconception 1: Option trading is too hard.
Don’t believe the snake-oil salesmen
Chris McKhann – optionMONSTER
Misconception 2: Option trading is a piece of cake.
Last week we discussed the misconception that option trading is just too hard. This falls on the other side of the equation.