#53 - Options Trading In Emerging Markets

Hey everyone, Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re talking about options trading in emerging markets. I think there’s two sides to this topic that I want to talk about. First thing I’ll talk about is actually just physically, I guess location-wise, trading in emerging markets or maybe trading overseas is really I think what people are trying to get to at this question and then we’ll talk about what you can actually trade in emerging markets because I think there’s a lot. The first part of it again is physical location. If you are abroad, you can trade any emerging market that you want. In fact, you can pretty much trade any market in the world depending on the broker that you have or really, where you live. Some restrictions are typically found in different countries like for example – I know that a lot of our members… I pray for you guys all the time down in Australia. You guys don’t really have that many choices of brokers you can use versus in the US or the UK or maybe in Germany. There’s a lot more choices of brokers that are actually able and willing to open up accounts in those countries and then also trade emerging markets from other parts of the world. I think it’s obviously a country by country scenario, but the reality is that in most cases, you do have the ability to trade other markets around the world. You’re not subjective to only trading your individual market. You may have to deal with a different broker, you may have to deal with maybe slightly higher commissions to do it, but it is possible to do. One of the best brokers for that I guess… Really, I don’t like their platform at all. I’ll be honest in saying that. But I think that they are the best one because they do have a wide variety of different markets that they use and that they serve and countries that they serve is Interactive Brokers. That’s one that I always suggest to people for emerging market, like accounts. If you’re trading from overseas, not necessarily from the US, you definitely want to check out Interactive Brokers. If you’re in the US, then you want to check out either Thinkorswim or Tastyworks and you can go ahead and signup and use our link over at optionalpha.com/tastyworks. The second to this obviously is – What can you trade? Can you trade options in emerging markets? The reality is that you could physically. If you had the approval to do it, you could trade those countries and those companies in those markets and then those options on them, depending on how they’re structured. What I prefer to do however is I prefer to trade the ETFs for different markets, so for different broad markets which I think gives you enough diversity anyway because there’s hundreds and hundreds of ETFs that you can trade. There’s probably a handful and we’ll go over some of these here today in the show that I trade that are from different emerging markets or clusters of emerging markets, really, groups of emerging markets. I think though, the reality is that it’s probably pretty insane at this level now in the world and what we know in finance and the access that we have to different countries and liquidity for you not to trade other parts of the world or other currencies even. Oftentimes, I’ll hear people talking about like, “Kirk, what are the best stocks for the US or what are the best ETFs for the US?” I’m like, “There might also be some other good trades or good trading opportunities elsewhere and you just have to keep them on your list and monitor them.” I think you have to be very broad with how you trade options now and I think some of these emerging market ETFs or global ETFs, whatever you want to call them end up being a really good substitute for trading in different parts of the world and give you exposure if you need it versus just having exposure in the US. You can go to places like etf.com or ETFDB which is etfdatabase.com. You can get a list of these. You can also pickup a copy of our Toolbox Light software which has all of our ETFs that we track that are prescreened. But some of the ones that I follow often are like EEM which is just a global iShares emerging market ETF. We also follow EWW which is Mexico, we follow RSX which is Russia, we follow FXE which is the euro, FXY which is the yen, FXI which is a Chinese index. There are so many different ones that you can actually follow. It’s actually kind of crazy that there’s a lot of different emerging markets out there that you can look at. I’m just even looking like right now… I mean, there’s India ETFs, there’s capital emerging market, bond funds. There’s crazy amounts of actual sectors and EFTs that you can invest in with diversity and with options. There’s a lot of things out there. Again, I focus on some of the top ones like EEM, EWZ which is Brazil. I don’t know if I mentioned that. EWW, RSX, FXI, FXY. EWY is another one that we recently traded. Those are all the ones that we throw into our basket, throw into our watch list and monitor on a monthly basis or on a weekly basis and see if there’s trading opportunities there. Okay. I think that pretty much wraps up this discussion. If you have any questions, let me know. Until next time, happy trading!

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