JLN Options: Warren Buffett and the Mispricing of Long-Term Options

Mar 5, 2013

Commentary New Restoring Customer Confidence Video
We’re back with an update on confirmations. This new video explains the NFA and CME Group’s electronic confirmation system for futures brokers.

Restoring Customer Confidence More ideas»
Confirmations: NFA and CME’s Financial Match.com Confirmations: NFA and CME’s Financial Match.com
MarketsWiki.tv The fraud at Peregrine Financial Group was uncovered in July 2012 by the National Futures Association (NFA) which used an electronic bank account confirmation system. (See Confirmations: Plugging Into Electronic Confirmations) In November 2012, the NFA and CME Group announced they would implement an electronic confirmation system for futures brokers. The system, operated by Alphametrics, provides a comprehensive check and match of what FCMs say they have in customer funds with what banks say they have. Chris Hehmeyer, CEO of HTG Capital Partners and chairman of the NFA, says the new system will help regulators and customers assure such a fraud does not occur again. Watch the video » +++++ About the Restoring Customer Confidence video series
In the aftermath of the MF Global collapse, fraud at Peregrine Financial Group and high profile high-frequency trading shocks, John Lothian News asks – how do you restore customer confidence and bring traders back? Visit the video series page on MarketsWiki.tv

Lead Stories

Warren Buffett and the Mispricing of Long-Term Options
Dan Caplinger, The Motley Fool
Last Friday, Berkshire Hathaway CEO Warren Buffett released his annual letter to shareholders. Filled with his usual colorful comments on a wide variety of investing topics, the missive will be the topic of conversation among millions of investors in the days and weeks ahead.
http://jlne.ws/13DdyVt CBOE’s Brodsky Says Transaction Tax Would Harm U.S. Liquidity
Nikolaj Gammeltoft, Bloomberg
The European plan to impose a levy on financial transactions will affect investors and companies trading in the U.S. and may harm market liquidity, William Brodsky of CBOE Holdings Inc. (CBOE), said today.
http://jlne.ws/XL1cpx S&P 500 breaks 2013 high on data, QE affirmation
Anthony Lazarra, Futures
The Institute for Supply Management’s non-manufacturing index increased to 56 last month from 55.2 in January. This fact, combined with Fed Vice Chair Janet Yellen’s statement that ‘I do not see any that would cause me to advocate a curtailment of our purchase program,’ are the likely primary immediate causes for the burst of buying this morning in U.S. equity futures.
http://jlne.ws/XL7oOh Dow Smashes Record: End of the ‘Lost Decade’?
Jeff Cox, CNBC
Now that the Dow has undone all the damage of the financial crisis, it might be a perfect time for the hard-charging stock index both to admire its handiwork and catch its breath.
http://jlne.ws/W2vx37 The Dow Isn’t Really At A Record High (And It Wouldn’t Matter If It Were)
Jacob Goldstein, NPR
Just a quick, cranky reminder: Despite what you may have read, the Dow Jones Industrial Average did not hit a new high today in any meaningful sense.
http://jlne.ws/13DfjSB Former Lehman Derivatives Banker Helps Paschi Unravel Contracts
Elisa Martinuzzi & Ambereen Choudhury, Bloomberg
Riccardo Banchetti, whose work packaging derivatives at Lehman Brothers Holdings Inc. got him the top European job at the firm a week before it failed, is now making a living unraveling the kind of deals he once developed.
http://jlne.ws/XKSkAd Volatility Revenue Up Futures Trade at CME
Jacob Bunge and Saabira Chaudhuri, Dow Jones Business News (via NASDAQ)
Derivatives trade at CME Group Inc. ( CME ) last month spiked to its highest level in a year and a half as volatility ramped up in stock and bond markets.
http://jlne.ws/W2xYTw VIX Index, the CBOE S&P 500 Volatility Index, falls 8.8% on Monday as major indexes rally
Wall Street Sector Selector
The VIX Index, also known as the “fear” index, fell sharply on Monday to start the week as major U.S. stock indexes rallied.


CME to reduce trading hours, reversing expansion
Chicago Tribune
CME Group said Tuesday it would reduce grainand oil seed trading hours at the Chicago Mercantile Exchange as of April 8, largely reversing an expansion of trading hours enacted last year.
http://jlne.ws/W2y6T4 CBOE February ADV Volume Fell 15 Percent Year-Over-Year 
The Options Insider
CBOE Holdings, Inc. (NASDAQ: CBOE) reported its February  trading volume for options contracts totaled 83.14 million contracts on the Chicago Board Options Exchange (CBOE) and C2 Options ExchangeSM (C2SM) and futures contracts on CBOE Futures ExchangeSM (CFE).
http://jlne.ws/13De2e9 CBOE And C2 Plan To Launch Mini-Options On March 18 For AAPL, AMZN, GOOG, GLD And SPY
CBOE Press Release
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that Chicago Board Options Exchange, Incorporated (CBOE) and C2 Options Exchange (C2) plan to launch trading in “mini-options” that are one-tenth the size of standard options on five popular stocks and exchange traded funds (ETFs).


ISDA Plans Big gest Over haul to Credit Derivatives Since 2003
Abigail Moses, Bloomberg
The International Swaps & Derivatives Association is planning the biggest overhaul of the $24 trillion credit derivatives market since 2003.

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