Derivs - Equity

Investors should look at buy-write strategies on undervalued China or Hong Kong financial stocks in a bid to benefit from a recent rally in HSCEI and HSI, according to strategists.

Insurance companies are increasingly considering the Russell 2000 as opposed to the S&P 500 when hedging the volatility of the underlying of variable annuities with options.

Nomura has made two key appointments to its Asia ex-Japan equity derivatives team in Hong Kong, hiring Laurent Poirot and Vincent Yam from Bank of America Merrill-Lynch.

Hedge funds are buying short-dated downside puts on Hong Kong indices and the Kospi 200 and selling upside calls to capture a premium created due to a mismatch in callable structured product flow, according to traders.

Option traders and hedge fund investors have been playing the steeper skew level on the Hang Seng China Enterprises Index, compared with the Hang Seng Index, since July, via short-dated listed options, put spreads, call spreads or butterfly combinations to capture skew movement.

The Hong Kong Securities and Futures Commission will require clearinghouses seeking recognition to submit a self-assessment detailing how they comply with the standards for financial market infrastructure set out by the Committee on Payment and Settlement Systems of the Bank for International Settlements and the International Organization of Securities Commissions.

Private banks in Asia have started buying 12-month autocallable structured products linked to a basket of U.S. equity, instead of simply playing the S&P 500 or Dow Jones indices, as investors become more confident with the U.S. economy.

South Korea’s plan to introduce a derivatives transaction tax in 2014 could hurt volumes and liquidity in the KOSPI 200 futures and options market, and will face stiff opposition from the market.

Investors should look at entering a three-month short call ratio spread on the Nikkei 225, selling a near-the-money call and buying 1.5x or 2.0x out-of-the-money call, in a bid to short the index’s upside skew.

Hong Kong structured product volumes could see an uptick prior to the Chinese government’s third plenary session to be held in October, which is expected to herald a number of major reforms to the nation’s economy.

Korea Investment Management listed South Korea’s first synthetic exchange-traded fund late last week on the Korea Exchange.

Equity markets have unofficially reached go-go status. There are a number of investors following the buy anything playbook and so far this year it is working. However, the option market is singing a very different tune.