Last month's equity put options written against China Construction Bank and Hutchison Whampoa expired unexercised.
I have rolled the money over into an equity put option against the Hong Kong Tracker fund (2800). Given current market conditions, I have gone with a conservative underlying and a relatively conservative price. Here are the details:
Underlying: Hong Kong Tracker fund (2800)
Market price: $20.60
Strike price: $19.58
Valuation date: 25 September
Maturity date: 28 September
Implied yield: 9.44%
Net purchase price if exercised: $19.43
In effect, if the option is exercised against me I will end up purchasing Hong Kong Tracker fund at a discount of 5.7% to the current market price.
Thursday, August 27, 2009
Tuesday, August 25, 2009
New property purchased
In spite of the rise in property prices, I have kept looking at properties for investment. With interest rates being as low as they are (below 1% on mortgages and zero on bank deposits), even a modest yield from real estate looks attractive.
I looked at a number of properties before putting in an offer on a property being sold as part of a bankruptcy proceeding last month. It would have been a bargain apart from one small detail - the trustee in bankruptcy (i.e. the government) did not have the title deeds and expressly disclaimed any liability for providing them. In effect I would have no assurance that I would get title to the property, would not be able to get a mortgage and would not be able to sell the property. Needless to say, that offer was quickly withdrawn.
The second property I tried to buy was sold before my offer was submitted.
On Sunday afternoon I looked at some more properties and put in an offer on one which I thought was good value in the current market. After some haggling the offer was accepted last night. The next steps are:
1. get finance - I have started shopping around for a mortgage. Even with a mortgage I will need to sell some of my equity investments to complete the purchase;
2. get quotes for refurbishment - I am asking for quotes for (i) basic fit out and (ii) full luxury remodeling. I will then run the numbers and see which makes the most sense.
As a rental proposition, the apartment may rent best with a carpark (which it does not have). I will look into buying a car parking space separately.
I looked at a number of properties before putting in an offer on a property being sold as part of a bankruptcy proceeding last month. It would have been a bargain apart from one small detail - the trustee in bankruptcy (i.e. the government) did not have the title deeds and expressly disclaimed any liability for providing them. In effect I would have no assurance that I would get title to the property, would not be able to get a mortgage and would not be able to sell the property. Needless to say, that offer was quickly withdrawn.
The second property I tried to buy was sold before my offer was submitted.
On Sunday afternoon I looked at some more properties and put in an offer on one which I thought was good value in the current market. After some haggling the offer was accepted last night. The next steps are:
1. get finance - I have started shopping around for a mortgage. Even with a mortgage I will need to sell some of my equity investments to complete the purchase;
2. get quotes for refurbishment - I am asking for quotes for (i) basic fit out and (ii) full luxury remodeling. I will then run the numbers and see which makes the most sense.
As a rental proposition, the apartment may rent best with a carpark (which it does not have). I will look into buying a car parking space separately.
Wednesday, August 19, 2009
Equity Put Option Written
Last month's equity put option over the Hong Kong Tracker fund (2800) expired unexercised.
Once again, I have rolled the contract forward for another month, this time using China Construction Bank (939) rather than the Tracker fund. However. I have been less aggressive and used a strike price a bit further out of the money and accepted a smaller option premium as a result. The reason for using a specific stock is that the premium offered was materially higher than the premium on the Tracker fund.
Details are as follows:
Underlying: China Construction Bank (13)
Market price: $5.81
Strike price: $5.47
Valuation date: 17 September
Maturity date: 21 September
Implied yield: 10.24%
Net purchase price if exercised: $5.43
If I get hit I will have effectively purchased the shares at about a 6.5% discount to the prevailing market price.
Once again, I have rolled the contract forward for another month, this time using China Construction Bank (939) rather than the Tracker fund. However. I have been less aggressive and used a strike price a bit further out of the money and accepted a smaller option premium as a result. The reason for using a specific stock is that the premium offered was materially higher than the premium on the Tracker fund.
Details are as follows:
Underlying: China Construction Bank (13)
Market price: $5.81
Strike price: $5.47
Valuation date: 17 September
Maturity date: 21 September
Implied yield: 10.24%
Net purchase price if exercised: $5.43
If I get hit I will have effectively purchased the shares at about a 6.5% discount to the prevailing market price.
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