Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>Global equity markets have experienced falling prices and increasing volatility over the past week. Some markets were affected more than others.</li>
<li>Hedging opportunities in the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a>, the <a href="https://www.smartkarma.com/entities/ftse-100-index-ukx" target="_blank" data-smartkarma-citation="entities:22904:1" rel="noopener">FTSE 100 Index (UKX INDEX)</a>, or the Swiss Market Index; all with sub-13% implied volatility.</li>
<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> experienced some of the largest market and volatility moves in international comparison, with more turbulence likely ahead following the Japanese elections.</li>
</ul>


Global equity markets have experienced falling prices and increasing volatility over the past week. Some markets were affected more than others.
Hedging opportunities in the S&amp;P/ASX 200 (AS51 INDEX), the FTSE 100 Index (UKX INDEX), or the Swiss Market Index; all with sub-13% implied volatility.
The Nikkei 225 (NKY INDEX) experienced some of the largest market and volatility moves in international comparison, with more turbulence likely ahead following the Japanese elections.


EQD | Global Option Implied Volatility - Nikkei 225, Nifty 50, S&P/ASX 200, S&P 500, SMI, FTSE 100

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

<ul>
<li>There could be two or three Aussie names that are deleted from global passive portfolios in November. In each of the cases, there is a lot to sell from passives.</li>
<li>One name is very high probability while the deletion of the others depends on the day of the week chosen.</li>
<li>Shorts have been built up on the stocks and there are strong indications of positioning. But the extent of the positioning varies, and the stocks could have differently.</li>
</ul>


There could be two or three Aussie names that are deleted from global passive portfolios in November. In each of the cases, there is a lot to sell from passives.
One name is very high probability while the deletion of the others depends on the day of the week chosen.
Shorts have been built up on the stocks and there are strong indications of positioning. But the extent of the positioning varies, and the stocks could have differently.


Australia: Potential Passive Selling in November Will Be Big

Quantitative Researcher, MRM Research

Nico Rosti

Quantitative Researcher

MRM Research

Quantitative Research

<ul>
<li>This week the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 INDEX</a> entered WEEKLY OVERBOUGHT status intra-week, peaking at 8384.50, then pulling back to 8283.20 at Close.</li>
<li>In this insight we will examine resistance levels the index will have a hard time to clear, without pulling back first at least 1 week.</li>
<li>According to our quantitative models, a pullback is highly likely to happen this week, or the next.</li>
</ul>


This week the S&amp;P/ASX 200 INDEX entered WEEKLY OVERBOUGHT status intra-week, peaking at 8384.50, then pulling back to 8283.20 at Close.
In this insight we will examine resistance levels the index will have a hard time to clear, without pulling back first at least 1 week.
According to our quantitative models, a pullback is highly likely to happen this week, or the next.


EQD | Upcoming ASX200 Pullback in 1-2 Weeks

Index Rebalance

<ul>
<li>With three quarters of the review period complete, there could be one change for the S&amp;P/ASX 50 Index and two changes for the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> in December. </li>
<li>There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.</li>
<li>Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.</li>
</ul>


With three quarters of the review period complete, there could be one change for the S&amp;P/ASX 50 Index and two changes for the S&amp;P/ASX 200 (AS51 INDEX) in December. 
There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.
Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.


S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up

<ul>
<li>Late last evening, <a href="https://www.smartkarma.com/entities/rio-tinto-ltd" target="_blank" data-smartkarma-citation="entities:13:1" rel="noopener">Rio Tinto Ltd (RIO AU)</a> and <a href="https://www.smartkarma.com/entities/arcadium-lithium-plc" target="_blank" data-smartkarma-citation="entities:40438:1" rel="noopener">Arcadium Lithium (LTM AU)</a> announced a definitive agreement where Rio will acquire Arcadium for US$5.85/share in cash.</li>
<li>
<a href="https://www.smartkarma.com/entities/arcadium-lithium-plc-2f9bfa3a-65a7-41f9-a157-e59603846420" target="_blank" data-smartkarma-citation="entities:40439:1" rel="noopener">Arcadium Lithium (ALTM US)</a> closed nearly 31% higher at US$5.55/share and <a href="https://www.smartkarma.com/entities/arcadium-lithium-plc" target="_blank" data-smartkarma-citation="entities:40438:1" rel="noopener">Arcadium Lithium (LTM AU)</a> should follow when the stock opens.</li>
<li>
<a href="https://www.smartkarma.com/entities/arcadium-lithium-plc" target="_blank" data-smartkarma-citation="entities:40438:1" rel="noopener">Arcadium Lithium (LTM AU)</a> could move around 40% higher today to catch up with <a href="https://www.smartkarma.com/entities/arcadium-lithium-plc-2f9bfa3a-65a7-41f9-a157-e59603846420" target="_blank" data-smartkarma-citation="entities:40439:1" rel="noopener">Arcadium Lithium (ALTM US)</a> - that would still leave a 5.4% spread to the offer price.</li>
</ul>


Late last evening, Rio Tinto Ltd (RIO AU) and Arcadium Lithium (LTM AU) announced a definitive agreement where Rio will acquire Arcadium for US$5.85/share in cash.

Arcadium Lithium (ALTM US) closed nearly 31% higher at US$5.55/share and Arcadium Lithium (LTM AU) should follow when the stock opens.

Arcadium Lithium (LTM AU) could move around 40% higher today to catch up with Arcadium Lithium (ALTM US) - that would still leave a 5.4% spread to the offer price.


Rio Tinto Goes All-In for Arcadium Lithium

Australia

The S&P/ASX 200 measures the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalization. Representative liquid and tradable, it is widely considered Australia's preeminent benchmark index. The index is float-adjusted. The index was launched in April 2000.

S&P/ASX 200 (AS51 INDEX)

EQD | Global Option Implied Volatility - Nikkei 225, Nifty 50, S&P/ASX 200, S&P 500, SMI, FTSE 100

Global equity markets have seen falling prices and rising volatility. Hedging opportunities exist in the FTSE 100, SMI, and S&P/ASX 200. The...

Gaudenz Schneider

Australia: Potential Passive Selling in November Will Be Big

There could be 2 or 3 stocks that are deleted from global passive portfolios in Nov. In each of the cases, there is a lot to sell from passives....

Brian Freitas

EQD | Upcoming ASX200 Pullback in 1-2 Weeks

The ASX 200 INDEX has entered WEEKLY-overbought status, it is going to pull back in the next 1-2 weeks, but the overall trend appears healthy....

Nico Rosti

S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up

There could be 1 change for the ASX50 and 2 changes for the ASX200 in Dec. Couple of ASX deletes could also be deleted from a global index in...

Brian Freitas

Rio Tinto Goes All-In for Arcadium Lithium

Rio Tinto and Arcadium Lithium have announced a definitive agreement where Rio will acquire Arcadium for US$5.85/share in cash. There were a lot of...

Brian Freitas

EQD | Global Option Implied Volatility - Nikkei 225, Nifty 50, S&P/ASX 200, S&P 500, SMI, FTSE 100

​Global equity markets have seen falling prices and rising volatility. Hedging opportunities exist in the FTSE 100, SMI, and S&P/ASX 200. The...

Gaudenz Schneider

Australia: Potential Passive Selling in November Will Be Big

There could be 2 or 3 stocks that are deleted from global passive portfolios in Nov. In each of the cases, there is a lot to sell from passives....

Brian Freitas

EQD | Upcoming ASX200 Pullback in 1-2 Weeks

​The ASX 200 INDEX has entered WEEKLY-overbought status, it is going to pull back in the next 1-2 weeks, but the overall trend appears healthy....

Nico Rosti

S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up

There could be 1 change for the ASX50 and 2 changes for the ASX200 in Dec. Couple of ASX deletes could also be deleted from a global index in...

Brian Freitas

Rio Tinto Goes All-In for Arcadium Lithium

Rio Tinto and Arcadium Lithium have announced a definitive agreement where Rio will acquire Arcadium for US$5.85/share in cash. There were a lot of...

Brian Freitas

Global equity markets have seen falling prices and rising volatility. Hedging opportunities exist in the FTSE 100, SMI, and S&P/ASX 200. The...

The ASX 200 INDEX has entered WEEKLY-overbought status, it is going to pull back in the next 1-2 weeks, but the overall trend appears healthy....