Concepts
Using USX options to hedge U.S. dollar risk
Martin Noël
With interest rates at historic lows, it is unlikely that the Bank of Canada will decide to raise the policy rate anytime soon. But we live in a world that is full of surprises, and things can change quickly. Events with the most unexpected repercussions can and do occur (the current pandemic comes to mind). Who really knows...
August – Educational Events
Montréal Exchange
August 10, 2020 Webinar – Live Market Analysis Time : 12:00 p.m. (ET) Speaker : Tony Zhang Language: English Where : Online More information here. August 12, 2020 Webinar – Put – Call Parity and synthetics Time : 4:3o p.m. (ET) Speaker : OIC instructor Language: English Where : Online More...
Butterfly on Shopify
Patrick Ceresna
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...
Trading your First Option
Martin Noël
As an investor, the first thing you need to know is how to choose which securities to buy. The second is when to sell them. That’s pretty easy, right? In this article, you will learn how to trade your first option. As you will see, you do not need to be an expert to start trading options. You just need to be familiar with...
Understand the “Rule of 16”
Steve Sosnick
Professional options traders are really good at dividing and multiplying by 16. That seems like a weird skill, but it is a crucially important one for anyone who wants to fully understand the terminology used in options markets. No matter how you utilize options, the “Rule of 16” is critical for analyzing volatility,...
Reduce the Risk Associated with Time Value Decay
Martin Noël
Reduce the risk associated with time value decay In this article, we will examine how to reduce the risk associated with the time value decay of options in a directional position, as well as how this affects the strategy’s payoff profile. As can be seen in the following chart, the price of shares in BCE Inc. (BCE) have...
Currency Options University — Part 7
Patrick Ceresna
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
Patrick Ceresna
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
Patrick Ceresna
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...
Hedging with Delta
Martin Noël
As can be seen in the following chart, the price of shares in National Bank of Canada (NA) recently peaked at $73.22, representing an increase of 21.85% in 110 days, for an annualized rate of return of 72.50%. It is unlikely that this pace of growth can be sustained over an extended period of time. In addition, there are signs...
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