New Class Action Lawsuit Alleging Systemic Manipulation of Multi-Billion Dollar VIX Index Derivative Market Announced by Cohen Milstein
As controversy surrounding the CBOE Volatility Index (“VIX Index”) continues to grow, a new federal class action lawsuit filed late Friday alleges widespread manipulation of the VIX futures and options market, resulting in hundreds of millions of dollars in losses for investors across the country. The litigation, filed on behalf of investors damaged by this manipulation, is the first lawsuit concerning this market manipulation to allege violations of the Commodity Exchange Act, which prohibits market participants from improperly influencing the price of commodity futures. Furthermore, the named plaintiff and its counsel signaled their intention to issue a third-party subpoena to the Chicago Board Options Exchange, publisher of the VIX index and the only source of information for identifying the unnamed traders and transactions involved in the alleged market manipulation. The named plaintiff is being represented by Cafferty Clobes Meriwether & Sprengel LLP and Cohen Milstein Sellers & Toll PLLC.
VIX Dropping Below 15 Clears Way for a Big Trade in March Calls
Gregory Calderone – Bloomberg
The VIX options market saw activity surge Friday as the Cboe Volatility Index dropped to its lowest level since Feb. 1.
The latest move involved closing a portion of March $25 calls when about 121,000 contracts were bought for 25 cents per contract. Those same calls may have been sold Feb. 2 for 62 cents.
Hedge funds resume liquidating bullish oil positions
John Kemp – Reuters
Hedge funds have resumed liquidating their bullish long positions in crude oil and refined fuels amid more signs that the earlier rally in prices has fizzled out.
Hedge funds and other money managers cut their combined net long position in the six most important futures and options contracts linked to petroleum prices by 50 million barrels in the week to March 6.
VIX Trading – A Fraction Of Its Former Glory
Peter Tchir – Forbes
At their peak, XIV and SVXY, two inverse VIX exchange traded products, had a combined assets under management of over $3.5 billion.
XIV no longer exists and SVXY has total assets of $766 million. Since the leverage has been decreased by 50% from -1 times the daily percentage change in the VIX Short Term Futures Index to -0.5 times, that is really the equivalent of about $38 million of “old” SVXY.
Keep calm and carry on with policy normalization, BIS tells central banks
The recent volatility in global financial markets should not deter top central banks from lifting interest rates or ending years of unprecedented stimulus, the Bank for International Settlements said on Sunday.
How volatility products aggravated equity correction
Neil Dennis – Capital.com
Stock markets across the globe suffered a sharp sell-off in late January and early February. While it was assumed fears of the impact of rising inflation on the pace of US rate hikes was the trigger, the sell-off was exacerbated by exchange-traded products based on volatility measures, a new report finds
Money Flows Remain Robust into Stocks
Bob Lang – Cboe
As the seasonally strong March period is now in full gear for stocks, I cannot help but wonder whether the highly volatile period of February will continue. That is a big question, and has many on the sidelines wondering if the roller coaster ride may begin again. As we watch the action day by day, we have seen some very choppy price movement, which is typical after such a volatile run.
Weekend Review of VIX Options and Futures March 9th 2018
Russell Rhoads – Cboe
The 25% drop in VIX last week may seem extreme, but it isn’t even in the top 10 of weekly losses for VIX (it is 11th). The all-time record was the last week in June 2016 with a 42% week over week loss. Note the big drop in futures along with a return to contango.
Blogging Options: CBOE Morning Update 2.12.15
Russell Rhoads – Cboe
Stocks had a great week last week with the Russell 2000 (RUT) gaining over 4% and Russell 1000 (RUI) rising about 3.5%. For the year RUT is up 4.01% while RUI is up 4.16%. As you can see below small caps took the 2018 performance lead for a day last week. The magnitude of the gain of over 4% for RUT this week is becoming commonplace. Four of the nine weekly moves for RUT in 2018 have been outside of +/- 3% while there were no moves greater than +/-3% in 2017. Welcome to a higher volatility regime.
Exchanges and Clearing
Why Is CBOE Holdings (CBOE) Up 12% Since Its Last Earnings Report?
A month has gone by since the last earnings report for CBOE Holdings, Inc. CBOE . Shares have added about 12.% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is CBOE due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Another Exchange Jumps on Bitcoin Bandwagon
Alexander Osipovich – WSJ
A startup exchange active in the derivatives market is expanding into bitcoin, the latest sign that market operators remain excited about cryptocurrencies despite bitcoin’s recent price slump.
New York-based trueEX LLC on Monday announced plans to offer derivatives on bitcoin and other “digital assets.” That makes it at least the sixth U.S. trading venue to jump into cryptocurrency derivatives in recent months.
February FX Options in Retreat at CME Group
Aziz Abdel-Qader – Finance Magnates
CME Group (NASDAQ: CME) has just released its Options Monthly Review for the month ending February 28, 2018, which showed a downward trend in its FX volumes compared to a month ago, though it managed to post steady growth across the group’s other product lines.On an aggregated basis, CME’s ADV total option shot higher by 59 percent year-over-year, coming in at 6,121,401 per day.
R.J. O’Brien Limited Hires Elena Patimova as Senior Vice President, Business Development
R.J. O’Brien & Associates (RJO), the oldest and largest independent futures brokerage and clearing firm in the United States, announced that Elena Patimova today joined its London-based affiliate, R.J. O’Brien Limited (RJO Limited), as Senior Vice President, Business Development.
In that role, Patimova will help the firm further grow its electronic sales, clearing and voice execution business while also raising the profile of RJO in the Europe, Middle East and Africa (EMEA) region. Patimova reports to Adam Solomons, RJO Limited Chief Customer Officer, EMEA.
These Three Options Charts Point to More Gains for U.S. Stocks
Joanna Ossinger – Bloomberg
U.S. investors expect the snapback in equities to persist, according to signals from the options market.
Stock investors paid less to protect from a selloff last week after the S&P 500 Index surged 3.5 percent and entered the ninth year of the current bull market. The price of puts on the benchmark for American equities fell relative to the price of calls, Credit Suisse Group AG equity-derivatives strategist Mandy Xu wrote in a report Monday.
Gundlach Says Volatility `Genie’ May Not Be Back in Its Bottle
Joanna Ossinger – Yahoo Finance
The VIX may not be sending an all-clear sign for the markets, according to Jeffrey Gundlach.
Cantilever Of The VIX Curve And February 5th
The CBOE Volatility Index (the “VIX”) seeks to measure the market’s current expectation of 30-day volatility of the S&P 500 Index, as reflected by the prices of near-term S&P 500 options. Because S&P 500 options derive value from the possibility that the S&P 500 may experience movement before such options expire, the prices of near-term S&P 500 options are used to calculate the market’s view on the potential rate and magnitude of movements, or “implied volatility,” of the S&P 500. However, the options used to calculate the VIX are constantly in flux.
Big Positioning Changes In Silver And VIX Futures
Cocoa (NIB) is up nearly 30% since the extreme spec short CoT reading last fall. The chart below shows my favorite metric for commodity positioning. It takes the net (long – short) position for each trader category, scales it by the market’s open interest (total # of outstanding contracts), and normalizes that net position as a % of OI as a 5-year percentile. This way, I have a single indicator to compare the positioning between markets of totally different sizes.
?With Higher VIX, Covered Call Writing Appears Attractive Again
The S&P 500 suffered a correction from January 26-February 8 with no technical warning signs. The rapid decline, featuring two days with losses in the 4% range, brought MACD to its most oversold condition in two years and CBOE Volatility Index to its highest level since mid-2015. – Equities.com
The ostensible trigger was a rise in 10-year Treasury yields to 2.9%, the highest level since early 2014, along with news of a 2.9% rise in wages.
Happy Birthday: Bull Market Turns Nine, Albeit with Higher Volatility
Yasmina Chafai El Alaoui – The Market Mogul
The bull market turned nine years old on Friday and has more than quadrupled since March 2009, making this the second longest epic run on U.S. stocks. Moving forward, the outlook remains optimistic, with contained volatility, even after sliding into correction territory early this year.