LEAD STORIES
Charges Bring SEC Hopes for New Weapon
By SARA SCHAEFER MUñOZ, WSJ.com
Three days after suspicious trading in the options market earlier this month, the U.S. Securities and Exchange Commission moved swiftly to charge two foreign suspects who had executed the deals and get a court to keep $1.1 million of their assets from leaving the country.
But the SEC didn't see the suspicious trading activity itself. It received tips from the Chicago offices of the men's brokerage firm, Interactive Brokers LLC, and the surveillance group at the Chicago Board Options Exchange where the trades took place. The reason: The SEC doesn't have access to the same real-time information as the exchanges and brokers and must rely on the up-to-date information provided by these brokers or exchanges if it wants to act quickly, according to SEC documents.
http://jlne.ws/beTYbhCharges Bring SEC Hopes for New Weapon
By SARA SCHAEFER MUñOZ, WSJ.com
Three days after suspicious trading in the options market earlier this month, the U.S. Securities and Exchange Commission moved swiftly to charge two foreign suspects who had executed the deals and get a court to keep $1.1 million of their assets from leaving the country.
But the SEC didn't see the suspicious trading activity itself. It received tips from the Chicago offices of the men's brokerage firm, Interactive Brokers LLC, and the surveillance group at the Chicago Board Options Exchange where the trades took place. The reason: The SEC doesn't have access to the same real-time information as the exchanges and brokers and must rely on the up-to-date information provided by these brokers or exchanges if it wants to act quickly, according to SEC documents.
Don’t Be Fooled by the VIX
The VIX exaggerates fear levels on Mondays
August 30, 2010
By Adam Warner, InvestorPlace
On Monday, the CBOE Volatility Index (VIX) opened up about 5%. The market did open slightly lower, but basically hovered close to unchanged for the first few hours of trading. Yet the VIX held onto its gains.
So is this another sign of impending doom we can file alongside the steep VIX futures term structure and the heavy skew toward out-of-the-money (OTM) puts?
http://jlne.ws/a1gMqJ
EXCHANGES
CME Group to Offer Customers Exposure to Benchmark U.S. Treasury Securities
CHICAGO, Aug. 30 /PRNewswire-FirstCall/
CME Group, the world's leading and most diverse derivatives marketplace, announced the launch of On-the-Run U.S. Treasury futures beginning Monday, October 25, 2010. These new futures contracts will provide market participants with efficient and cost-effective price exposure to 2-Year, 5-Year, and 10-Year U.S. Treasury on-the-run yields. The new contracts will be listed with, and subject to, the rules and regulations of the CBOT.
http://jlne.ws/cNE1p0
REGULATION
Was the Flash Crash a Warp-Speed Sting?
By JIM MCTAGUE, Barron's.com
ERIC SCOTT HUNSADER, a self-taught programmer who became an expert on market data, argues that rogue traders using high-speed computers deliberately slow the stock market's consolidated tape every trading day, to create fleeting price mismatches among the dozen exchanges handling NYSE-listed shares and to profit from the momentary differences.
http://jlne.ws/aZRej8
STRATEGY
Options Traders Prepare for a Big Fall Selloff
The Street's Conspiracy Theorists
By STEVEN M. SEARS, Barron's.com
Traders are talking black swans and black helicopters. The former are much-feared improbabilities that may hammer markets this fall. The latter carry stealthy conspirators who may be playing on those fears. Investors need to hedge against both.
BLACK SWANS ARE BAD. Black-helicopter conspiracy theories are good. This is the odd message emanating from typically cerebral parts of the options-trading community as investors are preparing for sharp stock-market declines that they fear could occur at any time—perhaps in September and October, historically the most volatile months of the trading year.
http://jlne.ws/ac8Hki
OPTIONS EDUCATION
S&P Implied Volatility- What Does It Mean?
Monday, August 30, 2010
by Fred Oltarsh of Libanman Futures
As the S&P rallies, the Implied Volatility (or mathematical theoretical value for an options contract) decreases. Despite the recent decline in the market, the Implied Volatility for the S&P is at the lower end of the range for the last three months. Examining Implied Volatility is essential before establishing an options position in any market. The current 10 and 30 day Historical Volatility in the S&P is just under 17 and 21% respectively. The October at-the-money options have an Implied Volatility of about 23.50%. All of this is important information to begin examining a potential position in S&P options. What else does one need to consider?
http://jlne.ws/bp9bPR
