When the markets open in US tomorrow, there may be opportunities arising out of North Korea’s nuclear test. There will be directional opportunities as well as arbitrage opportunities.

If there is over reaction on the downside,this will be an opportunity to buy. If there is very little reaction, there will be an opportunity to short. Vehicles of choice are two closed end funds KF and KEF, and Korea ETF EWY.

Arbitrage opportunities will arise by capturing the short term different price reactions in KF, KEF , EWY and Korea Exchange. Please note that US prices traditionally do not always exactly track local prices in Korea. Any computations will have to take into account traditional variances between prices on these securities.

Data from market prices immediately after North Korea’s prior nuclear test is also instructive in making profitable trades