Derivatives on the rise signal search for protection against Brazilian volatility

RIO DE JANEIRO, BRAZIL – The market has handled almost R$1 billion (US$190 million) in the Stock Exchange since 2017. Robots increased options access to individual investors.

The average volume of daily transactions involving stock options broke a new record in the first quarter of this year in B3 since 2017.

Since the second quarter 2019, the figure jumped from R$288 million to R$925 million in the first three months of 2021. The data show that this type of investment has grown among Brazilian investors, proving that the gains can outweigh the risks involved in the operation.

There is potential for further growth, according to Su Choung Wei, considered to be the Master of Derivatives. The way to do this is to spread more information about what is specifically offered in the modality by the Brazilian market, among other unique characteristics of the country.

“In developed markets the opportunities for gains are lower because there is a high level of information about the options, not to mention that they are low volatility markets. Here the analysis methods have not yet been consolidated, which is favorable for investors,” said Wei, who is launching a free online course on this type of operation.

In the Brazilian scenario, the focus of the course, there are particularities related to the commodities market, for instance. Options are used to minimize producer’s risks, for example. “Commodity securities become attractive within the scope of derivatives, as long as they are part of a structured operation that includes other assets,” explains Su Choung Wei.

Among the strategies cited by the consultant is the butterfly, a combination of selling call options at a pre-fixed value. “The butterfly is the recommended strategy for investors who expect little variation in the prices of their assets,” explains Wei.

Most of these structured operations are conducted through programmed robots that work within the Stock Exchange system. Automation, according to Su, has made the derivatives market more accessible to individuals. It is for this audience that the course The Seeds of Money is intended, taught by the professor between May 31 and June 7.

“There are now free robots on the market that can be used by individuals, something that was previously restricted to the universe of institutional investors,” adds Wei.

In the global context, considering the pandemic, the derivatives market traded outside the stock markets’ audited and organized environment, the so-called over-the-counter market, jumped from US$300 billion to US$15.8 trillion between mid second quarter 2020 and December, according to data from the Bank for International Settlements (BIS).

The increase, the institution’s survey showed, was led by operations in foreign exchange derivatives due to the depreciation of the dollar against the world’s major currencies. Foreign exchange derivatives were in greater demand for asset protection and had their market value increase by 21% in the second half, closing last year at US$3.2 trillion.

The course is free of charge and based on the exercise of 25 strategies that involve derivatives: “It is a segment recommended for investors with a moderate profile, who intend to reserve 2% to 3% of their resources in variable income products.”

Source: Infomoney

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