Amy Wu Silverman, RBC Capital Markets equity derivatives strategist, joins Yahoo Finance to discuss what is happening in the options market, outlook on the SPAC market, and the biggest risks for markets amid the pandemic.
Video Transcript
MYLES UDLAND: Let’s stay on the markets and talk a bit about what we have seen in the options market and what we may see in the options market as we roll into the month of March coming up in just a week. Amy Wu Silverman is the head of derivatives strategy over at RBC Capital Markets. Amy, it’s great to talk with you once again.
I’d love to start with what is happening in options right now because there was such– it was the center of all that GameStop, kind of, drama, and things were so out of whack with pricing and availability. And when you look at the options board today, what are you seeing implied in that pricing?
AMY WU SILVERMAN: Yeah, I mean, I guess compared to GameStop and what we saw there, like, nothing’s as exciting. But, you know, we continue to see a pretty large dichotomy. So within the options market, there still continues to be that momentum-driven fervor. To give you an example, we see a lot of upside buying in the SPACs.
So large traded call spreads, call options, all positioning for very short-term upside in the SPAC market across a number of different underliers. But at the same time on the index level, when you look at NASDAQ and Russell and S&P, you’re also seeing a lot of hedges going through. And I think that’s partly a function of there’s really two distinct cohorts now, the institutional one and the retail one.
And they’re a little bit kind of off doing different things. But it’s very clear that there appears to be more concern on the institutional side than you do see on the retail side.
JULIE HYMAN: And one of the things that actually surprised me on that front from last week’s GameStop hearing was Vlad Tenev, the Robinhood CEO, I think saying only, what was it, 3% of the folks on the platform are trading options, if I have that right. Or was that the– am I mixing it up with the 13%? It was a minority of investors, a small proportion of the investors on there were trading options.
And so when you talk about the interplay between retail and institutions, it still sounds like institutions are accounting for the vast majority of volume that we’re seeing in options. And so if that’s true, what does that tell you in terms of the balance and in terms of how that tail might be wagging the dog, so to speak?
AMY WU SILVERMAN: Yeah, it’s a good point. And I think there’s two things on that testimony. The first is we have seen just substantial call option buying. And the question being, like, how do we know that’s retail versus it being institutional? You really see it in the lot size. So, you know, the size of, call it, 10 option lots and under has exploded. That’s not institutional size.
Buying, now, it’s not necessarily all on the Robinhood platform. It could be across a variety of different brokerages. But that’s definitely there. But that is definitely not to say that, frankly, institutional investors then follow along when they saw that momentum continuing. And ultimately, that really impacted the volatility surfaces a lot of these single stocks like GameStop.
But beyond that, what I have found to be interesting is generally retail tends, at least until now, to only be buying calls. We haven’t seen them do that much hedging. But we see that more from the institutional space, where that’s always been part of a long-short portfolio program to have that insurance in place.
Now, one wrinkle to that that I would say is you’re starting to see on these Wall Street chat boards people pitching UVXY. So essentially being long volatility via these VIX-related ETFs. You know, that’s interesting to me because it would tell you that they’re also thinking about that tail protection as well. It’s not just sort of a credit-based hedge fund or institutional community who’s concerned about that tail risk.
BRIAN SOZZI: Amy, with the return of volatility in the markets about the past week continuing right now today to kick off this week, has that changed any of your strategies? What strategies are you putting in place?
AMY WU SILVERMAN: Yeah, you know, it’s a good question that’s interesting because one kind of stat I would give you is that, obviously, volatility is a lot lower than it was in March and April of last year because we obviously had kind of the steepest decline in recovery on record. I think VIX hit 88 or some record number.
And so it appears that volatility is lower now. But we’re still probably, I would say, 6 to 7 volatility points above the pre-pandemic level. And that hasn’t gone down. So essentially, the VIX call wings are very expensive, term structure is very, very steep, essentially telling you that future option prices are risky. So, you know, a couple different structures work for that.
One is any sort of program that’s selling that hallway. So essentially, the thesis there is, look, obviously the market has run up a lot. I’m willing, at this point, to sell an expensive call wing, still retaining upside, but sort of saying, I’m willing to give up upside beyond another 10% to 15% and using that to fund hedges.
Because the reality is buying hedges is still pricey. And you need some offsetting factor to make that more palatable if you want to own a hedge.
JULIE HYMAN: Amy, finally, I want to ask you about cryptocurrency and what you’re seeing. Obviously, there are a limited number of ways in the options market, in the derivatives market that one can play crypto. But what are you seeing? Or I mean, are we seeing activity in some of the Bitcoin proxies like a Tesla or MicroStrategy or the futures market, et cetera? And what directionally is it telling us, if anything?
AMY WU SILVERMAN: Yeah, so unfortunately, I’m a little limited right now in what I can comment on Bitcoin directly. But what I would tell you is that there are obviously options on Bitcoin itself. It’s not as vast and liquid as the primary listed options market. But it is there for people to use.
But beyond that, you know, it’s just, I think, more of a function in general of the larger play that we have seen on momentum and disruptive technologies. You know, to give you an example, I can discuss, like, the ARKK ETF, which thematically is about disruptive technologies. We’ve seen a lot of options action on that, we’ve seen a lot of options action on SPACs, we’ve seen a lot of options action on Tesla itself.
The one joke I make on Tesla is we have 2,000 stocks that we look at volatility surfaces for, and we keep Tesla in its own little bucket because it’s volatility surface has always been inverted. The call wing has always been higher than the put wing. That’s not really true consistently for any other stock other than Tesla. We’ll have to continue to make those kind of accommodations in the future because it kind of looks like it’s here to stay.
MYLES UDLAND: All right, really interesting conversation there, a look inside what’s happening in the options market, something I’m not sure that too many folks that look at equities think all that much about. Amy Wu Silverman is the head of derivatives strategy over at RBC Capital Markets. Amy, great to get your thoughts. Thanks for joining, as always. I know we’ll talk soon.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
