Posts tagged 'CBOE'

Guest post: Does the VIX really measure volatility?

This guest post is from Peter Cookson, founder of Perels, a consulting firm focused on emerging financial trends.

The CBOE Vix volatility index fell 12 per cent, closing at its lowest level since February 2007 — FT, June 19th

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How about that, SEC & CBOE edition

From the SEC’s order setting out a $6m fine in a settlement with the Chicago Board Options Exchange, over some serious failings relating to this probe of an online broker’s obligations under Regulation SHO (on short-selling)…

Self-regulation is a unique and fundamental component of federal securities regulation in the United States…

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The vexatious VIX

What should we make of this? The CBOE VIX, the barometer of choice for those monitoring market volatility, dropped like a stone between Xmas and New Year. And the trend has continued in the days since…

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A super contango in fear

This is a guest post for FT Alphaville by Theo Casey, a columnist at Futures & Options World, blogging on the back of FOW’s European Equity Options conference in Amsterdam.

The year is 2017. Read more

The Vix distortion quantified

Are volatility-linked exchange-traded products (ETPs) getting too big for the Vix futures market? Are they comprising the price discovery role of Vix futures? Are they the reason why implied volatility curves have become steeply elevated?

As it turns out, Barclays Capital’s equity strategy team apparently thinks yes, it is possible (H/T the FT’s Ajay Makan). Read more

Time for position limits on Vix futures?

Holy cow! Index Universe — self-described defenders of the ETF industry — have admitted there may be an issue with these products affecting the underlying assets, after all.

The case in point is the TVIX ETN, which started behaving oddly (ballooning in size) at the beginning of February. Note our stories about the matter here and here. Read more

Regulators vary on story of MF Global failure

Agencies who investigated MF Global before its collapse will give different accounts of when they first became concerned about its trades, when they appear before a Congressional hearing later on Thursday, the FT reports. Terry Duffy, chief executive of CME Group, said that MF Global seemed to be in “full compliance” with segregating its customers’ funds until the day before its collapse, only for CME and CFTC auditors to be told on 2am on the day the broker filed for bankruptcy that some funds had been transferred. The CBOE said it was receiving data from the broker in August, while Finra said it had been watching MF Global’s trades in euro sovereign debt since May. A”turf war” may meanwhile be opening between Chicago and New York prosecutors on bringing criminal charges over the collapse, Reuters says.

Vix settlement weirdness

News comes our way of there being some concern in the market about the Vix settlement process.

In one phrase: It’s off. Read more

The Bernanke 1×2 Call Spread

By Theo Casey, a columnist at Futures & Options World, blogging live from FOW’s European Equity Options conference in Amsterdam.

Presenting the best trading idea of the conference… Read more

Earnings vs event-driven stock correlations

During last summer’s US economic slump, the CBOE S&P 500 implied correlation index hit a couple of intraday record highs before starting a consistent (if jumpy) downward trend through the end of the year, as equity markets recovered and the tin hats came off.

Since then the index been somewhat erratic, which is unsurprising given the big event-driven moves we’ve seen this year: Read more

CDS options market multiplies alongside questions

What’s over-the-counter, a derivative, and expands despite financial crises?

The CDS index options market. Read more

CBOE unfazed by D Börse-NYSE plan

The head of CBOE, one of the leading US options exchanges, said on Thursday that the exchange could compete with the new options market that could emerge from the proposed tie-up between the NYSE Euronext and Deutsche Börse, reports the FT. The merger would create the largest US options market, combining NYSE Euronext’s three markets and the International Securities Exchange, owned by Deutsche Börse’s Eurex derivatives unit, with a market share approaching 40%. Chicago-based CBOE, which went public last year, had a market share of 26% in Wednesday trading. In CBOE’s fourth-quarter earnings call, CEO Bill Brodsky emphasised the value of CBOE’s proprietary products such as Vix volatility index options. CBOE reported a 3% drop in 4Q revenue to $117.4m, as the daily average volume of contracts traded declined 2% to 4.26m a day.

NY mayor backs NYSE, D Börse merger

Michael Bloomberg, mayor of New York, on Thursday welcomed the proposed merger of Deutsche Börse and NYSE Euronext, unveiled on Wednesday, calling the deal “very good for New York”, reports the FT. His endorsement came as the US and European bourses watched for US reaction to the dominance of the German group in the proposed tie-up. Separately, the FT reports that Robert Menendez, a US senator, called for “conditions” on any global exchange tie-up to address cybersecurity concerns,  citing recent hacking attacks against Nasdaq OMX. In an analysis, the FT examines the recent wave of exchange tie-ups and potential obstacles including anti-trust issues.

Skewed – the CBOE’s new fear indicator

The Chicago Board Options Exchange has just launched a new ‘fear factor’ index to sit alongside the now-famous Vix. Meet the Six, or the CBOE S&P 500 Skew Index.

The ‘SKEW’ is an option-based indicator that measures the perceived tail risk of the distribution of S&P 500 returns at a 30-day horizon. Basically it’s meant to measure what the equity options market thinks about the risk of a black swan event. Read more


A hat tip to Bloomberg for alerting us (again) to another request from the CBOE to the SEC.

Having recently asked for permission to list same-day options, the CBOE is now seeking to alter the terms under which credit default options (like credit default swaps but standardized, exchange-traded, and cleared by the OCC) can be traded. Read more

Same day options — no thanks

A tip of the stetson to Bloomberg for alerting us that the CBOE has formally asked the SEC for permission to list options with expiry dates of one to four days.

From the CBOE’s filing, here is how this will work (emphasis ours): Read more

A Vix curve ball

Things, it seems, are still looking a bit funny in the world of VIX futures.

Pragmatic Capitalism, for example, wondered on Thursday why it was that volatility futures were refusing to revert to the mean. It’s a point that has also been picked up by the Vix and More blog. Read more

Down with volatility, and down with volatility indices

The fear gauge. The chaos barometer. The weathercock of mild investor perturbation. Vix, Chicago’s almighty options volatility index, has been going down of late — having breached 17 on Wednesday, indicating that anxiety in equities is at its lowest since May 2008.

Except — maybe Vix doesn’t indicate anything useful at all. Read more

CME in talks with CBOE

CME Group, the world’s largest derivatives exchange, is in talks to take over the Chicago Board Options Exchange in a deal that would value the largest US options market at up to $5bn, according to Crain’s Chicago Business, reports Reuters. No formal bid is on the table, however, and further talks are on hold until after Wednesday. Bloomberg meanwhile reports that CBOE may have to resolve legal challenges to its ownership structure before being sold.

Mirror, mirror on the wall… where’s the market come this fall?

As Bloomberg noted on Monday, a significant number of options and futures traders are betting on some semblance of market disruption come September.

Among the tell-tale signs, the news agency noted VIX futures were above the level of the underlying index — suggesting investors expect fluctuations to widen and stocks to retreat. Specifically: Read more

CBOE to launch commodity volatility indices

The Chicago Board Options Exchange plans to launch a family of volatility indices for commodities, after the introduction this week of a volatility index for oil prices. The move will replicate its widely-followed “Wall Street fear gauge” – the S&P 500 Vix index. The new index, known as Oil Vix, measures the market’s expectation of the volatility of crude oil prices over the next 30-day period. It comes as oil prices suffer unprecedented swings, which has intraday ups and downs of more than $10, as traders react nervously to conflicting signals over demand and supply.

Chicago exchanges strike $1bn settlement

The Chicago Board Options Exchange, the US’s biggest options exchange, took a big step towards an initial public offering on Monday by striking a $1bn settlement to end a long-running legal dispute with members of the Chicago Board of Trade. Under the terms of the deal, the CBOT members will receive an 18% stake in the CBOE and a cash payment of $300m. Given that the CBOE is valued at about $4bn, the settlement is worth more than $1bn. CBOE members will vote on the settlement on June 11

CBOE edges closer to flotation

America’s biggest options exchange took a critical step closer to going public on Wednesday when the SEC ruled in its favour in a dispute with the world’s largest futures exchange. The SEC upheld a decision by the Chicago Board Options Exchange, one of the last big members-only exchanges, that would exclude former members of the Chicago Board of Trade – acquired by the Chicago Mercantile Exchange last year – from claiming a share of the CBOE once it demutualises. The wrangle has held up the CBOE’s plans to demutualise, which would pave the way for an IPO or for the exchange to be purchased. While a significant victory for the CBOE, the SEC’s ruling will not put the issue to rest. Attention now turns to Delaware, where former CBOT members – with the CME’s support – are suing the CBOE to have their trading rights converted into shares. Proceedings were halted in August, pending the SEC decision.

CME Group raises ante over rival’s ownership

The CME Group on Thursday intensified the battle over the future ownership of the rival Chicago Board Options Exchange by lifting a cap on its legal expenses and buying disputed purchase rights. The CBOE’s plans for an IPO that could value the group at more than $3bn have been effectively blocked by the simmering dispute with the CME, which argues that some members of the Chicago Board of Trade, which it purchased in July, are entitled to a payout from any sale or IPO of the options exchange through their control of so-called CBOE exercise rights.