JLN Options: Volatility Plunges, But Math Still Suggests ‘Shock’ is Coming: MKM

Jan 2, 2013

Lead Stories

Volatility Plunges, But Math Still Suggests ‘Shock’ is Coming: MKM
By Brendan Conway, Barrons
As stock indexes surge Wednesday, the market’s worry barometers are plunging. And yet for MKM Partners’ derivatives strategist Jim Strugger, the math of stock-market volatility still shows plenty of embedded risk.

Vix Futures Set New Single-Day Volume Record [December 31, 2012]
Press Release
CHICAGO, IL – December 31, 2012 – The CBOE Futures Exchange, LLC (CFE) announced today that CBOE Volatility Index (VIX index) futures set a new single-day volume record of 212,800 contracts (estimated) today. The new daily record eclipsed the previous single-day record of 190,081 contracts traded on September 13, 2012.
This is the first time in CFE history that trading volume has surpassed 200,000 contracts in a single day. VIX futures are poised for another record year in 2012, with trading volume up 86 percent through November. The top four trading months for VIX futures occurred in the last four months of 2012.

Cliff Optimism May Be Short-Lived
Steven Russolillo, The Wall Street Journal
While the so-called fiscal cliff has finally been averted, plenty of future budget clashes will likely set the stage for a volatile 2013.

Volatility-Linked ETFs Still Crashing with VIX on Fiscal Cliff Deal
John Spence, ETF Trends
The iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) was down 21% from Monday’s intraday high in Wednesday’s premarket trading as global markets surged after leaders in Washington reached a last-minute deal on the U.S. fiscal cliff.

NYSE Trading Glitch Caps Year of Snafus for Exchanges
Chris Dieterich, The Wall Street Journal
Rival exchanges briefly stopped sending orders to the New York Stock Exchange as the Big Board experienced trading problems with more than two dozen stocks Monday.

NYSE to Calculate Circuit Breakers Based on S&P 500, Not DJIA
Matt Egan, Fox Business
Ditching the Dow Jones Industrial Average, the New York Stock Exchange said this week that come February its circuit breakers will be based solely on the broader S&P 500.

S&P 500 Poised for New Highs in 2013
Vivianne Rodrigues and Arash Massoudi, Financial Times (via CNBC)
After finishing 2012 on a high note, investors believe US equities are bound to extend last year’s run.

Percentile of Put vs Call Skew Spread for S&P 500 Companies
Wendy Soong, BloombergBusinessweek
The following table shows the percentile rank over the past year for the 90%-110% skew spread, a measure of how expensive puts, or bearish bets, are relative to calls.

Hedge fund industry loses out again
Sam Jones, CNN
Bearish hedge fund managers have lost out in 2012, with the $2tn industry suffering another year of disappointing returns as traders were wrongfooted by a change in fortunes for the eurozone.

Active ETFs May Boom After SEC Lifts Derivatives Ban
John Spence, ETF Trends
The SEC’s recent decision to lift the nearly three-year moratorium on some new exchange traded funds that use derivatives should speed the rise of actively managed ETFs.

S&P 500 ETF Fee Impacts
Adam Jones, Seeking Alpha
Expense ratios, the ratio of fees charged for the amount invested, are important when selecting mutual funds or ETFs as they compound over the life of the investment. They have the potential to quietly diminish returns significantly if not considered when selecting a new fund or ETF. Recently the government has enforced higher visibility of this information to keep all investors aware of what they are being charged.


The Definitive Guide To Trading Options On Futures
Justin Kuepper, Market Daily News
Options on futures–otherwise called futures options or commodity options–may seem like a complex topic for these relatively new to derivatives and somewhat unnecessary for those with experience. But combining futures with options provides traders with a number of benefits, like the ability to hedge existing futures options, trade around the clock, or enhance leverage.

tradeMONSTER Launches ‘I Want to be a Trader’ Educational Webinar Series
Herald Online
Top rated online broker launches new investing webinar series as a complimentary educational offering to guide people through the process of learning how to trade stocks and options.

Volatility has Spiked, Now What for 2013?
Chad Karnes, InvestorPlace
On 12/13 when the S&P 500 was trading at 1430 we were focused on important contrarian signals that were giving warning signs.
The prevailing theme of the three signals was the marketplace was complacent and ripe for a selloff, or worse, a rogue wave and a great time to buy portfolio insurance was upon us.  One way to hedge your portfolio is to go long volatility.

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