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IB Traders' Insight

Global market commentary from IBG traders and market participants.

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2015-04-01 00:10:04

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor

Technical Analysis

GBPUSD Nearing Downchannel Resistance on Daily Chart

Although the GBPUSD remains firmly in a downchannel (in the weekly chart), it continues to make bottoming attempts.  On the daily and 4hr charts, GBPUSD appears on the cusp of testing downchannel resistance (at roughly 1.49).  The GBPUSD is also trying to form a higher low versus the mid March low (as seen in the daily chart).  Weekly, daily and 4hr RSI, Stochastics and MACD are mostly bottoming or rallying.

 

GBPUSD Weekly/Daily/4hr/Hourly

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-04-01 00:10:02

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor

Technical Analysis

Cotton (CT) Rejected at Downchannel Resistance on Weekly Chart

CT spiked up yesterday, only to reverse most of its gains by today's Asian session.  On the weekly chart, CT tested downchannel resistance on yesterday's spike, and is currently forming a weekly Doji.  Weekly, daily and 4hr RSI, Stochastics and MACD are mostly consolidating as CT catches a breather before trying to resume upside.

Cotton (ICE CT May15) Weekly/Daily/4hr/Hourly

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-04-01 00:09:59 

Technical Analysis

Soybean (ZS) Reverses Initial Spike Down Post USDA Figures

ZS experienced a wild session yesterday on the back of the USDA figures, with initial sharp downside followed by a strong rebound.  ZS has broken above a former upchannel support (on the 4hr chart), and formed a double bottom yesterday versus the mid March low (on the daily chart).  It's still a bit premature to call a higher March low versus the low last October (on the weekly chart), but for now, the same chart's triangle/wedge support is holding.  Weekly, daily and 4hr RSI, Stochastics and MACD are at various stages of rallying or forming bottoms.

 

Soybean (CME ZS May15) Weekly/Daily/4hr/Hourly

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice

2015-03-31 16:59:19

Posted by
Andrew Wilkinson
Chief Market Analyst
Interactive Brokers
Contributor

Stocks

Taking the rough with the smooth

Courtesy of a late afternoon acceleration for stock prices, the Dow industrials average closed the day down by 200-points.  But that also meant that the venerable average closed down for the first quarter of 2015, which it also did in the same quarter last year. Is this the start of something bigger, such as a bull market correction? This is only the sixth quarterly decline since the stock market finally touched down in March 2009. The Dow is higher by 10,168 points since the end of the first quarter of 2009 or 133%. The average rebound following a quarterly loss (including Q1 2009) is 8.5%. As former NYC mayor, Rudy Giuliani once said, you can’t make an omelet without breaking eggshells. At least the first quarter omelet wasn’t that messy. The Dow transports average index fared less well, suffering a net 4.4% loss for the first quarter. The average rebound in the case of transport stocks is 13.7%, although unlike the industrials, the transports average suffered back-to-back quarterly losses in the second and third periods of 2012.

Chart – Dow lower for the quarter

2015-03-31 16:46:49

Posted by
Montreal Exchange

Contributor

Options

Are Canadian banks a bargain?

With the G-7's lowest net debt to GDP ratio and the world's most stable and secure banking system, investing in Canada makes sense. In fact, Canadian banks have been ranked the soundest for seven straight years according to the World Economic Forum in Geneva, outperforming their US counterparts. With less competition and fewer regulatory restrictions, the Canadian "Big 6" banks have been trading relatively cheaply, compared to the 12 largest US firms, offering greater dividends and higher profitability. These banks, led by Royal Bank (Ticker: RY), Toronto-Dominion (Ticker: TD) and Bank of Montreal (Ticker: BMO) are also leveraging their expansion in the US. Royal Bank exceeded $1 trillion in assets last quarter, boasting the biggest wealth-management platform and largest capital markets division, according to BNN News. Even though all six banks had a rough start this year, with concerns over depressed oil prices and decreased consumer borrowing, that all changed in February with a strong rebound in the sector, posting better than-expected quarterly earnings. 

If an investor, for example, was neutral to bullish on the Canadian banks, and wanted to benefit from an increase in the underlying security, he might look at buying calls. Buying calls on an individual bank, or the sector such as the iShares S&P/TSX Capped Financials Index ETF (Ticker: XFN) or BMO S&P/TSX Equal Weight Banks Index ETF (Ticker: ZEB) is popular to potentially realize a profitable return, while risking only the price of the premium. Investors can purchase calls at a fraction of the price of the stock; so, one major appeal is leveraging your investment and realizing a higher percentage return than the equivalent stock position. If an investor wants to preserve unrealized profits, a collar, on the other hand, is a protective spread strategy used to lock in gains on a stock position. The cost of buying a protective put is offset by the premium received on selling a call; in most cases, the call and put are out-of-the-money. The investor may limit additional upside gains, but achieves the goal of significantly limiting risk.

 

This article is from Montréal Exchange and is being posted with Montréal Exchange's permission. The views expressed in this article are solely those of the author and/or Montréal Exchange and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-03-31 13:32:12

Posted by
Neil Azous
Founder & Managing Member
Rareview Macro LLC
Contributor

Macro

Closing Arguments - Q1 Consensus

The rearview mirror consensus views to end the quarter are as follows:

In local currency terms, European and Japanese equity markets are outperforming. The bear market in crude oil, weaker currencies, and monetary policy easing programs, each in their own right and even more powerfully in unison, are supporting growth and reinforcing the trend of lower inflation and bond yields. Add in the upturn in the Eurozone credit cycle and an improvement in the corporate sector in Japan led by wage growth or the prospects of third arrow of Abenomics beginning and it is easier to understand why these markets are doing well.

The internals of the US equity market continue to deteriorate and while the S&P 500 index option skew suggests there is greater upside than downside, investors will remain patient in adding length until the corporate reporting season in mid-April vindicates the concerns over the forward earnings profile and the impact of the US dollar strength. The S&P 500 is roughly flat on the year, lower on the month of March, and lower than the day of the FOMC meeting that suggested yields will be lower for longer; that in-and-of-itself tells you investors are focused elsewhere and truly taking a wait and see approach on the US. Put another way, professionals are investing in QE beneficiaries and reducing their US exposure to pay for it.

Despite the high degree of negative sentiment the fact is that emerging markets, at the asset class level, continue to trade range bound. There is no question that the concerns over emerging markets, both at the sovereign and corporate level, have risen in recent months due to the amount of large loan/credit balances outstanding and the foreign exchange risk associated with US dollar funding. However, at this point, to argue that the risks are not widely understood is now misguided. Everyone knows what they are. In fact, the exercise of March has been to argue that while risk is prevalent the concerns are overstated. We are not saying this is either wrong or right, and that some specific countries are not at real risk, but on aggregate it is one reason why the asset class as a whole is trading range bound.

 

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

 

This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

2015-03-31 13:17:50

Posted by
John Carter
President
Simpler Stocks
Contributor

Stocks

Simpler Stocks: Monday Movers

A strong way to start the week, with US stocks surging more than 1% on Monday. Big gains were seen across energy and financials, with pending home sales and personal income data quick to cheer investors.  And of course, merger Monday lived up to its name, with lots of deals announced before the open, particularly in the health care sector.

UnitedHealth Group Inc. (Ticker: UNH)

The health insurer is buying pharmacy benefits manager Catamaran (Ticker: CTRX) for nearly $13 billion.  The all-cash deal will immediately boost earnings. That cheered investors a bit, as they sent UNH shares up 2% intraday. Beta is still below 1x, with sales growth estimates likely to pick up beyond the 7% level now projected by consensus through 2016.

Intel Corp. (Ticker: INTC)

No confirmation yet this week that INTC has inked a deal to buy specialty semiconductor company, Altera (Ticker: ALTR). Altera already has some chip design/production deals with INTC, so a deal should be relatively smooth post-closing should one occur. The current yield is about 3%, with free cash flow yield of $9 billion or 6% on today’s price. 

Zillow Group, Inc. (Ticker: Z)  

A Benchmark note last week said that fears over Realtor.com’s ability to take away Trulia listings are “overblown” resulting in Z’s stock being undervalued.  Most MLS brokerages are working with Z, the sell-side analyst noted, and sales growth warrants a higher target price. The analyst kept his buy rating and $155 target.

Lululemon Athletica, Inc. (Ticker: LULU)

Nomura was recently positive on Lululemon, citing the growing women’s active wear apparel trend internationally. The “productivity gap” between the US and Canadian operations should also narrow, the firm writes. And LULU also enjoys brand loyalty. Nomura continues with its buy rating and $70 target on the stock.

First Solar, Inc. (Ticker: FSLR)

Moving downstream and beyond the yieldco, FSLR has made recent moves into power plant management. The initial push has 40 megawatts of power production under management. The EV/EBITDA is 6x, with shares comfortably above both moving averages. The sales growth is also estimated to accelerate through 2016 to 18%. Earnings estimates have the bottom line growing by 21% to $3.63 a share, yet the multiple is under 17x.

HomeAway Inc. (Ticker: AWAY)

Oppenheimer initiated last week on HomeAway with a buy rating and a $37 price target. The analyst noted a “secular shift” ongoing in the online travel industry, with growth in global GDP helping fundamentals (travel is linked to that growth). Shares are trading just below the 50-day moving average, so any push above that level may give support. 

 

About the author: John Carter has been a full time trader for 15 years, serving over 100,000 subscribers in over 100 countries.  For more analysis on high growth stocks visit www.SimplerStocks.com.

 

This article is from Simpler Stocks and is being posted with Simpler Stocks’ permission. The views expressed in this article are solely those of the author and/or Simpler Stocks and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-03-31 12:37:52

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor

Technical Analysis

Waverly Advisors Afternoon Update

Largest Rel Volume: Stocks with the largest multiple of their 20 day average volume. Note that the “average” value for this number will change as the trading day progresses, but the relative position of a stock within this list should show some persistence. These are likely stocks in the news, or stocks experiencing a sharp flow of new information.

Largest Rel Ranges: First, we express each stock’s daily range as a % of the 20 day average range, and then choose the 10 with the largest values of that measure. These are the stocks with the largest daily ranges, relative to their own typical daily ranges.

Gap Analysis shows stocks with open gaps (today’s high < yesterday’s low or today’s low > yesterday’s high) remaining.

Stocks with Open Gaps (for the Day): ASHR, AZN, BBL, BCE, BHP, BP, BUD, CBG, CCJ, DB, EMR, EWG, GENE(F), GOLD, GSK, HPQ, HSBC, INFY, KLAC, KSU, LM, NVS, PCP, RDS.A, RDS.B, RIO, SNE, SNY, STO, SYY, TOT, TSM, UL, UN, VOD, WDC

 

For more information about Waverly Advisors please click here.

2015-03-31 11:36:19

Posted by
Russ Koesterich, CFA
Managing Director
Global Chief Investment Strategist
BlackRock
Contributor

Stocks

Beware Momentum Stocks in Sheep's Clothing

Weekly Commentary Overview

  • Stocks lost ground last week, despite some positive news: The announcement of the largest merger of the year between Heinz and Kraft and more evidence of economic improvement in Europe. Nonetheless, most global benchmarks were down between 1% and 2%.
  • Investors continue to wrestle with disappointing  U.S. economic numbers—last week it was a weak durable goods report—and soft company earnings.
  • Not surprisingly, as stocks corrected, volatility spiked. While volatility remains below the long-term average, it is on the rise from last summer’s historically low levels.
  • Financial market volatility has been on the rise due to slower economic growth, disappointing earnings and anticipation of an eventual rate hike by the Federal Reserve. Meanwhile, there may be a potentially bigger risk lurking that investors seem to be dismissing for the time being: Greece.
  • The recent sell-off and pickup in volatility serve as a useful reminder of the risks lurking in some areas of the market. This was particularly true among the so-called momentum stocks, like biotech—as well as some sectors, like utilities, that have been acting that way.

Stocks Struggle as U.S. Economy Continues to Disappoint

Stocks lost ground last week, despite some positive news: The announcement of the largest merger of the year between Heinz and Kraft and more evidence of economic improvement in Europe. Nonetheless, most global benchmarks were down between 1% and 2%.

In the U.S., the S&P 500 Index fell 2.23% to 2,061, the Dow Jones Industrial Average dropped 2.29% to 17,712, and the Nasdaq Composite Index lost 2.69% to close the week at 5,026. More signs of investor skittishness: For the week ended March 25, investors withdrew $11 billion from equity funds. As for bonds, the yield on the 10-year Treasury rose slightly from 1.93% to 1.96% as its price correspondingly fell.

Investors continue to wrestle with disappointing U.S. economic numbers—last week it was a weak durable goods report—and soft company earnings. But while the losses were across the board last week, the recent sell-off and pickup in volatility serve as a useful reminder of the risks lurking in some areas of the market. This was particularly true among the so-called momentum stocks—as well as some that have been acting that way.

Hello Again, Volatility

Not surprisingly, as stocks corrected, volatility spiked. While volatility remains below the long-term average, it is on the rise from last summer’s historically low levels. Last week the VIX Index, a common measure of stock market volatility, traded as high as 17, which was 35% above the week’s low. We see a similar phenomenon in bond markets, where volatility has pulled back somewhat from the February high, but is up around 65% from last summer’s lows, as measured by the MOVE Index.

Financial market volatility has been on the rise due to somewhat mundane issues: slower economic growth, disappointing earnings and anticipation of an eventual rate hike by the Federal Reserve (Fed). Meanwhile, there may be a potentially bigger risk lurking that investors seem to be dismissing for the time being: Greece.

Last week, investors looked past Greece’s unresolved issues and bid up Greek bonds. However, time is running out for the country, which faces a serious cash crunch as early as April 9 when it is scheduled to make a 400 million euro payment to the International Monetary Fund. It is still not clear where the money to make the payment might come from.



In order to unlock previously agreed upon loans from the European Union, Greece must submit a comprehensive proposal of economic and structural reforms, which it has yet to do. Even if the government does manage to submit an acceptable set of reforms, it is not clear that the governing coalition will be able to hold together and get the reforms passed by the Greek parliament.

In short, Greece could be facing a serious crisis. Yet there is little evidence that investors are overly concerned about the potential ramifications: that Greece might exit the eurozone or the risks spread to peripheral countries. While a Greek exit is still not our base case scenario—another last minute compromise is the most likely outcome—the risks are rising. With volatility still below average, there is a lot of room for it to rise should there be an actual catalyst.

Caution on Momentum Stocks of All Shapes and Sizes

Greece aside, the rise in volatility represents a relatively normal adjustment. And while an uptick in volatility doesn’t herald an end to the bull market, it does imply that investors may want to revisit their investment positioning.

Last week was illustrative. The rise in volatility had a predictable impact: Stocks that are most expensive and have been driven by momentum were the hardest hit. One case in point is biotech. Through the close of the week ended March 20, the Nasdaq Biotech Index had surged 20% year-to-date. Last week, despite the relatively modest pullback in stocks, the Nasdaq Biotech Index fell roughly 5%.

Biotech is an obvious example of the momentum trade. It is a high “beta” or risky industry that has been a strong relative performer for many years. But there are also less obvious momentum names. As we have pointed out in recent weeks, yield plays were some of the best-performing stocks last year. While investors don’t typically think of these as “momentum” names, their relative valuations are stretched and, like biotech, they have benefited from a steady stream of money into the space. These stocks—utilities, for example—warrant caution as well.
 

 

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-03-31 11:28:00

Posted by
Barron's

Contributor

Options

Options Trading Bullish on Banks

How and why institutional investors are betting that the financial sector will turn around by year end.

 

Institutional investors that own major financial stocks are trading January options in anticipation that year-to-date weakness will turn into strength by year’s end.

With Morgan Stanley (ticker: MS) at $35.62, investors are selling January $32 puts. With Goldman Sachs (GS) at $186.78, top positions are January $205 calls, January $210 calls, and January $150 puts. Investors seem to be buying Goldman’s January upside calls and selling puts. With Bank of America (BAC) stock at $15.42, investors are buying January $17 calls. And positions in Citigroup (C), at $51, include the January $55, $60, and $65 calls.

The selection of contracts that expire in January represents a significant change in the sector’s usual trading tempo. In the past, investors primarily traded short-dated options to speculate on near-term stock events, such as quarterly earnings or Federal Reserve stress tests that would determine if banks could increase dividends and stock buyback plans. Options that matured over several quarters were rarely used to express fundamental views because too much could happen to roil the trade.

But investor confidence seems to be improving ahead of first-quarter earnings, even as banks trade relatively poorly. This is prompting some investors to use options to take a longer view.

The financial sector is down about 1% this year. Many top financial stocks, including Bank of America, Citi, Goldman, and Morgan Stanley are down even more. The sector is one of 2015’s worst-performing groups in the Standard & Poor’s 500. Only utilities and energy have fared worse, though the financial sector looks to be on the cusp of trending higher into mid-April earnings reports.

To be sure, the financials have been in sweet spots many times over the past few years, only to disappoint investors. But this time could be more than another head fake, just as many investors are having a hard time finding what they want.

The financial sector trades around 14 times earnings, compared with 17 times for the S&P 500. Financial earnings growth is expected to accelerate, creating a perfect storm for patient value investors and aggressive growth investors. Value investors are having a tough time paying 17 times earnings for stocks, and growth investors are queasy with the inventory of stocks offering 10% or more earnings growth.

MKM Partners, an institutional brokerage firm, is telling clients that composite bulge-bracket earnings should rise 19% in the first quarter, compared with the previous quarter, and up 8% from the year-ago period. Banks just received Fed permission to raise dividends and buy back shares, essentially reversing decisions unfriendly to shareholders from the financial crisis.

The January expiration captures several critical events that could boost bank stock prices, including several earnings reports. Should the Fed raise rates this year, the yield curve would actually resemble its name, and bank profits would increase.

ELSEWHERE IN THE MARKET, some pricing quirks have formed that let investors express bullish or bearish views without paying fear or greed premiums. Call options on the SPDR S&P 500 exchange-traded fund (SPY) that expire in 90 days are near the lowest level of the past five years.

By selling one S&P 500 put with a three-month expiration and a strike price 10% below the current market, it is possible to buy 11 calls with similar specifications, Credit Suisse is telling clients.

Investors who want to hedge stocks should consider the iShares Russell 2000 (IWM). The implied volatility of IWM options that expire in one month is at the lowest level in 10 years. Investors who want to hedge U.S. stocks should buy IWM puts, Credit Suisse says, because they are much cheaper than SPY puts.

 

Get investing analysis that moves stocks and markets—Subscribe to Barron’s for just $1 a week.

This article is from Barron’s and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron’s and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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