Equity Derivatives and Volatility Specialist, Clifton Derivatives

John Ley

Equity Derivatives and Volatility Specialist

Clifton Derivatives

Independent derivative and volatility research firm focusing on events/catalysts, earnings, relative value and cross asset volatility strategies.

Equity Derivatives

Korea Stock Exchange KOSPI 200 / Equity Derivatives

<ul>
<li>Kospi’s rally has extended seven months and now shows signs of fatigue, trading with speculative assets and now sharply diverging.</li>
<li>Implied volatility is elevated, with short-term measures above the 90th percentile on multiple lookbacks.</li>
<li>We recommend an option trade and hedge given the current setup.</li>
</ul>


Kospi’s rally has extended seven months and now shows signs of fatigue, trading with speculative assets and now sharply diverging.
Implied volatility is elevated, with short-term measures above the 90th percentile on multiple lookbacks.
We recommend an option trade and hedge given the current setup.


Kospi: Rising Volatility and Early Warnings From a Seven-Month Surge

Quantitative Researcher, MRM Research

Nico Rosti

Quantitative Researcher

MRM Research

Quantitative Research

<ul>
<li>
<a href="https://www.smartkarma.com/profiles/sanghyun-park" target="_blank" data-smartkarma-citation="accounts:354" rel="noopener">Sanghyun Park</a> recently posted a comprehensive insight regarding South Korea's move toward forcing firms to cancel treasury shares. I invite you to read it if you haven't yet.</li>
<li>The <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200</a> index passive flows will probably be deeply impacted by this legal reform, we could see this happening soon, before the December KOSPI 200 reshuffle.</li>
<li>Since funds moves could start any time, here is a quantitative-model-based analysis of the most probable trends, with a short-term focus (next 3-4 weeks).</li>
</ul>



Sanghyun Park recently posted a comprehensive insight regarding South Korea's move toward forcing firms to cancel treasury shares. I invite you to read it if you haven't yet.
The KOSPI 200 index passive flows will probably be deeply impacted by this legal reform, we could see this happening soon, before the December KOSPI 200 reshuffle.
Since funds moves could start any time, here is a quantitative-model-based analysis of the most probable trends, with a short-term focus (next 3-4 weeks).


KOSPI 200 Tactical Outlook As Treasury Share Cancellations Impact Passive Flows

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

Event-Driven

Korea Stock Exchange KOSPI 200 / Event-Driven

<ul>
<li>Since short selling was banned in November 2023, short interest has plunged in Korea as shorts were covered. Markets have not done much over the last 16 months though. </li>
<li>Foreign investor holdings have dropped from 32.05% in July to 28.57%. The top 25 stocks bought by foreign investors outperformed the top 25 stocks sold by 128% in 16 months.</li>
<li>There will be trade opportunities across indices, pref/ords, index migrations and deletions, potential market upgrades and overvalued stocks being sold.</li>
</ul>


Since short selling was banned in November 2023, short interest has plunged in Korea as shorts were covered. Markets have not done much over the last 16 months though. 
Foreign investor holdings have dropped from 32.05% in July to 28.57%. The top 25 stocks bought by foreign investors outperformed the top 25 stocks sold by 128% in 16 months.
There will be trade opportunities across indices, pref/ords, index migrations and deletions, potential market upgrades and overvalued stocks being sold.


Korea: Short Selling Is Back in March; Trade Ideas

<ul>
<li>Current gains echo past moves that required lengthy consolidation, suggesting risk management is prudent.</li>
<li>Volatility trends remain middling, but skew steepness points to cost-effective downside structures.</li>
<li>Rally momentum slows as Kospi reaches levels where past reversals have occurred versus SPX.</li>
</ul>


Current gains echo past moves that required lengthy consolidation, suggesting risk management is prudent.
Volatility trends remain middling, but skew steepness points to cost-effective downside structures.
Rally momentum slows as Kospi reaches levels where past reversals have occurred versus SPX.


<ul>
<li>The <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200 INDEX</a> reached a new all time high last Friday, closing at 462.74. Let's be clear: it's very overbought according to our  model. </li>
<li>Our forecast is that the index will NOT rally for more than another 1 or 2 weeks (i.e. this week and maybe one more week).</li>
<li>
449-442 is the price support zone with 50%-75% probability of reversal, if it was hit this week (this data will be updated if the index closes up this week).</li>
</ul>


The KOSPI 200 INDEX reached a new all time high last Friday, closing at 462.74. Let's be clear: it's very overbought according to our  model. 
Our forecast is that the index will NOT rally for more than another 1 or 2 weeks (i.e. this week and maybe one more week).

449-442 is the price support zone with 50%-75% probability of reversal, if it was hit this week (this data will be updated if the index closes up this week).


KOSPI 200 Tactical Call: Positioning for September Pullback

South Korea

The KOSPI 200 Index is a capitalization-weighted index of 200 Korean stocks which make up 93% of the total market value of the Korea Stock Exchange. The index was developed with a base value of 100 as of January 3, 1990.

Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY)

Kospi: Rising Volatility and Early Warnings From a Seven-Month Surge

Kospi’s seven-month rally is showing strain, with volatility rising and speculative behavior resembling patterns seen near prior peaks. A trade and...

John Ley

Korea: Short Selling Is Back in March; Trade Ideas

Short selling in Korea commences from Monday. There will be a lot of interest in shorting stocks/sectors depending on how they have performed since...

Brian Freitas

Kospi 200: Rally Echoes Pandemic Rebound

Prudent risk management is advised as current gains mirror past moves with lengthy consolidation, while volatility trends suggest cost-effective...

John Ley

KOSPI 200 Tactical Call: Positioning for September Pullback

The KOSPI 200 INDEX hits new all-time highs but it is very overbought: we predict a limited rally for 1-2 more weeks, or alternatively a pullback...

Nico Rosti

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Kospi: Rising Volatility and Early Warnings From a Seven-Month Surge

Kospi’s seven-month rally is showing strain, with volatility rising and speculative behavior resembling patterns seen near prior peaks. A trade and...

John Ley

KOSPI 200 Tactical Outlook As Treasury Share Cancellations Impact Passive Flows

​South Korea's move to cancel treasury shares may impact KOSPI 200 index passive flows, with potential changes before the December reshuffle....

Nico Rosti

Korea: Short Selling Is Back in March; Trade Ideas

Short selling in Korea commences from Monday. There will be a lot of interest in shorting stocks/sectors depending on how they have performed since...

Brian Freitas

Kospi 200: Rally Echoes Pandemic Rebound

​Prudent risk management is advised as current gains mirror past moves with lengthy consolidation, while volatility trends suggest cost-effective...

John Ley

KOSPI 200 Tactical Call: Positioning for September Pullback

​The KOSPI 200 INDEX hits new all-time highs but it is very overbought: we predict a limited rally for 1-2 more weeks, or alternatively a pullback...

Nico Rosti

South Korea's move to cancel treasury shares may impact KOSPI 200 index passive flows, with potential changes before the December reshuffle....

Prudent risk management is advised as current gains mirror past moves with lengthy consolidation, while volatility trends suggest cost-effective...

The KOSPI 200 INDEX hits new all-time highs but it is very overbought: we predict a limited rally for 1-2 more weeks, or alternatively a pullback...