Derived suspicion

Historic reversal session on January 19

It can be said that the session on January 19 is the historical session of the underlying and derivatives market when the VN index fell more than 60 points. For the derivatives market, the most recently expiring derivatives contract, VN30F2101 fell more than 70 points and returned to approach the starting point of the year 2021.

The derivative of the futures market is inherently a zero-sum game, one person’s profit is another’s loss, so with such a sharp drop, there are investors with big profits and there are also investors with big losses.

It is worth mentioning that, with high leverage, even with investors operating in “warehouses”, many derivative accounts have been “burned out” in this historic session.

As the Securities Investment Newspaper points out, with the highest number of contracts that have not yet been settled (Open Interest) at the highest level in history (55,318 contracts) at the end of the January 18 session, this is the share of many great investors. . Therefore, a decline in historical resistance is normal, but the January 19 session is highly abnormal.

As a professional derivatives investor, Mr. Nguyen Xuan Hoa commented that due to the exceptional advantage of derivative securities that can trade in both directions, strong volatile market sessions are a very good opportunity for the home. Profits.

However, the market fluctuates too fast and strongly like January 19, making the risks very great, especially for inexperienced investors who are new to the derivatives market.

The market fluctuated strongly, the trading volume increased, which caused the system of some securities companies to respond slowly, the slippage of the prices of the orders was very large, the stop loss was very wide, which increased the risks to the investors. position.

“This strong downtrend combines many factors, where F0 is selling, creating a terrible drop. This is completely understandable, but in this session, the creator not only earns 30-40 points, but 70-100 points, ”shared Mr. Hoa and said that the liquidation is due to investors. F0 and those who are not familiar with technical analysis.

As another investor explained, when the market is excited, investors expect the index to continue to rise, the price of the derivative will be much higher than the base index.

After that, the big hands realize that the market is already high, it is likely to correct, they will step up to open short derivatives positions. Selling a lot will bring the price down, but to avoid falling prices, they buy big stocks to boost the index.

Consequently, they will sell many derivatives at high prices. When the time is right, they sell the underlying, push the market down, and attract other investors to sell.

When the index crashes, they will close a short derivatives position (that is, they will buy back at a low price) and make a profit. The underlying stocks may suffer losses (or reduce the gains because they have been pooled to buy at low prices), but the loss is much less than the gain in the derivatives market.

In the past, the derivatives market often had erratic sessions, especially during the expiration session, raised questions about price manipulation.

1-month derivatives price movement since August 2018.

With the fluctuations observed in the derivatives market, it is also difficult to deny the participation of many large investors in these sessions. At this expiration (January 21), according to Ho Chi Minh City Securities Company, a series of notable points such as the number of contracts pending at the highest level in history and held until the expiration date (55,318 contracts as indicated above) .

The spread (the difference between VN30F and VN30) stayed positive for a long time, for 2 consecutive weeks, and sometimes rose to more than 20 points, especially after January 19, the spread narrowed to a negative level. In addition, investors should also pay more attention to abnormal fluctuations when there is no relevant information in the country and the world.

At the end of 2020, the number of investment accounts in derivative securities reached almost 168,000 (an increase of around 85% compared to 2019), demonstrating the growing interest of the investing public in equity derivative contracts. However, compared to the underlying securities, the Vietnam derivatives stock market is relatively small in scale, so it is still easy to manipulate.

At this maturity, the market fluctuates very unpredictably because, in addition to the risk of manipulation by the manufacturer, the very strong market volatility at this stage is also affected by strong public sentiment due to partnerships. Benefits of a large number of investors F0.

Forgotten risk prevention tool

The stock market has just experienced a long period of rise, the risk of a reversal is always present. At this time, investing in derivative or underlying securities will have more opportunities is the concern of many investors.

According to an investment advisory director at a Hanoi-based securities company, after the January 19 session, the medium-term market expectation in the medium term from experts, investors still lean towards a positive view . Therefore, the underlying market still has many opportunities.

However, with the appearance of stronger corrections, the liquidity of the derivatives market after a series of quiet days also started to rebound.

The advantage of the derivatives market is that you can make a profit even when the market falls and perhaps in the next sensitive threshold test, the derivatives market will receive more attention. At the top, derivatives are also a good hedge against risk.

Therefore, the advice of derivatives experts is that inexperienced investors should not trade during the expiration session, or only participate with a very small proportion of capital (10-20%). Because the expiration session always has many surprises, investors should not bet all assets on holding positions awaiting expiration, but should close positions before the expiration date of the ATC session to preserve profits.

At this stage, the market broke out of the medium-term downtrend and turned into an uptrend, so after each correction the market will continue to rise and corrections like now are an opportunity to restructure reputation.

To pursue the underlying stock market, investors must also learn about the derivatives stock market so that, where necessary, the derivative securities are a hedge for the underlying portfolios.

The initial objective of the derivatives market was to diversify investment channels, to avoid risks to the underlying equity portfolio when the market reverses. However, many investors are only interested in one market, neglecting useful tools to prevent risks and optimize returns.