US Stock Markets to shut down on Monday

[Victor 5]

I was wondering how will the shut down of US Stock Markets on Monday and possibly Tuesday affect our ability to trade options. We have a few positions in options on stocks of companies reporting on Monday after the bell.

[cwerdna 12]

Besides the above, I just got an alert on TOS saying that US equity and options markets will be closed Monday, Oct 29th.

Right now on http://www.cboe.com/...us/default.aspx it says:

Time System Status 22:57:17 CT CBOE

CBOE Holdings, Inc. (Nasdaq: CBOE) announced this evening that due to Hurricane Sandy, trading will be closed on Monday, October 29 for the Chicago Board Options Exchange (CBOE), CBOE Futures Exchange (CFE), C2 Options Exchange (C2) and CBOE Stock Exchange (CBSX).

If closures are determined for additional days, CBOE Holdings will make a further announcement.

Uh oh.... I do wonder what'll happen as I do have a few open positions that would've needed to be closed by EOD Monday and some by EOD Tuesday.

Edited October 29, 2012 by cwerdna

[srf335 14]

Definitely don't have a good feeling about this turn of events - have open positions in ADM, BIDU, MA and RL. Hope everyone on the eastern seaboard weathers this storm OK.

That said, looks like we're going to need some luck to not take a significant hit here.

[cwerdna 12]

Oddly enough, the notice that I quoted has gone away.

Right now at http://www.cboe.com/...us/default.aspx it says:

Oct 29, 2012 View Current Search Contact Information

System Status: Time System Status 01:58:06 CT CBOE

CBSX

CFE

COF

C2 Exchange

Pulse

CFLEX

FBW

BackOffice

SRO Systems are operating normally

However http://communities.cboe.com/t5/What-s-On-Our-Minds/CBOE-ANNOUNCES-EXCHANGE-CLOSURES-FOR-MONDAY-OCTOBER-29/ba-p/4141 still remains:

CBOE ANNOUNCES EXCHANGE CLOSURES FOR MONDAY, OCTOBER 29

by mkearney on 10-28-2012 10:47 PM

CBOE HOLDINGS ANNOUNCES EXCHANGE CLOSURES FOR MONDAY, OCTOBER 29

Chicago, IL – October 28, 2012 - CBOE Holdings, Inc. (Nasdaq: CBOE) announced this evening that due to Hurricane Sandy, trading will be closed on Monday, October 29 for the Chicago Board Options Exchange (CBOE), CBOE Futures Exchange (CFE), C2 Options Exchange (C2) and CBOE Stock Exchange (CBSX).

If closures are determined for additional days, CBOE Holdings will make a further announcement.

Marty Kearney

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Edited October 29, 2012 by cwerdna

[Marco 221]

Hope everyone on the East coast gets well though 'Sandy' but looks like there won't be any stock or option trading across all exchanges for Mon and possibly Tue. So I guess we'll be holding some names through earnings - which is not great really. Lets hope for some big moves.

[Kim 7,424]

BIDU definitely doesn't look good and BIDU options almost always overprice the move. Unless we are really luck, we are looking at a sizable loss here, especially considering those options expire on Friday. With ADM, we are still more than 2 weeks to expiration, and the history of post-earnings moves looks not bad, so we still might be okay with this one. But lets not speculate - there is nothing we can do at this point.

[Rogers 263]

Another good reason to mix in some +theta trades. I think the recent additions from Kim and Chris in this direction are great and help to balance the earnings trades..

[cwelsh 1,497]

Im VERY worried about the BIDU trade, it'll probably take a 30% (or more) loss, while the others that need to be closed will take a 15-20% it.

This means we just need to "hope" someone has a blowout earnings surprise (either way) to offset the potential loss in volatility. This brings back nightmares of the tornado situation I went through last summer. And while I have since developed a contingency plan for not being able to trade from DALLAS, I'm not sure its possible to develop a contingency plan for "can't trade from anywhere."

[Kim 7,424]

That's true Chris. But we need to remember that something like this happens maybe once in 10-15 years. And like you said, hopefully one of the companies will be able to offset the losses, at least partially. But I agree, we need to be prepared to take a BIG loss with BIDU. I fact, I would be probably happy with "only" 30% loss.

[coachcr 2]

Life's lessons ... another great example of why position sizing is so important. Hopefully, this one won't hurt so bad.

[cwelsh 1,497]

Who knows, maybe they'll report record losses and the stock will lose 40% of its value , but yes, position sizing is key

[smt1 2]

Markets closed tommorow as well.

[cwerdna 12]

On the front page of the CBOE, I noticed a link to this odd memo:

http://communities.c...tices/ba-p/4153

Updated OCC Information Memo Regarding Exercise Notices/Settlement Dates

by mkearney on 10-29-2012 04:20 PM

If you wish to exercise Equity (Stock) Options today, check with your broker - after reading the below info:

CBOE Regulatory Circular RG12-146

C2 Regulatory Circular RG12-049

RE: Processing on October 29, 2012 – Hurricane Sandy Update

The OCC has issued an updated information memo regarding OCC processing

timeframes, exercise notices/settlement dates, stock loan and prices for Monday, October 29,

2012, in light of the various market closures today. Please refer to OCC Information Memo #

31463, which is available on the OCC website at www.theocc.com.

Please take note that OCC will allow option exercises in the normal fashion on Monday,

October 29, 2012. Options exchanges may elect to restrict exercises of non-expiring, Americanstyle

index options pursuant to their rules. In that regard, CBOE has issued CBOE Regulatory

Circular RG12-144, which indicates that the exercise of non-expiring American-style, cash-settled

index options is prohibited pursuant to Rule 4.16( for Monday, October 29, 2012.

CBOE and C2 (and CBSX) will be closed for trading on Tuesday, October 30, 2012. Any

processing decisions for Tuesday, will be made at a later time.

* * * * *

For further information, please refer to CBOE Rule 4.16, CBOE Regulatory Circular

RG12-144, CBOE Information Circulars IC12-088 and IC12-089, and C2 Information Circulars

IC12-011 and IC12-012. Please also refer to OCC Information Memos # 31462 and 31463.

Marty Kearney

Of course, it looks like it was issued after the markets would've been closed on a regular day.

Could this have possibly helped on our SO plays, like BIDU where we're probably going to get screwed? I thought about it and didn't think so given that we don't own the underlying stock and on straddles, the strike prices are equal. Maybe it could've helped if BIDU jumped (in other markets) big time and we exercised the call (if we have enough buying power) then turned around and sold the stock and the put?

[cwelsh 1,497]

On the front page of the CBOE, I noticed a link to this odd memo:

http://communities.c...tices/ba-p/4153

Of course, it looks like it was issued after the markets would've been closed on a regular day.

Could this have possibly helped on our SO plays, like BIDU where we're probably going to get screwed? I thought about it and didn't think so given that we don't own the underlying stock and on straddles, the strike prices are equal. Maybe it could've helped if BIDU jumped (in other markets) big time and we exercised the call (if we have enough buying power) then turned around and sold the stock and the put?

You're assuming (a) that your broker and/or exchange allows exercise. I tried to exercise some commodity options yesterday and this morning, and was told the exchange was not permitting it and ( that on open tomorrow, BIDU (or anything else) matches the foreign markets.

If there had been a huge drop in the price, I would tend to agree with you and think that exercising the put may be a good idea, but I'm not sure we'd mirror an uptick. Even then though, you're gambling on a mirrored move two days in the future. I have NOT run the statistics though -- are we better off doing that, or holding? I don't know. I'm playing with an option calculator and BIDU right now to see if I can project things at all.

[cwelsh 1,497]

On a separate note, I finally got the reason why the markets were closed -- because it made NO SENSE TO ME, since they, post 9/11, have been set up to be able to run completely electronically from numerous locations around the country. There's supposed to be a system in place to prevent this exact thing from happening.

And the answer is -- specialists. Virtually all specialists, who are charged with maintaining orderly markets, are floor traders in NY. None of them would be in, and the SEC was hyper worried about a flash crash on a thinly traded stock without a specialist around to reign it in. The discussion I heard gave the example of MA -- a huge capped stock ($56B), but very thinly traded for its size (less than 750K shares a day). What if a some fund dumped 10% of their holdings of MA? Electronic trading projections showed the price could easily fall from $452 to around $50 in a matter of minutes. Without a specialist there to reign that in, who knows what chaos would ensue.

I'm not saying I buy that explanation, but it's the first I've seen that made sense.

And in other updates -- foreign markets have largely been mixed --- while I'm hoping for a huge market swing one way or the other tomorrow, I'm not holding my breath.

[Xfanman 9]

Some interesting comments on Options for this weeks events when the markets reopen-->

http://www.traderpla...market-reopens/

Edited October 30, 2012 by Xfanman

[Guest Corto]

The most interesting/amazing thing to me over the past two days is I am RELAXED! No trades to follow, much less blog activity on all sites, no election coverage, etc. I actually feel like I am on vacation! Not really looking forward to tomorrow other than it being Halloween!

Mike

[Guest listolyman]

On a separate note, I finally got the reason why the markets were closed -- because it made NO SENSE TO ME, since they, post 9/11, have been set up to be able to run completely electronically from numerous locations around the country. There's supposed to be a system in place to prevent this exact thing from happening.

And the answer is -- specialists. Virtually all specialists, who are charged with maintaining orderly markets, are floor traders in NY. None of them would be in, and the SEC was hyper worried about a flash crash on a thinly traded stock without a specialist around to reign it in. The discussion I heard gave the example of MA -- a huge capped stock ($56B), but very thinly traded for its size (less than 750K shares a day). What if a some fund dumped 10% of their holdings of MA? Electronic trading projections showed the price could easily fall from $452 to around $50 in a matter of minutes. Without a specialist there to reign that in, who knows what chaos would ensue.

I'm not saying I buy that explanation, but it's the first I've seen that made sense.

And in other updates -- foreign markets have largely been mixed --- while I'm hoping for a huge market swing one way or the other tomorrow, I'm not holding my breath.

i agree Chris. Post-9/11 was supposed to decentralize the exchange so that it would no longer be geographic dependent. There will probably be more changes after this 2 day shutdown. I heard that the problem is that the exchange running without specialists has never been "tested". Specialists do not have to be in NYC. My thoughts are that the ny unions have a stronghold on the exchanges and will not give up control easily. There needs to be a DR plan for the future. I know that Mastercard and Visa are never down due to a storm or power outage. When i was a data center manager for a fortune 500 company the business continuity plans were critical for the financial institutions to ensure zero downtime.

[tjlocke99 18]

On a separate note, I finally got the reason why the markets were closed -- because it made NO SENSE TO ME, since they, post 9/11, have been set up to be able to run completely electronically from numerous locations around the country. There's supposed to be a system in place to prevent this exact thing from happening.

And the answer is -- specialists. Virtually all specialists, who are charged with maintaining orderly markets, are floor traders in NY. None of them would be in, and the SEC was hyper worried about a flash crash on a thinly traded stock without a specialist around to reign it in. The discussion I heard gave the example of MA -- a huge capped stock ($56B), but very thinly traded for its size (less than 750K shares a day). What if a some fund dumped 10% of their holdings of MA? Electronic trading projections showed the price could easily fall from $452 to around $50 in a matter of minutes. Without a specialist there to reign that in, who knows what chaos would ensue.

I'm not saying I buy that explanation, but it's the first I've seen that made sense.

And in other updates -- foreign markets have largely been mixed --- while I'm hoping for a huge market swing one way or the other tomorrow, I'm not holding my breath.

You have to protect those few remaining very well paid specialist jobs! I highly doubt a machine algorithm could not replace them or as you point out the jobs could be geographically dispersed.

This stuff also still smells of providing some insider advantage, just like the fact institutions can trade options past 4 PM - doesn't that let them take advantage of the early after market activity?

[coachcr 2]

Kinda like insider trading being legal for congress .... but we would see jail time for such activity!