Futures hold ground in healthy trading
JANUARY Hang Seng Index futures held their ground yesterday, as profit-taking and consolidation gripped the cash market.
The contract closed unchanged on the day at 10,575, a premium over the cash of 46 points, again no effective premium on Thursday.
Trading opened at the day's low, after a sell-off in the cash overnight, of 10,460. The high of the day came just after the afternoon opening at 10,665.
February futures were up 15 points to 10,665, a premium over the cash of 136 points.
March futures lost ground, falling 70 points to 10,710. Meanwhile June futures were marked 10,660.
Total trading was a healthy 18,736 contracts. In January there were 17,628 contracts, in February there were 3,218 contracts and in March along with June there were less than 10 contracts each.
In index options, in January calls the strikes from 10,000 through to 11,200 were busy. In the puts the strikes from 9,800 to 10,600 were busy.
Implied volatility at-the-money lifted for a second day to about 17.5 per cent, according to futures exchange data. The measure stood at about 14.5 per cent three days ago.
The rise of implied volatility indicates that the heavy offsetting going on earlier in the week has been arrested and options prices are now rerating to reflect expectations of a continued rally in the cash market through January and February.
Many analysts' full year-end forecasts have already been reached and exceeded by the stock market.
Bulls still believe there is a strong likelihood 11,000 is in sight next week with 11,500 by the end of the month.
A breakthrough in the United States budget dispute would trigger another surge in stock markets around the globe. A breakthrough would also release snagged data.
Contained in this batch of data could be some surprises that might cause a short-term correction.
However, interest rates are expected to be cut further in the first half as the Federal Reserve wrestles with the possibility of a slowdown in the economy, which could become deeper because of the government three-week closure.