MONEYWEB, Alec Hogg, 04 May 2005
Single-stock futures – what they are, and why the JSE and Moneyweb have run this contest with four banks’ trading teams.
MONEYWEB: Alan Thomson is with the JSE and he runs the derivatives operation. We’ve got a whole bunch of new listeners now, Alan. We need to tell them what single-stock futures are and why we’re running this competition. It’s going to make money for Aids orphans.
ALAN THOMSON: Goodness me, Alec. I’m looking at the clock and it’s 18:57 and you want me to …
MONEYWEB: And you’ve just wasted five seconds. But really basic stuff. It’s like a share, except it’s a future on the share.
ALAN THOMSON: It’s exactly that. You purchase a share, but you agree on the price on that share, you agree on a price now, and it’s for delivery in some specified date in the future.
MONEYWEB: Now we’ve got a competition where we’ve got four banks whose trading teams are not competing against each other, but competing to make money for the Aids orphans’ fund, Noah. How are we doing in or how are they doing in that competition?
ALAN THOMSON: There’s a bit of bad news on that front, Alec – in two aspects. The competition is nearing the end. I think today was almost the last day. We’re going to do final report-back next week, but we at one stage were up nearly R60,000 fairly early on, and we have managed to lose a little bit of money amongst the banks. We’re currently sitting at R36,000 and I don’t see it changing massively before the end of the competition.
MONEYWEB: How did we do last year?
ALAN THOMSON: We’re about the same. I think R34 000 last year. So it’s a slight improvement on last year.
MONEYWEB: What does it show you? Difficult markets?
ALAN THOMSON: I think it was very difficult. I think in the beginning, if we had a look at the trades, the market was going up, everybody was long. Markets churned a little bit, a bit of indecision. We’ve got two banks that did exceptionally well, one that has done a lot of trading and has managed to break even, and one that has lost some money.
MONEYWEB: So there’s someone like me.
ALAN THOMSON: Yes. But it’s very interesting going through some of the stats, and we always said that we would never disclose who the banks are, but I’m going to break that rule today and just say that the bank that made the most money is our old friend, Arthur Buchner.
MONEYWEB: He did it for us last year.
ALAN THOMSON: He did it this year as well. Only a short head ahead of another bank.
MONEYWEB: Well, it’s quite interesting. Arthur Buchner came and rescued a situation after I had played the single-stock futures on this programme, and we’d got to a very bad negative position. Arthur rescued it, and we made R30,000 for the Aids orphans last year.
ALAN THOMSON: He’s done something similar this year, because Arthur actually started off very slowly. Of all the banks they were perhaps the worse performers. And by far and away their strategy was they did a lot of trades. If you have a look, I’ve got the sheet here in front of me, there’s one bank that has got about eight or ten trades and Arthur’s got about two pages. And there’s two banks that traded very, very actively, two banks that traded sort of more buy-and-hold strategies. Different strategies and there’s no trend here at all. There’s one that traded a lot and broke even. There’s one that did very little and lost some money, one that did very little, made money, and then Arthur who traded a lot and did very well.
MONEYWEB: Our thanks to Alan Thomson from the JSE, and to Arthur Buchner and the other members of that single-stock future team.