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Volatility Index hits 4-month high, U.S. election coming up

Warrants over the S&P 500® Index (SP500) captured interest last Friday with the U.S. presidential election coming up on 3 November 2020. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), which is a measure of U.S. market volatility and often referred to as the fear index
macquarie structured warrants 20200914

The Hong Kong market was shut on Monday (26 Oct) last week in conjunction with the day following the Chung Yeung Festival holiday, while the Malaysian market had a holiday on Thursday (29 Oct) in view of the Birthday of Prophet Muhammad. With the shorter trading week along with a decline in trading activity for warrants over shares, total warrants turnover declined 42.0% week-on-week (w-o-w) to RM736.9mil.

Warrants over the S&P 500® Index (SP500) captured interest last Friday with the U.S. presidential election coming up on 3 November 2020. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), which is a measure of U.S. market volatility and often referred to as the fear index, rose to above 30 last week, hitting a high of 40.28 on Wednesday as the SP500 fell 3.5% on that day. The SP500 ended the week at 3,269.96 points, down 5.6% w-o-w. The call and put warrants over the SP500 allow bullish and bearish investors to trade the U.S. market during the Bursa trading hours. Call warrants move in line with the underlying while put warrants move in an opposite direction to the underlying. 

Taking second place on the top warrants list is the call warrant HSI-CBB with 114.8mil units traded. As the Hong Kong market reopened on Tuesday, the Hang Seng Index (HSI) suffered four straight days of decline, finishing at 24,107.42 points last Friday, down 3.3% w-o-w. HSI-CBB expires in less than 1 month on 27 November 2020. Investors may consider switching to warrants with longer time to expiry to minimize the holding cost in the form of time decay.

Despite the 43.5% w-o-w decline last week in turnover for warrants over shares, the top warrants list was still mostly populated by these warrants, namely warrants over glove maker Supermax Corporation, which saw its share price rise 2.2% w-o-w to end the week at RM9.47, a welcomed partial recovery for bullish investors following an 11.7% plunge in the previous week. Call warrants SUPERMX-C1I, SUPERMX-C98 and SUPERMX-C1A were in the top warrants list with 234.5mil, 79.1mil and 77.7mil units traded respectively, while put warrant SUPERMX-HC took fifth place with 71.8mil units traded. Other stock underlyings that were popular include Top Glove, Hartalega, Duopharma, Bursa and Mah Sing.

Top warrants by volume traded:

Warrant nameVolume
(mil.)
IssuerExercise price / levelExpiry date
SUPERMX-C1I234.5Kenanga14.0026 Jul 2021
HSI-CBB114.8Macquarie26,40027 Nov 2020
SUPERMX-C9879.1Kenanga4.5031 May 2021
SUPERMX-C1A77.7CIMB4.5029 Jan 2021
SUPERMX-HC71.8Kenanga9.0025 Jan 2021

If you have any questions or need further assistance, please do not hesitate to contact us via our hotline at 03-2059 8840 or email us at [email protected]

To view the full list of structured warrants available on Bursa Malaysia, kindly visit malaysiawarrants.com.my

Provided for Malaysian residents information only. This commentary has not been reviewed by the Securities Commission Malaysia. It is not an offer or recommendation to trade and is not research material. Past performance is not indicative of future performance. You should make your own assessment and seek professional advice.

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