Plus500 Share Discussion Threads

[gettingrichslow] 26/10/2018 10:45

NYC25, I agree Rifleshot's post is thorough and interesting and there isn't a sentence in his post that I don't understand but as I've already commented (and Chucko responded helpfully) it is far from clear that increased volatility is indeed structural - heard that many times before over several decades, then it dissipates. It also doesn't factor in further regulatory risk. One thing I've learnt over the years is that however robust the case looks it can always go the other way too, and usually just after you wade in heavily!

[chucko1] 26/10/2018 10:28

NYC25, the Odey point to which you refer is that they are bound to sell as the share price goes higher, ceteris paribus, since the funds which hold the largest positions may not exceed 10% of AUM (OEIC rules). The “unconstrained” funds are very small by comparison - one of them has around 25% of its AUM in PLUS.

Further worth stating that Odey have owned since 100p (launch in mid 2013), so they are hardly unaware of the various pros and cons. They believe this is another SKY GR for them - hold indefinitely for vast returns. In this respect, I would favour their knowledge over the more distant analysis of the hedge funds (though one must acknowledge how many HFs have shorted recently).

[dj trading] 26/10/2018 10:19

NYC25 _ I suggest you read your contribution before telling others what to do!

Over 50% of your posts are directed at El C

Feel free to read my posting history! btw as most long termers know I'm an accountant - perhaps care to share your qualifications after your comment above (NYC25 - "And if you don't understand some of it...or some of the footnotes, keep reading until you do.")
Dave Jones

[daijavu] 26/10/2018 10:13

Perhaps ElCapital could give us the same sort of detailed explanation as Rifleshot has. I would find that helpful too.

[daijavu] 26/10/2018 10:10

I found Rifleshot's post very helpful and I thank him for it. I wish I had his knowledge.

As for ElCapital, I was merely wondering what the basis for his beliefs is.

[nyc25] 26/10/2018 10:07

DJ and others please no more wasting time on idiots. Take the time to CAREFULLY READ what the guy above has said. And if you don't understand some of it...or some of the footnotes, keep reading until you do.

Rifleshot...I don't really understand your bearish point about Crypto or the Hanbury Odey point giving the shorts a way out...can you explain?

[dj trading] 26/10/2018 09:59

I see El C is back this time with diversionary tactics - no mention of price as his imaginary hindsight short is well out of the money!

Anyway I did say I expected him to close on a spike down but it doesn't look like that is going to happen today so we have tactic 2 - Averaging up!

Of course averaging up generally involves doubling up and so he will have at least 8 times his initial stake in play on the 3rd average up. Let's ignore margin calls etc. Anyway we know it's all imaginary as he didn't even know if he had paid the $1.38 divi on the 23rd Aug so he can keep averaging up indefinitely with his imaginary trades - usually after a peak when price falling again. Watch this space!

Just as a reminder of his latest imaginary hindsight position - quite a loss in just 4 days well over 100% at 10-1 leverage!

23rd Oct "Im shorting again this morning. Legging in"
"1252 averag"
"short increased 1268. it will be fine, im always right"
Current price 1384

[nyc25] 26/10/2018 09:46

I'm based in the States. Know that the Reg Environment around these sorts of businesses is softening not hardening. Pus will get a US Licence as a best in class provider in time. Americans don't give two hoots about grand old brands like IG...they'll look very carefully at who does things best (Plus) and encourage them to take market share.

[daijavu] 26/10/2018 09:35

ElCapital.

Are you suggesting that Plus is another GLOBO or Quindell?

[chucko1] 26/10/2018 09:31

ElCap, I am surprised at your last post. It is not “strange”; - it is that they run their risk in a modern fashion, as opposed to IGG who are a little archaic by comparison.

Compare with 2007-9 when certain banks blew up in their credit trading areas and others did not - the difference: risk philosophy and precision. Talent had nowt to do with it. So some sailed through the whole episode with flesh wounds only, akin to the CHF debacle of Jan 15 (where the outcomes were extremely varied).

[gettingrichslow] 26/10/2018 09:14

Chucko, yes I agree with your last post, looks like more volatility around today and that's certainly translating straight into the SP, shorters getting squeezed now.

[noujay] 26/10/2018 09:01

Not strange. Fantastic

[metis20] 26/10/2018 08:59

"Additionally, the Company's risk management framework ensures that risk exposures are strictly limited resulting in consistent revenue generation with low volatility. The Company employs a combination of limits and internal hedging tools to ensure risk is managed by having a very large number of small customers; monitoring exposure limits (by client, instrument and total exposure), with the ability to cap trades and hedge once limits are reached. Credit risk is limited by having all customers pre-fund their account, as well as a margin close-out policy, to minimise unfunded customer losses. In addition, Plus500 does not offer CFDs in less liquid instruments, such as small cap stocks, which also limits its risk exposures."

[elcapital2018] 26/10/2018 08:48

isnt it strange though that even though they dont hedge they never seem to get stung when things like bitcoin crashed or the swiss franc...even though everyone else did

[chucko1] 26/10/2018 00:09

GRS, I don’t disagree - no one can say with certainty that vol will increase for a certain period of time. However, what we can say with certainty is that QE is ending and QT (quantitative tightening) is beginning. So the prospects of entirely different financial markets is good, with investment alternatives to stocks and property (in the form of cash, bills etc. - people used to earn interest - remember those days!). In short, the easy pickings are gone and there will be increasing uncertainty.

Another thing we have learned is that PLUS really do make some decent money when there is some volatility. It takes about one good month in three to earn a further 30% or so, thus implying about double the normal run-rate for the time there is volatility.

In terms of regulation, the thesis is that Plus fare OK in the medium term even with increasing rules. But we will not know that for sure until a further few months from now. Also, regulation could in theory be far more draconian, as in an outright ban as existed in the US. But that is rarely seen, and I sense that ESMA have gone as far as they intend and government taxation would be the greater threat (not that I have any better idea than anyone else if such a prospect is at all likely).

[gettingrichslow] 25/10/2018 19:39

I agree there are some interesting posts today but I've seen many such claims of structural volatility increases in the past, many of which lasted a while then faded, boosting IG for example but only temporarily. So although I'm a holder of PLUS I'm not convinced this current bout of volatility will be here for long. No-one today has mentioned the possibility of further regulation either - that risk has to be factored in surely in any balanced appraisal?

[chucko1] 25/10/2018 17:56

NYC25, I was not trying to be sarcastic, but I put the term in quotation marks as it is not clear what this “big thingy” is about, or even a hint of what it is. I have read various theories but I do know that Odey are fully aware of them: the non-reduction of their position in PLUS fully indicates what they think of these “concerns̶1;.

I made the point about VIX (vol) only having looked at the series for the first time (though I have traded in many, many others!). As I wrote that post, I was looking at them all together along with the DOW. What I noticed and why I wrote that part of the post was because as the DOW was rising, the vol futures were all falling, but the first contract (NOV18) was falling the most - this suggests a sticker price for the later contracts and hence an expectation of an elevated VIX in the future. Doesn’t mean that it HAS to he that way, but it’s how the market sees it for now.

Oil futures (and of course, many others) do the same sort of thing - the front contracts reflect the immediate supply/demand characteristics and the later contracts move in a correlated fashion (typically), but not to the same degree. Just because, for example, supply is higher than expected near term (think Saudis turning on the taps), there is a likelihood they will not continue (or even start) that policy in the medium term.

[chucko1] 25/10/2018 17:40

It shows what is possible with a good array of posters. But there is also useful information amongst the trash, though it does elongate the whole process, I suppose.

Rifleshot’s post was a wonderful summary - consider the time it must have taken to so coherently lay out the information. Far more patience than me!

[nyc25] 25/10/2018 17:22

Chucko do you believe there might be a big thingy or are you being sarcastic?

I agree with rifleshot who makes the bull case crystal clear in a way no one else has. Vol is the thing in the short term. International diversification is jam tomorrow. They need to make 130-150 this quarter and RNS at some point over the next 5/7 weeks. If they do, share price will recover. If you're right about the Vix Futures Contract even better...and that would support Rifleshot footnote about volatility being structural and therefore sustainable and not needing big global news events to keep it going well into next year...

is that the point your making?

[foolishben] 25/10/2018 17:12

Another interesting read, thanks Chucko1. While we are dishing out the appreciation, I must say your posts are always of a high quality, same goes for financethoughts. Makes it worthwhile sifting through the other nonsense on this board.

[saltraider] 25/10/2018 16:46

Thanks rifleshot ... appreciate the effort and the sharing.

[chucko1] 25/10/2018 16:43

OK, this is interesting.

So the bulls are of the belief that enhanced volatility will lead to the level of profits that will take PLUS somewhat higher. I agree that volatility is THE key component, but followed by their increasing success in international roll-out. Multiply the two factors together and you will not be far off (barring “the big thingy”).

So what of volatility? The VIX is often cited and it has moved somewhat higher since early October and has remained there (increased further, in fact). But there are also a series of VIX futures with contracts extending out to July 2019. What is notable is that the front VIX contract (Nov18) is 20.36 (and is what is commonly referred to as the VIX), but the later contracts only fall to 19.05 (in the case of the JUL19 contract). This quite gentle shape suggests that “the market” believes that volatility will remain relatively elevated well beyond Q4.

Maybe, maybe not, but in theory, PLUS could actually hedge their higher earnings in part by selling VIX futures contracts! Or you individually could hedge the PLUS share price! (shame to say you would have to have a pretty big position as just one contract has a sensitivity of $1,000 per 1% volatility change (arithmetic change, not geometric).

I’ve got a better idea - I just checked on the PLUS500 web site and you can trade the VIX on there! Full service on this board, I tell you.

Worth pointing out that as the Dow has rallied some 350 points, the VIX has just fallen from 21.3 to 20.2. This negative correlation is persistent. What this means is that owners of PLUS really do not want to see any meaningful recovery in equities, and so as previously stated PLUS is a wonderful diversifier if sized correctly.