According to IndexUniverse the CBOE has licensed a volatility index (RVX) and a buywrite index (BXR) to the Russell 2000. The article notes that investment products should not be far behind.
It would make sense that the premium taken in on a smaller cap index would be quite a bit larger than on the S&P 500 and thus any products tied to BXR should yield more than products tied to BXM or BXY. We'll see.
A reader asked about the call selling CEFs. Lately most, but not all, are down 2%-4%. This is not shocking because interest rates have gone up a lot as of late. One thought I had with these is that they would be interest rate sensitive but less so than most bond funds and that seems to be holding up for now.
I would also note that the NAVs of these funds has held up much better than the market prices. Most of the funds have seen big increases in the discount to NAV in the last few weeks. The reality is that these funds are not bond funds but the market has partially sold them down anyway.
Higher interest rates could a good thing for these funds in one respect which is that most option pricing models factor in interest rates. Higher rates could mean higher option premiums.
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3 comments:
Roger, I am searching for an explaination for the disconnect between China's Shanghai traded A shares and the H shares traded in Hong Kong. I don't know the % of the H shares to the total Hong Kong market valuation. I'm basing this opinion on the short term performance of the Shanghai index vs EWH. The A shares have taken off since Easter for a number of reasons, the most important IMO is the easing of the Goverment regulations about personal ownership. The Chinese Gov. can certainly reverse their course but it appears that they are allowing wealth creation for the masses by investments. What are the best ideas to take advantage of this trend. EWH? EWT? EWS? Multinational Companies who trade with China? Are foreign mutual funds allowed direct investment into the Chinese markets? All the above? Tom in Indy
Tom,
I am not an expert on all of the various ownership regulations and restrictions that pertain to China.
There are two China ETFs that I am aware of, FXI (personal holding) and PGJ. I view EWT as more of a proxy for foreign tech. EWS is interesting because of its manufacturing and its currency but I don't know that you are really capturing China with either one. I have never studied the Hong Kong ETF.
"What are the best ideas to take advantage of this trend. EWH? EWT? EWS?" - Tom
Clarification:
EWH – Hong Kong ETF (~fair value)
EWT – Taiwan ETF (correction mode not over)
EWS – Singapore ETF (slightly overvalued)
Disclosure:
This reply was written by a member of the CrossProfit analyst team. This is a personal view and may not reflect the views of CrossProfit.com.
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