Latest news with #tradingstrategies
Forbes
03-08-2025
- Business
- Forbes
Sell Caterpillar Stock Ahead of Its Upcoming Earnings?
Caterpillar (NYSE:CAT) is set to announce its earnings on Tuesday, August 5, 2025, prior to the market opening. Analyzing Caterpillar's stock performance over the last five years after earnings announcements shows a significant pattern of negative responses. In 68% of cases, CAT stock has recorded a negative one-day return following the announcement of results. The median decline for one day has been -3.2%, while the maximum drop observed in one day has reached -7.0%. For event-driven traders, recognizing these consistent historical trends can provide a strategic edge, however, the actual outcomes compared to consensus and expectations will ultimately determine the results. Traders might consider two main strategies: The consensus analyst forecast for the forthcoming quarter is earnings of $4.90 per share on revenue of $16.26 billion. This reflects an anticipated decline compared to the same quarter last year, which reported earnings of $5.99 per share on revenue of $16.69 billion. As per its most recent report, Caterpillar has a current market capitalization of $208 billion. In the past twelve months, the company generated $63 billion in revenue and was operationally profitable, indicating $12 billion in operating profits and a net income of $9.9 billion. That being said, if you are looking for growth with less volatility than individual stocks, the Trefis High Quality portfolio offers an alternative — having surpassed the S&P 500 and generating returns exceeding 91% since its launch. Also, see – AMD Stock To $330? See earnings reaction history of all stocks Caterpillar's Historical Odds Of Positive Post-Earnings Return Here are some insights on one-day (1D) post-earnings returns: Additional information regarding 5-Day (5D), and 21-Day (21D) returns post-earnings is summarized alongside the statistics in the table below. Correlation Between 1D, 5D and 21D Historical Returns A comparatively less risky strategy (although it may not be helpful if the correlation is weak) is to comprehend the correlation between short-term and medium-term returns after earnings, identify the pair with the highest correlation, and carry out the relevant trade. For instance, if 1D and 5D exhibit the highest correlation, a trader can take a "long" position for the subsequent 5 days if the 1D post-earnings return is positive. Below is some correlation data based on a 5-year and a 3-year (more recent) history. Please note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and the subsequent 5D returns. Discover more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (a combination of all three, the S&P 500, S&P mid-cap, and Russell 2000), producing strong returns for investors. Additionally, if you desire upside with a smoother experience than an individual stock like Caterpillar, consider the High Quality portfolio, which has outperformed the S&P and achieved >91% returns since its inception.
Reuters
09-07-2025
- Business
- Reuters
Explainer: Why did India's securities regulator bar Jane Street?
MUMBAI, July 9 (Reuters) - Jane Street has been barred from the Indian securities market by its markets regulator, which has said the U.S. firm used its trading strategies to "manipulate" a key stock market index, leading to losses for millions of retail investors, allegations Jane Street has rejected. The Securities and Exchange Board of India (SEBI) in its interim order said Jane Street accumulated large volumes of constituent stocks of the Bank Nifty index (.NSEBANK), opens new tab, which comprises the 12 top Indian bank stocks, in the cash and futures markets, thus pushing up the index prices. Simultaneously, Jane Street took short positions in the derivatives segment by buying cheap "put" options and selling expensive "call" options linked to the Bank Nifty, the regulator said. The SEBI order said that during the second half of most days in which Jane Street's positions were studied, the U.S. firm reversed the first leg of its trade, selling the constituents in the cash and futures markets, thereby pushing down the price of the index and its constituents. This, in turn, led to a rise in value for the "put" options and a drop in value for "call" options, earning Jane Street large profits, which outweighed any losses that were incurred during the first leg of the trade. SEBI said this trading pattern created "a false or misleading appearance of market activity" and attracted "unsuspecting" investors to trade at levels that were "artificial and temporary". Jane Street, in an internal email to its employees, said the activities in question were what is known as an "arbitrage trade", which is commonly used by large trading firms in financial markets. In an arbitrage trade, firms simultaneously buy and sell the same asset in different markets and pocket the profits from the difference in prices. In its internal memo, Jane Street argued there was a large gap between the price of the Bank Nifty index in the options markets and the price implied by the level at which the stocks were trading. This divergence, it said, was clearly observed and Jane Street traded in a direction consistent with closing that gap. Arbitrage trading is legal in India. According to details in the SEBI order, the first is size. In the first leg of the trade, where Jane Street was buying shares of constituents of the Bank Nifty Index, it was doing so in volumes large enough to move the index. Its trades made up 15%-25% of the entire market's traded value in the constituents of the banking index, SEBI said. The second is the distortions between the cash and derivative markets in India. India's derivatives-to-cash market ratio in terms of volume is the highest in the world, SEBI said. In 2024, this ratio was 400 times. In its order, SEBI highlighted Jane Street's trading activities on January 17, 2024 - one of the trading days under investigation - saying the U.S. firm traded roughly $1.2 trillion (103 trillion rupees) worth of cash-settled options on the Nifty Bank index. That amount equates to roughly 353 times the trading volumes of the bank stocks in the index. Proprietary trading giants such as Jane Street have made hefty profits from India's derivatives market, which accounts for roughly 61% of equity options contracts that are currently traded worldwide, according to data from the Futures Industry Association. In the 12 months to March 2024, proprietary traders and foreign investors made gross profits of 330 billion rupees and 280 billion rupees, respectively, a SEBI study in September 2024 showed. During that same period, retail traders lost 524 billion rupees. On Monday, SEBI said retail investor losses on derivative trades widened by 41% to 1.06 trillion rupees in the subsequent year. It did not blame proprietary traders for the widening losses of retail investors and nor did it provide fresh data on gains made by proprietary traders. SEBI has seized $567 million of Jane Street's funds, equivalent to the amount of what it calls "unlawful gains". The U.S. firm can deposit that amount and regain access to the Indian markets. It also has 21 days to file its reply or any objections to the order, and can also challenge the order judicially via the Securities Appellate Tribunal. SEBI, meanwhile, is working on a final order and also expanding its investigation into Jane Street's trade on indexes other than the Bank Nifty.
Bloomberg
07-07-2025
- Business
- Bloomberg
Jane Street Probe Prompts India to Upgrade Market Surveillance
India's securities regulator plans to boost its surveillance systems to better detect complex trading strategies after taking action against high-speed trading giant Jane Street Group for alleged market manipulation. The Securities and Exchange Board of India is beefing up its monitoring capabilities to address the 'surveillance issue' revealed by the Jane Street case, Chairman Tuhin Kanta Pandey told reporters Monday.
Telegraph
01-07-2025
- Business
- Telegraph
What is a moving average, and how do you use it?
Moving averages seek to cut through the noise of wild swings in the stock market to provide a clearer picture of what is driving prices. Through the application of moving averages you can use the same techniques market professionals apply to establish whether the current price is looking expensive or cheap relative to the trend they have identified, and then profit from its future response. Here, Telegraph Money explains what a moving average is, and the strategies to use it. What is a moving average? Formula Moving average in stock trading Strategies using moving average Reasons to beware of the moving average What is a moving average? The moving average is a simple mathematical calculation that uses the mean of the closing price of any asset over a given period of time. Because it simply uses price and time periods, it can be applied to any market, from share prices, foreign currency, and commodities like oil and gold. So, for example, to use a five-day moving average you take the closing price of an asset from five consecutive days, add all these together, and then divide by the number of periods, five in this case, to calculate the first point on your chart. The average is moving because as you add every subsequent day's trading into the calculation the first price drops out from the total and you still divide by five, thus it 'moves'. It is considered a trend-following tool because it is always looking at past or lagging data. Formula The moving average calculation works as below, where 'P' refers to the closing price. The length of time can be whatever you like, but we've used five days: Five-day moving average = P1+P2+P3+P4+P5 / 5 Exponential Moving Average The exponential moving average works in a similar way, but it adds more weight to the most recent price movements, so the average reacts faster to changes in the market, and so it can allow you to identify changes in the trend more quickly. To calculate the exponential moving average you start with the same simple moving average calculation and then work out the weighted multiplier. Five-day moving average = P1+P2+P3+P4+P5 / 5 Weighted multiplier: 2 / (selected time period, in this case 5 + 1) In this example, this comes to 0.3333 or 33.33pc. Then add it all together to establish the exponential moving average. Exponential Moving Average (EMA) = Price (p) x M + EMA (y) x 1 – M In this case, p = closing price today, M = weighted multiplier and EMA (y) = EMA yesterday In our example of a five-day exponential moving average we can see it would apply a weighting of a third to the most recent closing price, and the other two thirds to the previous four days, as opposed to the simple moving average which weights each closing price a fifth. Moving average in stock trading Because you are creating an average rather than following the daily price, it smooths out the wild swings you can sometimes get in the market. Say, for example, there is somebody in the market who is forced to sell their entire holding in one day. The price of that asset on that day would fall sharply, but by looking at the moving average you would see it as an upward trend, and as an isolated event, so you could then buy on this weakness. The most commonly used averages are the 50-day, 100-day and 200-day moving averages. They work because by filtering out the daily market noise, it shows a clear trend in either a rising bull market or falling bear market.
Reuters
30-05-2025
- Business
- Reuters
HEDGE FLOW Hedge fund investors want managers who trade macro, says SocGen survey
LONDON, May 30 (Reuters) - Hedge funds that trade on big macroeconomic market swings have become a top pick for investors, according to a Societe Generale ( opens new tab survey of 322 firms, against a backdrop of global markets roiled by tariff uncertainty and stop-start trade wars. Half of the respondents polled said they would consider putting their money into discretionary global macro hedge funds in the next 12 months, the SocGen survey conducted between November 2024 and May 15 showed. The private survey was sent to investors on Wednesday and was seen by Reuters on Friday. The number of respondents expressing interest in putting money into macro hedge funds rose by around 9% compared with the bank's last survey in autumn 2024, the report said. According to hedge fund research firm PivotalPath, global discretionary macro managers, not using systematic trading to come up with trade ideas, posted a return of around 7% on investment through April in 2025, compared with a flat performance by the wider universe of hedge funds. Investor interest in equity market-neutral funds also grew roughly 10% since SocGen's autumn survey, the report showed. These hedge funds trade a balance of stocks, trying to maintain a portfolio which neither positions them long nor short stock markets as a whole. A short bet expects an asset value to decline. While global macro hedge funds taking discretionary bets often top this survey, the investors queried by SocGen expressed their highest enthusiasm for the strategy in two years, the bank data showed. Crypto hedge funds garnered the least intent to invest from those surveyed, with just 6% of investors wishing to allocate to the strategy, the lowest proportion in two years. Interest in multi-strategy hedge funds ticked up, with roughly around a third of investors surveyed interested in systematic and fundamental multi-strategy funds, up 5% and 4% respectively since the same time last year. Multi-strategy hedge funds trade many different kinds of markets under one brand.
