Thursday, May 14, 2009

Equity put option rolled over

One of my two outstanding put options written against the Hong Kong Tracker fund (2800) expired today. With the market down nearly 600 points the premiums for writing put options were quite high so I have rolled over the contract:

Strike: $15.56
Market: $16.54
Underlying: Hong Kong Tracker fund (2800)
Implied yield: 13.94%
Determination date: 11 June
Maturity date: 15 June

Of course, if the market goes into free fall, this will be an expensive mistake. That said, the underlying is an index fund - I am enough of an optimist to believe that all I would have to do is wait to recover the money.

As an aside, there are some large cap stocks which look attractive as individual investments. Next time around, I may be more aggressive and write a close to the money put option against an individual stock on the theory that if I get hit, I will have purchased at below the prevailing market price and if I do not get hit, I will have pocketed a much larger option premium.

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