Risk Management

Using call options as a hedge
May 16, 2018
Protection

Using call options as a hedge

Martin Noël

As can be seen in the following chart, the share price of ONEX Corporation (ONEX) has been weak enough to suggest that some caution may be necessary. The Relative Strength Index (RSI), which was recently in oversold territory, is trending downward. The same is true of the stochastic oscillator (%K). Although the scope of the...

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3 months ago
Real Estate, Canadian Banks and Downside Risks
March 28, 2018
Risk Management

Real Estate, Canadian Banks and Downside Risks

Patrick Ceresna

I want to take a dive into the most passionately debated issue of a correction in Canadian real estate and the impact on Canadian banks.  The general consensus is that over the long-term home prices will continue to rise and the risks directly to the banks are limited as mortgage default risk predominantly sit with the...

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5 months ago
Covered Calls and Gold                        –                               A Perfect Match
September 18, 2017
Risk Management

Covered Calls and Gold – A Perfect Match

Hans Albrecht

This is a fairly consistent rule in listed options markets: As assets rise in value, option pricing tends to pull back on a relative basis. As markets push higher, investors are deemed to be less fearful and therefore the cost to insure a portfolio against a market drops. We see this rule routinely play out in the VIXC (the...

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11 months ago
Hedging Canadian Bank Risk with Debit Spreads
August 01, 2017
Protection

Hedging Canadian Bank Risk with Debit Spreads

Patrick Ceresna

The recent hawkish shift and rate hike by the Bank of Canada has ushered in a resounding 10% rise in the Canadian dollar in a few short months.  This has not only put stress broadly on Canadian equities, but it has instilled concerns about the tightening of credit conditions on an already over indebted Canadian consumer....

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1 year ago
Bottom Fishing Cenovus? Hedging may be Appropriate
May 10, 2017
Bullish Outlook

Bottom Fishing Cenovus? Hedging may be Appropriate

Patrick Ceresna

Cenovus stirred up the Canadian oil industry back on March 29th with an announcement on the $17.7 billion-dollar purchase of ConocoPhillips’ Canadian oil sand assets. To say the deal was not well received is an understatement as the stock dropped over 10% on the announcement and continued to actively distribute lower. From...

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1 year ago
It’s Good to be the Insurer
May 04, 2017
Risk Management

It’s Good to be the Insurer

Hans Albrecht

  Option pricing, or insurance, is a relative value product. For instance, a $300 annual premium for $1 million of life insurance coverage for a young, healthy individual is reasonable. However, that same $300 price tag to insure a 65 year-old smoker with high blood pressure is way too cheap. When it comes to life...

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1 year ago
Peak Optimism Weighing on Canadian Banks
April 05, 2017
Risk Management

Peak Optimism Weighing on Canadian Banks

Patrick Ceresna

Reflecting on the last 9 months, we can decisively identify the global reflation trade as the primary driver of the equity rally. This was considerably accelerated by the Republican sweep in the U.S. elections driven by expectations of new growth driven by tax cuts and fiscal spending. During that roaring bull advance, it was...

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1 year ago
Fading the Trump Hysteria
January 05, 2017
Protection

Fading the Trump Hysteria

Patrick Ceresna

The stock markets are first and foremost a behavioral exercise. Investors are always trying to price in the future – 6 to 9 months in advance. To put that statement into perspective, one must recognize that the market is therefore driven by perceptions and assumptions more than it is about realized certainties. That...

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2 years ago
Gold versus Gold Stocks
June 20, 2016
Bullish Outlook

Gold versus Gold Stocks

Richard Croft

Gold has been on a tear recently. Not because of any real change in supply demand metrics. This is all about defensive positioning against a perceived devaluation of paper currency. In short gold bulls are playing the crisis insurance card… again! I am not about to tell you to buy gold. I’ve talked about it in the past but...

702
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2 years ago
Has the Tide Turned for the Canadian Economy?
April 01, 2016
Index Options

Has the Tide Turned for the Canadian Economy?

Patrick Ceresna

The last two months have dynamically changed the narrative toward the Canadian economy. Over those two months, the markets have substantially shifted, including: 15% rise in the Canadian Dollar from its $0.68 lows to its current levels around $0.78. 27% rise in oil prices from their lows below $30.00 to around $38.00 today. 16%...

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2 years ago