BarCap and Merrill Lynch expand derivatives research

Barclays Capital and Merrill Lynch have released new reports on derivatives strategies.

The investment banking arm of Barclays has published ‘European Option Strategies: Combining directional and volatility views’. The report merges Standard and Poor’s analysis on equity underlyings with Barclays’ own on volatility and derivatives. It uses this information to identify attractive options, among them buying medium-term strike calls in Novartis, the Basel-based pharmaceutical company, due to low implied volatility and the possibility of corporate growth. Unwinding put overlays in France Telecom are also recommended, given the stock’s recent strong performance.

Priya Balasubramanian, the report’s author, said the link allowed Barclays to produce the most effective derivatives strategy for their customers. She also said it was the first time the rating firm’s research had been used in this way.

Merrill Lynch is also expanding its derivatives research offering. Its new report, ‘Global rate derivatives strategies’, focuses on opportunities in interest rate derivatives.

Among opportunities highlighted in the report are likely rises in eurozone interest rates while US rates look to be held, as well as a low implied historical volatility ratio in the European market.