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Earnings Derivatives

What are earnings derivatives?

Earnings derivatives are a tool for investing directly in company and industry earnings streams. This can be implemented as either options or futures. Options on earnings are cash settled where the strike “price” is based on a target earnings level, with expiration dates that coincide with the release of company earnings reports. Futures products follow a similar logic, with cash settlement based on the realized earnings level reporter n a certain date.

Stock price can be broken down into the earnings a company generates and a multiple on that earnings. Earnings reflect actual company performance. Multiples reflect market sentiment about future changes. Earnings derivatives turn earnings into their own investable asset class. This allows you to make investment decisions based directly on business fundamentals, rather than changes in stock market sentiment. You can also use earnings derivatives to hedge short term earnings uncertainty and mitigate volatility of stock positions. We have three patents pending on the unique methodology behind earnings derivatives. As this market develops it will be the biggest change to equity investing since the invention of stock options in the 17th century.

What kind of investors trade Earnings Derivatives?

Earnings derivatives were originally designed for long/short equity hedge funds looking to hedge their portfolios against earnings uncertainty. They can also be used as a tool for expressing a view on company fundamentals over a specific time period , separate from changes in market sentiment or changes in forward guidance. However, with the rise of big data, and quantamental analysis, they have become an ideal tool for active equity traders.

Can retail investors access earnings derivatives?

We anticipate heavy interest from sophisticated retail investors. Earnings calls are data heavy news events. Retail investor blogs and websites are full of earnings opinions. Traffic on sites such as Seeking Alpha surges around earnings days. Crowdsourced earnings estimate site Estimize has over 100,000+ contributors.
I’m an active trader, what can I do with earnings derivatives?
Debate over whether a company will meet or beat quarterly earnings expectations will drive trading volume on a consistent basis.

Where can I trade earnings derivatives?

We expect to have it licensed to one or more exchanges soon. Additionally, we are developing a tokenized version that will trade on the Ethereum Blockchain. Please email if you are interested in learning more.

BLX Global Indexes

What is earnings power indexing?

Earnings Power Indexing extends the idea of earnings derivatives to sectors and themes. We developed this unique method of indexing that can track rolling trailing twelve month earnings and revenue of different industries. For example the FAANG Revenue Index directly tracks changes in combined aggregate revenue of Facebook, Amazon, Apple, Netflix and Google. The Domestic Airlines Revenue index does the same for the airline industry. Options on these indexes can be used to hedge industry downturns, or express macro views at the industry level. It’s all about separating out company fundamentals as a tradable asset.
Why do you calculate based on trailing twelve month earnings and revenue?

Where can I find information on BLX Global Indexes?

Investors can find indexes on the Thomson Reuters Eikon platform under the following symbols:

Select Bank Revenue (.BLXSBR)
Select Bank Earnings (.BLXSBE)
Airline Revenue (.BLXDAR)

Additionally, investors can find historical index data, along with analysis tools on our Github page.

What other financial products have you developed?

In addition to options and futures, our indexes can be used for Structured Products, Exchange Traded Notes(ETNs),Contracts For Differences(CFDS), binary options, Swaps, Annuities and Insurance Contracts.

BLX Global

Who is BLX Global?

BLX Global Markets develops and licenses innovative financial products. Our offerings are centered around Earnings Derivatives®, which allow investors to make direct investments in company earnings streams, and express granular views on individual value drivers. The ability to turn bottom line financial metrics into tradeable and hedgeable assets makes our patent pending system unique. We provide a full spectrum of index and derivative products for exchanges, investment banks, and asset managers around the world.

Do you have patents for your methodology?

The system and methods used for Earnings Derivatives and Earnings Power Indexing are covered by the claims of patents issued and pending in the US and other Countries. These include pending US patents Nos. 16281163, 62865736, and 62906547, and pending Patent Cooperation Treaty International Applications PCT/US19/33432.