Traders Pay Up For Protection Against Sharp Falls In US Stocks

Stock Market News TodayTraders have been scrambling to protect themselves from a collapse in US stocks, spooked by the coronavirus outbreak, the looming presidential race and the sheer strength of last year’s rally.

The US equity market climbed 29 per cent in 2019 and started this year strongly, but the spreading nervousness has sent the S&P 500 index down by about 2.5 per cent since the middle of the month.

The Cboe Volatility index — known as the market’s “fear gauge” — suggests that traders are now bracing for sharper moves. The 10-day moving average volume of Vix call options — derivatives that allow traders to benefit from a spike in turbulence — has increased from 200,000 traded at the start of January to about 400,000.

The Vix itself has climbed from a low of about 12 points in mid-January to over 18 on Thursday, when the S&P 500 index was off by 0.7 per cent by midday in New York.

There are many negative factors “that are screaming for a big stock sell-off”, said Stephen Aniston, president of, a volatility trading analytics provider.

Activity in put options linked to the US stock market, which offer investors protection against equities slumping, has also been rising in recent weeks as the spreading coronavirus and the approaching US presidential election has investors on edge.

Trading in S&P 500 put options has climbed to levels not seen since September. The 10-day moving average for put volume on the S&P 500 has gone from 720,000 at the start of January to 920,000, again the highest since October.

Traders said the flurry of hedging activity is similar to October 2018, when Federal Reserve chair Jay Powell’s remarks on interest rate increases and “quantitative tightening” rattled the market, and also in February 2018, when Vix-linked funds hit trouble.

A slide in government bond yields and a rise in gold prices are further signs of investors’ sharpened appetite for safe assets, traders noted. The benchmark 10-year US Treasury yield sank to a four-month low below 1.55 per cent on Thursday, while gold has nudged above $1,580 a troy ounce.

The upcoming US presidential election has also prompted some investors to buy insurance against market declines. Senator Bernie Sanders recently surpassed former US vice-president Joe Biden in a poll on the popular political betting site PredictIt for the first time, just days ahead of the first caucus for the 2020 Democratic presidential nomination.

A Deutsche Bank poll indicated that 90 per cent of clients thought that a victory for Mr Sanders would be negative for the US stock market. The left-leaning US senator from Vermont is in the lead with a 39 per cent chance of winning the Democratic nomination, according to bets on PredictIt. Data gathered by Real Clear Politics has him ahead in Iowa, which casts the first votes of the 2020 campaign next week.

“The market is going to start to price in some serious probability of a leftwing Democratic win, which will hit stocks quite a bit,” Mr Aniston said.

Investors are also worried that underwhelming corporate profits will unsettle the stock market, given how far and fast it rallied over the past year. “We now see the market fully valued, particularly within US equities. This is not going to persist indefinitely,” warned Erin Browne, a managing director at Pimco.


Best Stock Trading Platform In Europe {2020}

StockMarketNews.Today — what is the best stock trading platform in Europe for 2020? ….  How To Choose The Best Online Broker in Europe { 2020 } …

Best Online Trading Platform. Start Trading Now or Try a FREE Demo Account.

To evaluate brokers, you should look at the following factors:

>>> Commissions
>>> Account Minimum
>>> Account Fees
>>> Your Trading Style and Tech Needs
>>> Promotions

Look at commissions on the investments you’ll use most… Brokers generally offer a similar menu of investment options: individual stocks, options, mutual funds, exchange-traded funds, and bonds. Some will also offer access to futures trading and forex (currency) trading.

A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today

The investments offered by the broker will dictate two things: whether your investment needs will be satisfied, and how much you’ll pay in commissions. Pay careful attention to the commissions associated with your preferred investments:

Individual stocks: You’ll typically pay a per-trade commission of $4 to $7. Some brokerages also offer per-share pricing.

Options: Options trades often incur the stock trade commission plus a per-contract fee, which usually runs $0.15 to $1.50. Some brokers charge only a commission or only a contract fee.

Mutual funds: Some brokers charge a fee to purchase mutual funds. You can limit mutual fund transaction costs or avoid them completely by selecting a broker that offers no-transaction-fee mutual funds. (Mutual funds also carry internal fees called expense ratios. These are charged not by the broker, but by the fund itself.)

ETFs: ETFs trade like a stock and are purchased for a share price, so they are often subject to the broker’s stock trade commission. But many brokers also offer a list of commission-free ETFs. If you plan to invest in ETFs, you should look for one of these brokers.

Bonds: You can purchase bond mutual funds and ETFs at no charge by using no-transaction-fee mutual funds and commission-free ETFs. Brokers may charge a fee to purchase individual bonds, with a minimum and maximum charge.

Pay attention to account minimums… You can find highly ranked brokers with no account minimum. But some brokers do require a minimum initial investment, and it can skew toward $500 or more. Many mutual funds also require similar minimum investments, which means even if you’re able to open a brokerage account with a small amount of money, it could be a struggle to actually invest it.

Watch out for account fees… You may not be able to avoid account fees completely, but you can certainly minimize them. Most brokers will charge a fee for transferring out funds or closing your account. If you’re transferring to another broker, that new company may offer to reimburse your transfer fees, at least up to a limit.

Most other fees can be sidestepped by simply choosing a broker that doesn’t charge them, or by opting out of services that cost extra. Common fees to watch out for include annual fees, inactivity fees, trading platform subscriptions and extra charges for research or data.

Consider your trading style and tech needs… If you’re a beginner investor, you probably won’t need extras, like an advanced trading platform. But you may want an education and a little hand-holding. This could include videos and tutorials on the broker’s website, or in-person seminars at branches. Many brokers offer these services free to account holders.

Active traders, on the other hand, will want to look for a brokerage that supports that kind of frequency. That includes weighing a broker’s trading platforms, analysis tools, research and data offerings in addition to commissions — including discounts for high-volume traders — and fees.

Plenty of high-quality online brokers offer free demo access to trading platforms.

Take advantage of promotions… Online brokers, like many companies, frequently entice new customers with deals, offering a number of commission-free trades or a cash bonus on certain deposit amounts.

It isn’t wise to choose a broker solely on its promotional offer — a high commission over the long term could easily wipe out any initial bonus or savings — but if you’re stuck between two options, a promotion may sway you one way or the other.

Best Online Trading Platform. Start Trading Now or Try a FREE Demo Account.


◊ Best Stock Trading Platform In Europe {2020} : Plus500 Review ◊

Plus500 is a streamlined broker that focuses on trading in a wide range of financial markets with relatively low spreads and no commissions but without offering many extra services. Plus500 has been in the forex and CFD business since 2008. They are registered in the U.K. and licensed by the Financial Conduct Authority (FCA).

The company offers access to a comprehensive product line including forex, stock indexes, equities, commodities, cryptocurrencies, ETFs and options. Plus500 is the first broker to introduce a bitcoin CFD in 2013. The company does not charge commissions on any of its trades.

All costs are contained within the spread for each of more than 2,000 trading instruments offered on Plus500’s WebTrader platform. Plus500 Ltd. (PLUS.L) is a publicly traded company on the AIM section of the London Stock Exchange since 2013 with a £1.73 billion ($2.25 billion) market capitalization and clients in more than 50 countries around the world. Plus500 offers access to more than 2,000 trading instruments.


Trust … The company is registered with the Financial Conduct Authority (FCA), CySEC, ASIC, FSCA, FMA, MAS, and the ISA, which provides good accountability and visibility. The company is required to take steps to ensure client funds are not comingled with corporate funds – ensuring that client money and assets are protected in the unlikely event that Plus500 becomes insolvent – by holding those funds in segregated accounts at regulated banks.

If Plus500 defaults, any shortfall of funds of up to £50,000 may be compensated for under the Financial Services Compensation Scheme (FSCS). If the custodian bank holding client funds goes into liquidation, any shortfall of funds of up to £85,000 may be compensated for under the FSCS.

Plus500 also offers Negative Balance Protection, ensuring that clients cannot lose more than they have put into their account. Guaranteed stop losses can be used on some instruments depending on market conditions but they are subject to a wider spread.

The company does not charge commissions on any of its trades. All costs are contained within the spread for each of more than 2,000 trading instruments offered on Plus500’s WebTrader platform. Large volume traders do not get a trading discount at Plus500 and the spread is the same whether you trade one lot or 1,000 lots.

There are no charges for normal withdrawals or terminating an account. However, inactivity fees kick in after an account has been idle for three months. Beginning traders can open an account with as little as £100.

Traders can qualify for a “professional” account, which offers a higher level of maximum leverage, but the costs are the same. Investors with a professional account may increase their maximum leverage ten-fold, from 1:30 to 1:300.

Plus500 also offers access to options trading on many markets. These are very similar to plain call and put options traded on exchanges, but they are not standardized which means that the option premium can be customized for your risk tolerance and strategy objectives.



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