Opening Bell 26.04.2016

Your world at 9am

world.2016-04-26

Equities

Major
DAX(DEU) -0.76%
CAC(FRA) -0.52%
UKX(GBR) -0.78%
NKY(JPN) -1.26%
SPX(USA) -0.18%
MINTs
JCI(IDN) -1.72%
INMEX(MEX) -0.22%
NGSEINDX(NGA) -0.34%
XU030(TUR) -0.99%
BRICS
IBOV(BRA) -1.98%
SHCOMP(CHN) +0.03%
NIFTY(IND) -0.56%
INDEXCF(RUS) -0.60%
TOP40(ZAF) +0.17%

Commodities

Energy
RBOB Gasoline +0.64%
Brent Crude Oil +0.65%
Heating Oil +0.72%
WTI Crude Oil +0.68%
Ethanol +0.00%
Natural Gas +0.34%
Metals
Platinum -0.37%
Copper +0.00%
Gold 100oz +0.07%
Palladium -0.36%
Silver 5000oz +0.00%

Currencies

USDEUR:+0.02%
USDJPY:-0.25%

MINTs
USDIDR(IDN) +0.14%
USDMXN(MEX) +0.01%
USDNGN(NGA) +0.00%
USDTRY(TUR) +0.04%
BRICS
USDBRL(BRA) -0.23%
USDCNY(CHN) +0.02%
USDINR(IND) +0.20%
USDRUB(RUS) +0.14%
USDZAR(ZAF) -0.09%
Agricultural
Cocoa +0.00%
Feeder Cattle +0.00%
Soybean Meal -0.98%
Wheat -0.53%
Coffee (Arabica) +0.00%
Coffee (Robusta) +0.00%
Lumber +0.00%
Orange Juice +0.00%
Soybeans -0.45%
White Sugar +0.00%
Cattle +0.00%
Corn -0.20%
Cotton +0.34%
Lean Hogs +0.00%
Sugar #11 +0.00%

Out of 42 world ETFs listed in NYSE that we track, 21 are trading above their 10-day SMA and 40 are trading above their 50-day SMA. Also, there were 13 sigma events over the last 24 hours. Details here.

Must reads

India needs more judges. (LiveMint)

India’s outsourcing firms like Infosys and Wipro are increasingly more open to making large upfront payments while bidding for large deals that offer assured revenues. (ET) WIPRO 554.35 0.00 (0.00%) INFY 1,208.10 0.00 (0.00%)

Goldman is opening its doors to the masses with the launch of GS Bank, an FDIC-insured, Internet-based savings bank. (TC, FT)

Bank of Japan’s exchange-traded fund purchases have made it a top 10 shareholder in about 90% of the Nikkei 225 Stock Average. And they are not done. (Bloomberg, FT)

T Rowe Price predicts that computers will become increasingly important in asset management, supplanting the industry’s traditional backbone of human stock pickers, economists and analysts. (FT)

Good luck!

Options Daily 26.04.2016

NIFTY Summary:

  1. May 7000 calls added 5,40,675 contracts.
  2. Apr 8100 calls shed 14,18,025.
  3. May 7000 puts added 3,20,250.
  4. May 6500 puts shed 5,250.

Our trend model indicates a LONG on the NIFTY and LONG on the BANKNIFTY.

APR NIFTY OI

APR NIFTY OI chart

APR BANKNIFTY OI

APR BANKNIFTY OI chart

MAY NIFTY OI

MAY NIFTY OI chart

MAY BANKNIFTY OI

MAY BANKNIFTY OI chart

APR NIFTY Volatility

APR NIFTY Volatility chart

APR BANKNIFTY Volatility

APR BANKNIFTY Volatility chart

MAY NIFTY Volatility

MAY NIFTY Volatility chart

MAY BANKNIFTY Volatility

MAY BANKNIFTY Volatility chart
Dotted lines indicated actual underlying volatility. Solid lines are IVs.

VIX Density Plot

VIX kernel density plot

5-day forecast based on ARMA(3,0)+GARCH(1,1) model:

VIX 16.63 16.66 16.70 16.74 16.78
σ 0.76 0.81 0.85 0.88 0.91

2016-04-25 Implied Volatility Record

https://www.youtube.com/watch?v=RRW_NHncYqk

Options Daily 25.04.2016

NIFTY Summary:

  1. May 8200 calls added 5,72,100 contracts.
  2. May 7500 calls shed 2,775.
  3. May 7900 puts added 1,74,600.
  4. Apr 7600 puts shed 8,02,350.

Our trend model indicates a LONG on the NIFTY and LONG on the BANKNIFTY.

APR NIFTY OI

APR NIFTY OI chart

APR BANKNIFTY OI

APR BANKNIFTY OI chart

MAY NIFTY OI

MAY NIFTY OI chart

MAY BANKNIFTY OI

MAY BANKNIFTY OI chart

APR NIFTY Volatility

APR NIFTY Volatility chart

APR BANKNIFTY Volatility

APR BANKNIFTY Volatility chart

MAY NIFTY Volatility

MAY NIFTY Volatility chart

MAY BANKNIFTY Volatility

MAY BANKNIFTY Volatility chart
Dotted lines indicated actual underlying volatility. Solid lines are IVs.

VIX Density Plot

VIX kernel density plot

5-day forecast based on ARMA(3,1)+GARCH(1,1) model:

VIX 16.49 16.56 16.63 16.70 16.77
σ 0.78 0.82 0.86 0.89 0.92

2016-04-22 Implied Volatility Record

https://www.youtube.com/watch?v=_M3DsvArvcM

Market-Cap Deciles, Part III

Part I, Part II of the series.

111% vs. 11%

A portfolio of ~150, equal-weight, small-cap stocks, rebalanced monthly, gave a return of 111% from 2015 through now.

decile.9.2016-04-24

While a similar portfolio of mega-cap stocks gave a return of 11% during the same time frame.

decile.0.2016-04-24

Variance

Returns from the small-cap portfolio are accompanied by larger volatility.

decile.distribution.9.2016-04-24

decile.distribution.0.2016-04-24

Accessibility

Is the alpha accessible? Given the meager volumes in the small-cap space, narrow circuit breakers and intra-day volatility of prices, small-cap alpha is hard to access. The impact cost of trading 150 small-cap stocks every month would be pretty high for large positions.

However, a portfolio with an exposure of Rs. 10,000 – Rs. 50,000 per stock is doable. So, theoretically, you can size the portfolio between Rs. 15,00,000 – Rs. 75,00,000 to access this alpha.

Appendix

Cumulative wealth charts for each decile (both cap- and equal-weighted): (a)

Box plots of cumulative returns of stocks in each decile: (b)

Options Weekly 24.04.2016

Summary: May NIFTY 8300 calls added 13,53,450 contracts while 7800 calls shed 48,975. On the Put side of the equation, the 7700 strike added 9,28,425 while the 7300’s shed 41,700.

APR NIFTY OI

APR NIFTY OI chart

APR BANKNIFTY OI

APR BANKNIFTY OI chart

MAY NIFTY OI

MAY NIFTY OI chart

MAY BANKNIFTY OI

MAY BANKNIFTY OI chart

APR NIFTY Volatility

APR NIFTY Volatility chart

APR BANKNIFTY Volatility

APR BANKNIFTY Volatility chart

MAY NIFTY Volatility

MAY NIFTY Volatility chart

MAY BANKNIFTY Volatility

MAY BANKNIFTY Volatility chart
Dotted lines indicated actual underlying volatility. Solid lines are IVs.

VIX Density Plot

VIX kernel density plot