Readings: VIX, Fertilizers, Share buybacks
- VIX & More: Ten Things Everyone Should Know About the VIX
Q: How is the VIX calculated?
A: The CBOE utilizes a wide variety of strike prices for SPX puts and calls to calculate the VIX. In order to arrive at a 30 day implied volatility value, the calculation blends options expiring on two different dates, with the result being an interpolated implied volatility number. For the record, the CBOE does not use the Black-Scholes option pricing model. Details of the VIX calculations are available from the CBOE in their VIX white paper.
Q: How do investors use the VIX to time the market?
A: This is a subject for a much larger space, but in general, the VIX tends to trend in the very short-term, mean-revert over the short to intermediate term, and move in cycles over a long-term time frame. The devil, of course, is in the details.
For NSE’s India VIX, go here.
In the United States, farmers in Iowa eager to replenish nutrients in the soil have increased the age-old practice of spreading hog manure on fields. In India, the cost of subsidizing fertilizer for farmers has soared, leading to political dispute. And in Africa, plans to stave off hunger by increasing crop yields are suddenly in jeopardy.
Overall global consumption of fertilizer increased by an estimated 31% from 1996 to 2008, driven by a 56% increase in developing countries.
Prices at a terminal in Tampa, Fla., for one fertilizer, diammonium phosphate, jumped to $1,102 a ton from $393 a ton in the last year, according to JPMorgan Securities, which tracks the prices. Urea, a type of granular nitrogen fertilizer, jumped to $505 a ton from $273 a ton in the last year.
- Economic Times: Share buybacks in India touch a record $1.1 billion
Share buybacks totalled $1.1 billion from nine deals so far this year. Of the nine only that of Madras Cements has been completed (March 5, 2008).
The other buybacks that have been initiated but are yet to be completed include that of Reliance Energy, Great Offshore, Mastek, Patni Computer, Gujarat Flurochemicals, JB Chemicals and Pharma, Sasken Communication and Goldiam International.
As per Thomson data, India is the 15th most active in share buybacks globally. With Reliance Energy’s $885.9 million buyback, India has also recorded the biggest share buyback in Asia so far this year.
Note Niederhoffer’s study on stock buybacks - “The 76 companies which have announced buybacks so far in 2006 have outperformed the S&P 500 by 1.8 percentage points, while stocks announcing buybacks in 2002, 2003, 2004 and 2005 have outperformed the S&P by 13.7, 16.4, and 10.0, and 4.2 percentage points since inception respectively”.
Wonder if this is applicable to Indian stocks as well.
