10 October 2016 at 14:10 GMT
- US earnings season may trigger mild volatility
- US presidential election has investors on edge
- Equities retain their gains as Clinton seen winning
The US corporate earnings season may stir up a touch of volatility. Pic: iStock
By Georgio Stoev
This week kicks off earnings season in the US and with it volatility could come back, albeit sparingly. Being October, just a few weeks before US general election, also has investors nervous. Equities have managed to keep their gains so far as if investors are foreseeing another Democrat in the White House come January 20. Here's how different assets fared for the week of October 3–7t
Source: Saxo Bank
A look back into last week's action sees gold being the biggest mover, down 4%. Despite this punishment, gold has been a good asset to have in a portfolio. We could see buyers coming back into this market after the selloff. Gold futures for December delivery GCZ6 seem to be finding support near $1,257. Volatility has increased in gold options as the price went down.
Investors who believe that prices of the precious metal could stabilise in the short run could look at a short put spread using the ETF or option on the underlying future – selling 1255 Nov 16 Put/Buying 1245 Put for a net credit of $3.60.
Oil seems to be poised to move higher and we could look at a vertical call spread here using CLX6, 51/52 for a debit of $4.30. This provide an opportunity to make $5.30 (1 lot size is 1000).
Earnings are coming and you should be properly hedge for your long equities. It's not too late to add a collar or protective Put on some of your core positions. We discussed these strategies in depth last week
Have a good week ahead.
– Edited by Clare MacCarthy
Georgio Stoev is futures and options product manager at Saxo Bank