A Twist on Risk Reversals
The past few months have been challenging for investors. During the first month of the coronavirus crisis, the stock market fell from record highs with unprecedented speed. Meanwhile, the subsequent rally has been just as befuddling to many. Canada’s most liquid stock index ETF, the XIU, plunged from $27 to $17 (a loss of...
Butterfly on Shopify
Recently the Royal Bank of Canada lost its title as our country’s most valuable company in terms of market capitalization. For two brief weeks, Shopify sat at the top of the heap. Chart 1: Royal Bank vs. Shopify May 31, 2020 Source: Bloomberg SHOP’s run has been a sight to behold. Chart 2: Shopify...
Put-Writing Strategies in the Canadian Market
The coronavirus crisis has caused massive sell-offs in global equity markets throughout the world. Canada has not been immune, and our benchmark large-cap S&P TSX 60 Index has lost over 36% from its February high. CHART 1 – S&P/TSX60 Source: Bloomberg A move of this magnitude from new highs to a...
Shares in Uranium Participation Corp are trading at a discount
Uranium Participation Corporation (Symbol U on the TSX exchange) is a company that invests in uranium. Uranium presents an attractive investment opportunity at this time. The commodity itself is currently trading at below the cost of production for most miners, a situation that cannot continue indefinitely. Eventually companies...
Currency Options University — Part 7
Currency Hedging for US Dollar Investors For the past decade, Canadian investors of US dollar-based assets have had it good. No, they have had it great. Not only have American financial assets been the best performing assets in the major markets, but over that same period the value of the Canadian dollar has fallen...
Currency Options University — Part 6
Currency Hedging for Exporters In the previous post we examined the role that USX currency options can play in hedging a company’s import costs. In this instalment of Currency Options University, we will explore using Montréal Exchange USX currency options to mitigate the risk that Canadian exporters face when selling goods...
Currency Options University – Part 5
Currency Hedging for Importers Although USX currency options are often used by speculators interested in expressing a directional view on the USD/CAD exchange rate, they also offer an interesting opportunity for corporations that conduct business in both currencies and are interested in mitigating the exchange rate risk...
Year-End Opportunity in Cannabis Stocks?
Through 2018 and into the first quarter of 2019, Canadian marijuana companies represented one of the hottest sectors in the equities market. However, since its March 19, 2019 high of $23.87, the Horizons Marijuana Life Science ETF (HMMJ) has been on a steady decline, and by November 19, 2019 it was down to $8.34, having lost...
Currency Options University – Part 4
Directional Trading with USX Currency Options Our focus in Part 4 of the series is to demonstrate how USX currency options can be used for directional trading through the direct purchase of a call or put option. Options offer investors a way to buy a long position with a defined risk (limited to the cost of the option), while...
Currency Options University – Part 3
Part 3: Specifications of USX Options To summarize, in Part 1 we reviewed the macro drivers that influence a currency’s value, and in Part 2 we focused on the impact of those changes in the currency’s value on investors. The focus in Part 3 will be on understanding the specifications of Canadian USX options and how to size...
Patrick Ceresna
Derivatives Market Specialist
Big Picture Trading Inc.
124 posts
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