Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>The <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> has been trading sideways between 35,000 and 40,000 for the past eleven weeks.</li>
<li>A short straddle allows investors who believe that the Nikkei 225 continues to trade sideways to earn a profit of up to 7% in six weeks.</li>
<li>This Insight presents the strategy rationale, profit and loss profile, back-testing and risk management measures. </li>
</ul>


The Nikkei 225 (NKY INDEX) has been trading sideways between 35,000 and 40,000 for the past eleven weeks.
A short straddle allows investors who believe that the Nikkei 225 continues to trade sideways to earn a profit of up to 7% in six weeks.
This Insight presents the strategy rationale, profit and loss profile, back-testing and risk management measures. 


EQD | Nikkei 225 Option Opportunity – Earn Premium in Sideways Markets with Straddles

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

Nomura Research Institute / Index Rebalance

<ul>
<li>
<a href="https://www.smartkarma.com/entities/nomura-research-institute-ltd" target="_blank" data-smartkarma-citation="entities:18129:1" rel="noopener">Nomura Research Institute (4307 JP)</a> and <a href="https://www.smartkarma.com/entities/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku (7453 JP)</a> will replace <a href="https://www.smartkarma.com/entities/nippon-paper-industries-co-l" target="_blank" data-smartkarma-citation="entities:557:1" rel="noopener">Nippon Paper Industries Co L (3863 JP)</a> and <a href="https://www.smartkarma.com/entities/dic-corp" target="_blank" data-smartkarma-citation="entities:7343:1" rel="noopener">Dic Corp (4631 JP)</a> in the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>'s CPAF will drop from 3 to 2.7 and there will be further selling in March 2025 as the CPAF drops to 2.4 (or possibly even 2.1!) </li>
<li>Passives will need to buy 7-15x ADV (13-14% of real float) in the adds and sell 2.7-6.5x ADV in the deletes. There is a big reverse funding trade too.</li>
</ul>



Nomura Research Institute (4307 JP) and Ryohin Keikaku (7453 JP) will replace Nippon Paper Industries Co L (3863 JP) and Dic Corp (4631 JP) in the Nikkei 225 (NKY INDEX). 

Fast Retailing (9983 JP)'s CPAF will drop from 3 to 2.7 and there will be further selling in March 2025 as the CPAF drops to 2.4 (or possibly even 2.1!) 
Passives will need to buy 7-15x ADV (13-14% of real float) in the adds and sell 2.7-6.5x ADV in the deletes. There is a big reverse funding trade too.


Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

Thematic (Sector/Industry)

<ul>
<li>Kokusai Elec and Micronics may see upside as CXMT's blockbuster IPO nears, with its retail tranche reportedly 212x oversubscribed.</li>
<li>TDK, Minebea Misumi and Nitto Denko may face pressure after Qualcomm's price hike points to lower sales of cheaper handsets across Asia.</li>
<li>Ibiden and TEL look unfairly sold on Friday and worth revisiting today.</li>
</ul>


Kokusai Elec and Micronics may see upside as CXMT's blockbuster IPO nears, with its retail tranche reportedly 212x oversubscribed.
TDK, Minebea Misumi and Nitto Denko may face pressure after Qualcomm's price hike points to lower sales of cheaper handsets across Asia.
Ibiden and TEL look unfairly sold on Friday and worth revisiting today.


Japan Morning Connection: Risk-On Mood May Return as Red Sea Tensions Ease

<ul>
<li>After a selloff yesterday, AI names are set to recover as NVDA's Kyber roadmap fears ease.</li>
<li>Likely we see a break for NEC Corp which has been trading better recently with flows moving out of SPE.</li>
<li>Interesting to see GS upgrade Nitto Boseki to buy on the expectation that the supply-demand balance for T-glass used in chip packaging will remain significantly tighter than previous assumptions.</li>
</ul>


After a selloff yesterday, AI names are set to recover as NVDA's Kyber roadmap fears ease.
Likely we see a break for NEC Corp which has been trading better recently with flows moving out of SPE.
Interesting to see GS upgrade Nitto Boseki to buy on the expectation that the supply-demand balance for T-glass used in chip packaging will remain significantly tighter than previous assumptions.


Japan Morning Connection: TDK Lags as Peers with More MLCC Exposure Capture AI-Driven Gains

<ul>
<li>Bernstein raises Softbank TP from Y8,200 to Y11,200 while ARM flirts with new ATHs. Softbank still well below MTD highs and lagging peers.</li>
<li>A potential positive for Nikon after AMAT signed a deal with EssilorLuxottica, which owns 19.6% of Nikon, for a partnership on intelligent optical systems</li>
<li>Lasertec +13.2% yesterday on ASML comments. May see further upside after further remarks were made overnight.</li>
</ul>


Bernstein raises Softbank TP from Y8,200 to Y11,200 while ARM flirts with new ATHs. Softbank still well below MTD highs and lagging peers.
A potential positive for Nikon after AMAT signed a deal with EssilorLuxottica, which owns 19.6% of Nikon, for a partnership on intelligent optical systems
Lasertec +13.2% yesterday on ASML comments. May see further upside after further remarks were made overnight.


Japan Morning Connection: Can Softbank Shake off Weakness as Analysts Hike Targets and ARM Eyes ATHs

Japan

TDK CORPORATION manufactures electronics components such as magnetic tapes and ferrite cores.  The Company also sells power supplies, inductors, transformers, ceramic capacitors, magnets, LAN (Local Area Network) components, sensors, and semiconductors.  TDK markets its products worldwide.

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TDK Corp (6762 JP)

EQD | Nikkei 225 Option Opportunity – Earn Premium in Sideways Markets with Straddles

Investors can earn a premium by using a short straddle strategy on the Nikkei 225, which has been trading sideways for the past eleven weeks.

Gaudenz Schneider

Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Nomura Research Institute and Ryohin Keikaku replace Nippon Paper and DIC in the Nikkei 225. Fast Retailing will be capped (and probably again in...

Brian Freitas

Japan Morning Connection: Risk-On Mood May Return as Red Sea Tensions Ease

Ibiden and TEL may be worth revisiting after Friday's overreaction, while memory SPE names Kokusai and Micronics could see support from CXMT's...

Andrew Jackson

Japan Morning Connection: TDK Lags as Peers with More MLCC Exposure Capture AI-Driven Gains

AI names set for a relief rally as NVDA roadmap fears ease. MLCC exposed plays Murata and Taiyo Yuden outperform TDK while it is weighed down by...

Andrew Jackson

Japan Morning Connection: Can Softbank Shake off Weakness as Analysts Hike Targets and ARM Eyes ATHs

Softbank lagging peers while ARM eyes new ATHs. Lasertec may build on yesterday's gains as ASML flags rising AI demand. Nikon worth watching on...

Andrew Jackson

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

EQD | Nikkei 225 Option Opportunity – Earn Premium in Sideways Markets with Straddles

​Investors can earn a premium by using a short straddle strategy on the Nikkei 225, which has been trading sideways for the past eleven weeks.

Gaudenz Schneider

Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Nomura Research Institute and Ryohin Keikaku replace Nippon Paper and DIC in the Nikkei 225. Fast Retailing will be capped (and probably again in...

Brian Freitas

Japan Morning Connection: Risk-On Mood May Return as Red Sea Tensions Ease

Ibiden and TEL may be worth revisiting after Friday's overreaction, while memory SPE names Kokusai and Micronics could see support from CXMT's...

Andrew Jackson

Japan Morning Connection: TDK Lags as Peers with More MLCC Exposure Capture AI-Driven Gains

AI names set for a relief rally as NVDA roadmap fears ease. MLCC exposed plays Murata and Taiyo Yuden outperform TDK while it is weighed down by...

Andrew Jackson

Japan Morning Connection: Can Softbank Shake off Weakness as Analysts Hike Targets and ARM Eyes ATHs

Softbank lagging peers while ARM eyes new ATHs. Lasertec may build on yesterday's gains as ASML flags rising AI demand. Nikon worth watching on...

Andrew Jackson

Investors can earn a premium by using a short straddle strategy on the Nikkei 225, which has been trading sideways for the past eleven weeks.