JLN Options: Volatility Futures Reach 19-Month High After 24% S&P 500 Advance

Feb 22, 2012

Lead Stories

Volatility Futures Reach 19-Month High After 24% S&P 500 Advance: Options
By Nikolaj Gammeltoft and Cecile Vannucci, Bloomberg – Feb 22, 2012
Futures traders are pricing in the biggest increase in U.S. equity hedging costs since 2010 after the Standard & Poor’s 500 Index rose within 2 points of erasing last year’s slump.
April futures on the Chicago Board Options Exchange Volatility Index settled at 25.15 yesterday, or 6.96 points higher than the level of the gauge, according to data compiled by Bloomberg. The gap widened to 7.02 points on Feb. 17. The last time two-month futures were that high in relation to the index known as the VIX was July 2010. The S&P 500 has surged 24 percent since Oct. 3 on optimism Europe will resolve the debt crisis. Now, traders are increasing hedges to protect against losses, according to Dominic Salvino, a specialist on the CBOE floor for Group One Trading.
http://jlne.ws/zd44CX

Calm VIX No Green Light For Stocks
MarketBeat – WSJ
By Steven Russolillo
The Dow is a quick rally away from 13,000 and the S&P 500 isn’t far from its 2011 highs. But the biggest surprise of the year, according to at least one market analyst, is the sleepy stock-market fear gauge. The Chicago Board Options Exchange’s volatility index, known as VIX, continues to meander under 20, roughly its long-term average. Even as stocks drift lower today, the VIX is only up a smidgen. And the longer the VIX stays below 20, the bigger the debate rages over whether the stock investors are acting calm or complacent.
http://jlne.ws/xvU6oT

Option flow in homebuilders turns bullish Real-time equity news, XE.com
A few of the homebuilders have attracted bullish option order flow ahead of Wednesday’s Existing Home Sales data, said Joe Cusick, senior market analyst at brokerage optionsXpress. KB Home shares fell 3.37 percent to $11.75 and options volume on the stock includes 21,000 calls and 2,924 puts, according to Trade Alert. The top trades were part of a spread, in which the strategist apparently bought 8,000 April $13 calls for 74 cents and sold 10,000 April $15 calls at 22 cents per contract, Cusick said. If this is an opening position, this 4X5 call ratio spread is a bullish play that makes its best payoff if shares rally to $15 through the April expiration, which represents a 27.6 percent gain over the next 59 days.
http://jlne.ws/wddzHK

Exchanges

Why Anonymous is Winning Its War on Internet Infrastructure
Elise Ackerman, Forbes
“To our hacker allies, our fellow occupiers, our militant comrades all over the world, the time for talk is over: it’s time to hack and smash, beat and shag.”
The call to arms issued last week by the international hacker group Anonymous was accompanied by a frenzy of online hacking. Attackers took down the websites of a tear-gas manufacturer in Pennsylvania, the Nasdaq and BATS stock exchanges and the Chicago Board Options Exchange. A few days later they hacked into websites owned by the Federal Trade Commission and the Bureau of Consumer Protection.
http://jlne.ws/AzrBbC

INSTITUTIONS

Lake Hill Capital Management Launches New Volatility Products and Adds Key Personnel
NEW YORK, Feb. 21, 2012 — /PRNewswire/ — Lake Hill Capital Management LLC, an investment management firm focused on volatility trading, is expanding by launching two new products and hiring several senior professionals. Investors have access to Lake Hill through a hedge fund limited partnership or separately managed accounts. The Lake Hill Index Strategy generates alpha by extracting edge from the options market through a balanced portfolio of short-dated exchange-traded index options. The Lake Hill Long Volatility Strategy is a “tail-risk” hedging program designed to provide a constant form of insurance that performs during volatile periods.
http://jlne.ws/z9pKvJ

Technology

OptionsCity Software integrates with Lightspeed Trading for a robust trading solution
OptionsCity Press Release
February 22, 2012
Chicago – OptionsCity Software, a provider of end-to-end electronic trading platforms, has now integrated with Lightspeed Trading, LLC (LST), a New York-based introducing broker. The incorporation of OptionsCity and LST will provide a solution for equity and options traders to access the marketplace more efficiently. OptionsCity’s award-winning options trading platform, Metro, will now integrate with LST’s proprietary technology environment enabling traders to create and execute complex trading strategies across many markets.
“We are pleased to combine offerings with a software vendor so highly regarded as OptionsCity,” remarked Collin Carrico, Managing Director of Lightspeed Financial, Inc, the parent company to LST. “This integration is a necessary next step in our strategic growth plan aimed at delivering the most complete brokerage services across asset classes to professional traders.”
http://jlne.ws/AAqUop

TradeStation Releases Powerful New Portfolio-Level Back-Testing Tool
PLANTATION, Fla., Feb 22, 2012 (GlobeNewswire via COMTEX) — TradeStation, the award-winning broker-dealer and futures commission merchant, today announced the release of Portfolio Maestro, a powerful new addition to its analysis and trading platform that enables traders to quickly and precisely evaluate strategies for multiple symbols simultaneously.
http://jlne.ws/xxINjW

Anova Technologies Launches Its Newest Exchange-to-Exchange Connectivity Route Between 350 Cermak and 400 S Lasalle
High Frequency Traders
February 22, 2012
Anova Technologies, a custom optical engineering firm, will now offer ultra-low latency connectivity between 350 Cermak and 400 S Lasalle, bringing a key gateway to NY/NJ options exchanges and the CBOE into the ultra-low latency loop. As is standard, Anova’s path will displace the available offerings by providing a significant speed advantage to its clients.
http://jlne.ws/wi4btb

Strategy

Low-Cost Options ‘Collar’ Would Cut CO2 Risks, Jefferies Says
By Mathew Carr, Bloomberg Feb 21, 2012
Power stations, factories and airlines concerned that volatile carbon prices may boost their compliance costs can use a low-cost options strategy to cut price risks, said Jefferies Bache Ltd.
Emitters could buy a December call option at a strike price of about 11 euros ($14.54) a ton and sell a put option at a strike of about 7 euros, said Andrew Ager, head of carbon in London at the unit of Jefferies Group Inc. (JEF) In the so-called collar, the price of the call at 1.25 euros a ton would almost offset the revenue from selling the put at 1.10 euros, based on data yesterday from ICE Futures Europe in London.
http://jlne.ws/w2kazo

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