Russian stocks are split into qualitative categories. The main difference between them is how you can trade them. There are options for each category, but only one has weekly options – the RTS index.
The RTS index was launched in 1992 and measured the performance of the 50 most liquid Russian companies from all industry sectors. Making quick decisions based on liquidity and capitalisation makes it possible to avoid common mistakes that affect other indexes. The RTS Index also has futures contracts available with a monthly expiration date, which is less risky than short-term trading. It takes longer for an investor to exit a position in these assets if something goes wrong.
The Russian market offers weekly options for a select number of stocks. It’s very different from the United States, where most stock options expire once per month after four weeks. In Russia, these weekly expirations are scheduled every Friday and beginning on Mondays, and they start up again each week.
The Moscow Exchange recently launched its “Weekly Trading Session” in two popular ETFs: iShares MSCI Russia Capped Index Fund (ERUS) and Market Vectors Russia ETF (RSX). Since these trades settle on Fridays, positions opened until Monday night carry over to next week’s settlement day.
The principal weekly options in Russia
When traders look at the list of weekly options in Russia, they may notice that the most prominent companies, such as Gazprom (OGZPY) and Rosneft (RNFTF), do not appear anywhere on this list. Instead, many oil and natural resource companies are mixed in with retail operations, mining firms, media outlets, airlines, and even restaurants.
For example, OboronProm was one of the first companies to offer weekly options in Russia. It’s an aviation company that makes planes, helicopters and many other things for the armed forces. It has weekly options through September 2019 and, in American terms, trades with a $500 multiplier, so each contract represents $5,000 worth of stock.
Other airline stocks also have weekly expirations, though not all of them are blue chips since Aeroflot (AFLT) does not have any available after January 6th 2017. The three major Russian airlines are included, though, since Pulkovo Airlines (LEDRQ), Ural Airlines (ALUB), plus NordWind Airlines (NWD) all have weekly options that expire on Fridays every week until expiration in 2018-20 21.
European retail stocks
European retail stocks are top-rated for weekly options in Russia because they influence this market. Magnit (MGNT), the giant retailer based in Moscow, is one example. Four supermarkets and two DIY retailers also appear on the lists of companies with weekly expirations.
Stock market volatility and Russian stocks
In 2008, as oil prices were falling from their all-time highs near $150 per barrel down towards a low near $30 per barrel, there was a corresponding rise in volatility as measured by the standard deviation for almost every stock on the RTS Index. This wide dispersion among daily price movements saw several stocks reach 1 or 2 standard deviations or more above/below their moving averages over a short period.
It’s similar to the period before the financial crisis when stock market volatility was relatively low (although not as low as now). Unfortunately, predictive analysis is only accurate about 50% of the time, even when there are clear patterns like we see here.
ETFs and Russian stocks
Many other mutual funds trade weekly, so options also create a tool for risk management and hedging purposes. The Russian ETFs have a healthy options volume and offer the opportunity for speculators to take advantage of weekly expiries.
For investors who trade weekly options, it is essential to understand how different international markets function since there are some anomalies compared to what most experienced traders see in global stock exchanges. New investors who want to trade in Russia stocks are advised to use a reputable online broker from Saxo Bank.