Progress in the single-stock futures competition, making money for Noah.

MONEYWEB, Belinda Anderson, 16 March 2005

Deon Strydom: Nedbank Equity Capital Markets

MONEYWEB: Joining us for our look at the competition and how it’s going this evening is Deon Strydom from Nedbank Equity Capital Markets. Deon, you work with Arthur Buchner, whom we have spoken to in the past about this competition. What can you report to us? How much money have you made for the Aids orphans so far?

DEON STRYDOM: Well, before we get there, I’d immediately like to say that we certainly don’t need an Eliot Spitzer in single-stock futures. The pricing is particularly transparent.

MONEYWEB: That’s good to hear.

DEON STRYDOM: And the market makers are very reputable. Just turning towards the competition quickly, I think at the end of last week we were up R59,000. The picture this week doesn’t look as rosy. We’re still up R49,000, and that just goes to show that on single-stock futures you can obviously both make and lose money.

MONEYWEB: So it was a case of some positions not being closed out, and then the shares falling back.

DEON STRYDOM: Well, I think there are a number of factors coming into play here. One of the factors would be that it’s futures closeout this week. So I think a lot of the derivatives players are focusing on rolling into the next contracts and squaring their positions, and making sure that they manage their risk properly. So I think a number of them would probably not be trading as actively as would normally be the case.

MONEYWEB: So the futures closeout is making it a fairly risky market at the moment.

DEON STRYDOM: Well, it makes the market volatile and it makes it unpredictable. And I think looking at a stock like ECOs, for example, today we had a R6, R7 move – up and down. So there is the opportunity to make a lot of money. There is also the opportunity to lose money.

MONEYWEB: So, a note of caution. We’ve been very optimistic so far. But just be very careful. Now, Arthur mentioned to us about a week ago that Argent Industrial was one of the companies that you’d taken a punt on. How’ve you done on that?

DEON STRYDOM: We’ve done pretty well on Argent. Bought them around about the R10,30 level, sold them around about the R11 level. So we did well on that. We did well on FirstRand. Where we did get burnt was Sanlam – basically just a lot of money going out of the industrial sectors, the financial sectors. So I think we were a little bit slow in cutting our position there. On the bright side, we did make quite a bit of money on ECOs and we sold we went short at the R2.95 level, and then bought them back at R2,81, basically just on the back of technical resistance at those levels. It’s actually been a fantastic trading stock because it’s been very volatile.

DAVID SHAPIRO: See, single-stock people – they only know the codes. They don’t know what shares they’re trading in.

MONEYWEB: What is it?


DEON STRYDOM: Edcon. Yes. I’m assuming we’ve a reasonably informed audience.

MONEYWEB: Never assume anything. Where is the money going to be made going forward?

DEON STRYDOM: Well, I think still resources. And obviously the people that have benefited from single-stock futures are the guys who took a view a week or two ago that the rand had strengthened too much, and that it could possibly weaken from the R5,80 odd levels. So I think all of those guys were really rewarded, particularly today, when we saw very big moves in Anglos, Liberty International, Richemont and the like.

MONEYWEB: Most of the positions taken so far have been, we’ve heard in previous interviews, on the long side – in other words, the banks taking a positive view on things. There haven’t been too many short positions – in other words, people thinking things are going to go down. Has that changed now with this bit of negativity?

DEON STRYDOM: Well, I think we’re still in a broader bullish scenario, and basically the trend is your friend. Having said that, any out performance on a day could be a possible cue to shorting that particular stock, and once again a lovely opportunity for single stocks – the medium-term view, the day traders, you know a bit of everyone.

MONEYWEB: If you were to pick one potential opportunity for our listeners? Obviously we know it’s a risky market. And people must be careful. But what would you say?

DEON STRYDOM: All right, I think just sticking with that resource view – Anglos – on pullbacks. I don’t necessarily want to go out and buy it at R149, R150 tomorrow. But certainly R147, R145, around about there, possibly a little bit of a strengthening in the rand, and possibly weakening afterwards.

MONEYWEB: Deon Strydom from Nedbank Equity Capital Markets. This feature was brought to you by single-stock futures – a new dimension to trading the JSE.

Posted in Market commentary

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