JLN Options: Volatility Derivatives Soar Despite Placid Market

Mar 12, 2013

Commentary & Insight

Jill Sommers

Jill Sommers Reflects on the CFTC, Dodd-Frank, and Her Future

Jill Sommers, Commissioner of the Commodity Futures Trading Commission (CFTC), is stepping down after the first quarter of this year. Sommers spoke with JLN editor-in-chief Jim Kharouf about the progress of Dodd-Frank, position limits, and what the future holds for the CFTC after her resignation.

Sommers discussed how the CFTC has changed over the last five years — including their increased budget and staff, moving from principles-based to rules-based rulemaking and their greatly increased public profile.

She also reflected on the Dodd-Frank rulemaking process, saying she wished the CFTC had defined swap-related terms first and delayed compliance with any rules until the rulemaking process was completed.

Sommers was sworn in as a CFTC commissioner on August 8, 2007 and served until April 13, 2009. President Barack Obama nominated her on July 20, 2009 to serve a five-year second term. Before becoming a CFTC commissioner, Sommers worked on several over-the-counter derivatives issues as policy director and head of government affairs for ISDA, as well as working closely with congressional staff drafting the Commodity Futures Modernization Act of 2000.

Watch the video »

Lead Stories

Volatility Derivatives Soar Despite Placid Market
Peter Chapman, Traders Magazine
The U.S. economy is on the mend. The European debt crisis is under control. The financial crisis of 2008 is receding into memory.
And volatility is tamed. In fact, the CBOE Volatility Index hit 11.50 Monday, a new 52-week low. This also is the lowest the index has been since April 2007.
Yet derivatives based on the Chicago Board Options Exchange Volatility Index have never been more popular.

KANSAS CITY, Mo., March 12, 2013 /PRNewswire/ — BATS Options, a U.S. equity options market operated by BATS Global Markets (BATS), will list Mini Options on five high-priced and actively traded securities on March 18 with no charge for members to trade. 
**BATS joins ISE, CBOE, and NYSE in launching mini options on March 18. At a very competitive price. — SR

Swaps-Clearing D-Day Set to Trim Dealer Profits: Credit Markets
Matthew Leising & Silla Brush, Bloomberg
The $639 trillion over-the-counter derivatives market begins the largest transformation in its 30- year history today with rules intended to contain another financial crisis, trimming profits for Wall Street banks.

VIX Throws Wrinkle Into March Options Expiration
Rocky White, Forbes
This week brings us to the third Friday of the month, which means equity options expire.  Since we specialize in options trading, we look very closely at the market’s performance during this week.

VIX Cruises to Six-Year Low
Kaitlyn Kiernan, The Wall Street Journal
The market’s so-called fear gauge played limbo Monday to finish at its lowest level in more than six years as optimistic investors again pushed share prices higher.

How Low Can the VIX Go?
Steven Russolillo, The Wall Street Journal
The market’s fear gauge doesn’t have a care in the world these days.
The CBOE’s Volatility Index, or VIX, recently fell 7.2% to 11.69, falling below 12 for the first time this year. The last time it hovered around current levels came in 2007.

What Worry? VIX Shows First 11-Handle Since 2007
Brendan Conway, Barron’s
Lots of investors seem to think the stock market is ripe for a correction. But they’re not acting on their convictions.
At least, not the ones who buy and sell stock options.

Who’s afraid of an S&P 500 triple dip?
Wallace Witkowski, MarketWatch
The stock market hasn’t been this carefree since early 2007. Should we be worried about that?
As the S&P 500 Index moves toward an all-time high and volatility sits at multiyear lows, investors should remember we’ve been here twice before, with the index just below 1,600 both in 2000 and 2007 only for it to take a dive soon after.
So is a third dip on the horizon? Or will the U.S. stock benchmark power to a record?

Junk Bond Puts Jump on Record-Low Yield  (video)
In today’s “Options Update,” Bloomberg’s Dominic Chu examines options activity on junk bond puts after yields dropped to an all-time low. He speaks on Bloomberg Television’s “Market Makers.”


2012 transaction volume for global exchange-traded derivatives falls 15 percent
The trading activity of derivatives contracts on exchanges around the world declined by 15 percent in 2012, according to data contained in The World Federation of Exchanges’ annual survey of global markets.

NSE tweaks the way option strike prices are fixed (India)
Economic Times
MUMBAI: Options traders may soon step up trading in relatively less volatile stock option counters such as Tata Power, Vijaya Bank, Indian Hotels and Gujarat State Petronet, as the National Stock Exchange (NSE) has tweaked the way option strike prices are fixed – from denomination to volatility of the underlying stock – from April 1 across all expiries.


SEC Looking to Hand Out Punishments that Fit the Crime
Reuters (via Fox Business)
The Securities and Exchange Commission is experimenting with punishments that more closely fit the wrongdoing at issue in a bid to give its enforcement cases more bite.


Buy the Rumor and Sell the News. Well, not Always.
Andrew Giovinazzi, The Options Insider
I don’t quite know what happened between last Monday and Friday, but someone with a big bottle of happy pills was doling them out like candy from a Pez dispenser.  The Sequester is no problem, Italy has no choice but to follow the path, Draghi won’t lower rates and Uncle Ben won’t raise them and just like that the Dow is at an all-time high.

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