Derivatives Analysis and Structured Products Ideas

Transcription

1 Ucap Hong Kong Asset Management Limited Derivatives Analysis and Structured Products Ideas 7 th October 2015

2 Market parameters Implied correlation Slightly decreased compared to last week and remains high worldwide with the market turmoil. Volatility will be parameternumber1 to extract value when trading WO structures (WO put, WO call). One star featureshouldbe includedas much as possible as its cost is quitelow. Interesting to diversify with Japan/Russel. Underlying Corr Low Range High Average North/Latin America x Now o Avg Dow Jones Industrial o x S&P o-- --x Nasdaq o x Russel o x S&P/TSX o x Europe/Africa/Middle East Euro Stoxx o x FTSE o x CAC o x DAX o x Swiss Market o x Asia/Pacific Rim Nikkei x-o Hang Seng o x S&P/ASX o x Parameters Term: 3M Range: 2Y

3 Volatility: Skew overview Skew SX5E skew unchanged over the last week after the FOMC meeting and remains quite high. Global risk assets face significant tail risk from China, EM in general and commodities hard landing scenario. Given the high skew, it is interesting to finance yield structures via OTM (Out-of-The-Money) Put rather than barrier structures. 90% Strike 110% Strike 3M 90% - 110% Spread Underlying Implied Vol Implied Vol Spread Low Range High Average North/Latin America x Now o Avg Dow Jones Industrial o x S&P o x Nasdaq o x Russel o-- --x S&P/TSX o x CBOE SPX Volatility o-- --x Europe/Africa/Middle East Euro Stoxx o x FTSE o x CAC o x DAX o x Swiss Market o x Asia/Pacific Rim Nikkei o x Hang Seng o x S&P/ASX o-x Kospi o x NSE CNX Nifty o x Parameters %Money: 90%/110% Term: 3M Range: 2Y

4 Volatility: Global overview Implied volatility 3M Volatility levels increased over last week (almost 1 point up in Europe, 1 point down in US). Be opportunistic on selective companies for which vol spike has been exacerbated (see global leaders list or recommendation). With these levels of volatility, difference between phoenix and phoenix memory will be significant (especially for longer maturities). Equity vol drivers are delayed rate hike expectations and a surge in EM equities. With the Fed now not expected to hike this year (33% probability Fed Fund Futures), this should provide a reprieve for EM equities, which have been battered by a combination of slowing economic growth and Fed tightening expectations. Underlying Vol Low Range High Average North/Latin America x Now o Avg Dow Jones Industrial o x S&P o x Nasdaq o x Russel o x S&P/TSX o x CBOE SPX Volatility o x Europe/Africa/Middle East Euro Stoxx o x FTSE o x CAC o x DAX o x Swiss Market o x Asia/Pacific Rim Nikkei o x Hang Seng o x S&P/ASX o x Kospi o x NSE CNX Nifty x-o Parameters %Money: 100% Term: 3M Range: 2Y

5 Volatility: Global overview Volatility Curve for SX5E lastweek (SX5E index down by 0.80% over lastweek). 5Y IV around21.0 comparedto 20.0 last week (1Y lowest level : 18.3) 1Y IV around23.0 comparedto 22.3 last week (1Y lowest level : 17.4) 3m IV around26.5 compared to 25.4 last week (1Y lowest level : 16.1) 1m IV around28.6 compared to 27.9 last week (1Y lowest level : 13.9) Term structure remains completely inverted. Benefit from this high short term volatility by investing in Daily Range Accrual structures, decreasing autocallable structures and monthly autocallability ATM 1M IV ATM 1Y IV ATM 3M IV ATM 5Y IV

6 Volatility: SPX analysis Volatility Curve for SPX for lastweek (SPX index up by 1.04% over last week). 5Y IV around19.9 comparedto 20.1 last week (1Y lowest level : 18.4) 1Y IV around19.5 comparedto 19.8 last week (1Y lowest level : 15.0) 3m IV around18.6 compared to 19.7 last week (1Y lowest level : 12.0) 1m IV around18.8 compared to 20.0 last week (1Y lowest level : 9.5) The curve is now flat. Still a few opportunities to benefit from high short term volatility by investing in Daily Range Accrual structures, decreasing autocallable structures and monthly autocallability ATM 1M IV ATM 1Y IV ATM 3M IV ATM 5Y IV

7 Product Ideas 1 YearUSD StabilityNote on S&P % p.a Currency Maturity Coupon Callabilityfeature Capital Protection Ticker USD 1 Year 7.30% p.a. Starting from the first quarterly anniversary, the notes are monthly callable at 100% + accrued coupon If the underlyingnever falls by more than10% on any day on close to close, the productwillbe redeemed at 100%. Else, every 1% drop belowthe -10% triggeredwillresult in a 20% lossof capital. SPX Index 1 YearEUR StabilityNote on SX5E % p.a Currency Maturity Coupon Callabilityfeature Capital Protection Ticker EUR 1 Year 6.90% p.a. Starting from the first quarterly anniversary, the notes are monthly callable at 100% + accrued coupon If the underlyingnever falls by more than10% on any day on close to close, the productwillbe redeemed at 100%. Else, every 1% drop belowthe -10% triggeredwillresult in a 20% lossof capital. SX5E Index

8 Product Ideas 2 YearsUSD YETI WO on Biogen/ Amgen / Gilead 3.65% p.q. Ki65 DBK Currency USD Maturity 2 Years Coupon 3.65% quarterly if the WO is above 65% (with memory effect) 14.60% p.a. Autocall Quarterly if the WO is above 85% Protection 65% European(35% downside protection) Ticker BIIB UW / GILD UW / AMGN UW IShares Nasdaq Biotech Tracker - Weekly

9 Product Ideas 5 YearsAUD Callable100% KG Participation Note on SMI Currency AUD Maturity 5 Years Callable by issuer At 110% after 1 Year At 120% after 2 Years At 130% after 3 Years At 140% after 4 Years Redemption at Maturity At 100% + 150% of the upside performance of the underlying Protection 100% capital guaranteed at maturity Ticker SMI Index 5 YearsUSD 100% KG Participation Note on SMI Currency USD Maturity 5 Years Redemption at Maturity At 100% + 100% of the upside performance of the underlying(capped at +45%) Protection 100% capital guaranteed at maturity Ticker SMI Index

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