Australian (ASX) Stock Market Forum

Santos Call Options

Jump to new
sanford002

sanford002

Joined
3 January 2008
Posts
3
Reactions
0
Could any here tell me what happens to the OPtion prices when there is a scenario like the one happening with Santos now.

Does the parcel of shares held inthe option automatically increase...due to the 2 for 5 offer...

and it will be interesting to see what happens to the share price after the tradign halt....in case of BSL the price shot up quite a bit..same with BHP previously...

My analysis is based on these previous articles...

http://www.shawstock.com.au/news/post/BlueScope-completes-capital-raising.aspx

http://www.businessspectator.com.au...tal-rai-pd20090505-RQVTX?OpenDocument&src=tnb


Cheers
John
 
Hi Sanford,

Please see attachement, ASX circular in light of the capital raising, and how it effects STO options.

Cheers
 

Attachments

  • sto.pdf
    35.9 KB · Views: 215
Sheesh, can they express it in a more complicated manner or what?!
Can someone translate it for me please?
I hold 1 contract of May 15 calls on STO. What happens to these?

Also, when does the trading halt end?

Cheers, Emil
 
emilov said:
Sheesh, can they express it in a more complicated manner or what?!
Can someone translate it for me please?
I hold 1 contract of May 15 calls on STO. What happens to these?

Also, when does the trading halt end?

Cheers, Emil
Click to expand...

Emil, I think it's a fairly complicated formula - probably why no one answered your question - it was certainly my reason. I was in Telstra options not long after starting options trading and it was a similar process to what has happened in STO and I didn't fully understand it then either. However, I found out it all panned out OK.

You will notice that, although the strike price has been adjusted, there will now be an increased number of shares per contract (SPC) on your option, so technically, you should still hold the same value as you did before. Of course, the total value of your option will continue to increase or decrease depending on the underlying movement.

Just as a point of interest going forward, one of the biggest nuisance factors with these strike and SPC changes is that, as time moves on, new month option strikes will be listed at the regular strike prices. It then makes it complicated for any sort of calendar rolls or spreads with different SPC between the different time series.
 
Ok, so in case anybody cares: my 15$ call (worth around 2400$ on Monday) was replaced with a 14.14$ call (now worth around 350$). You can read about my frustration here.

Cheers, Emil
 
emilov said:
Ok, so in case anybody cares: my 15$ call (worth around 2400$ on Monday) was replaced with a 14.14$ call (now worth around 350$). You can read about my frustration here.

Cheers, Emil
Click to expand...


Hi emilov

As far as I can tell the drop in your options worth is not caused by the process of the re-evalution of the strikes but due to the dilution of the value of each share by the introduction of the new issues

Has your calculation included the extra 16 shares that your contract now holds now a contract size of 1016 as opposed to the initial 1000 , probably doesn’t add up to much but worth the consideration

More so the drop is due to the issue price of $12.50 even with the extra 16 shares picked up per thousand it is still well below the previous trading prices

If the issue price was known over the last few months would people be buying in at 15,16, or 17 . no way , knowing the dilution affect of the new shares and the issue price?

In my experience quite often there are runs on a stock prior to a raising pushing the price up and I am a firm believer in market manipulation

In your case i suppose its whats known as a black swan event that could not have been foreseen by those outside of management and those in the know.
 
jackson8 said:
Hi emilov

As far as I can tell the drop in your options worth is not caused by the process of the re-evalution of the strikes but due to the dilution of the value of each share by the introduction of the new issues

Has your calculation included the extra 16 shares that your contract now holds now a contract size of 1016 as opposed to the initial 1000 , probably doesn’t add up to much but worth the consideration

More so the drop is due to the issue price of $12.50 even with the extra 16 shares picked up per thousand it is still well below the previous trading prices

If the issue price was known over the last few months would people be buying in at 15,16, or 17 . no way , knowing the dilution affect of the new shares and the issue price?

In my experience quite often there are runs on a stock prior to a raising pushing the price up and I am a firm believer in market manipulation

In your case i suppose its whats known as a black swan event that could not have been foreseen by those outside of management and those in the know.
Click to expand...

sorry the above should read 1061 shares per contract which makes it extra 61 over the original contract size
 
Oh hell yeah it was because of the dilution, no question about that. I did receive a call with a lower strike price and yes, the contract size grew as well. But that appears to me that even if the manure they gave me instead of my cake stinks slightly less it still remains manure.

Damn, I just saw that oil dropped over night in he US. When it rains it pours eh?...
 
emilov said:
Oh hell yeah it was because of the dilution, no question about that. I did receive a call with a lower strike price and yes, the contract size grew as well. But that appears to me that even if the manure they gave me instead of my cake stinks slightly less it still remains manure.

Damn, I just saw that oil dropped over night in he US. When it rains it pours eh?...
Click to expand...

Hi emilov

A couple of buy recommendations from the finance page of my local paper, the Sunday mail. their reason being

Quote…santos has announced a potential $3bn capital raising with part of the proceeds contributing to its equity share of the PNG LNG project. The issue capitalises well on the recent strength of the stock price and the $A and see this raising as a significant vote of confidence in the LNG project . santos represents good value after the adjustment of the share price to the capital raising,…..

Another

Quote…the local oil and gas producer aims to raise up to $3bn at $12.50 to fund its share of the PNG LNG project. We encourage shareholders to take up their rights to these shares discounted on a 2:5 basis. We also believe the share price weakness following this rights issue offers an opportunity for new investors to buy into one of australia’s premier oil and gas companies……….

Best of luck
gary
 
Thanks Gary,
I do understand that Santos is a good value and a profitable company. Unfortunately my calls expire in less than two weeks. We'll see how things go, I might roll my calls out if Santos appears to have resumed its trend.

Cheers, Emil
 
emilov said:
Thanks Gary,
I do understand that Santos is a good value and a profitable company. Unfortunately my calls expire in less than two weeks. We'll see how things go, I might roll my calls out if Santos appears to have resumed its trend.

Cheers, Emil
Click to expand...

hi emil

is it worth selling a couple of calls against them to recoup a few dollars though it will cap some gains in the event of a big move
 
Gary, thanks mate. That is on my list. Let's see how things develop next week. Oil did fall so energy stocks should drop on Monday. But that might not happen to Santos, since it is "such a good value" currently.

Cheers, Emil
 
Emil, if it drops it might be worth seeing if it's worthwhile to buy one of the $13.67 calls and then sell two of the $14.14 - especially IF it can be done for no cost or a tiny debit. This would effectively leave a bull call spread of $13.67 (long)/ $14.14 (short) and would lower the breakeven by 47c. Highest open interest for STO in May is the $14.14 strike - not that it guarantees it will go there by expiry, but it can add a little to the possibility.

One of the biggest drawbacks could be your brokers fees if you are paying $75. With IB, the total cost of the above adjustment would be $9 (inclusive of ASX fees).

Something to consider... Hopefully, though, it will simply keep rising and not dip with the oil price...:)
 
Sails thanks for that advice. Oh, I just read about the commission of 9$ and my reaction was, say whAAT? Are you saying I can get away with 9$ per leg? Where is this wondrous broker? And what is the catch?
 
emilov said:
Sails thanks for that advice. Oh, I just read about the commission of 9$ and my reaction was, say whAAT? Are you saying I can get away with 9$ per leg? Where is this wondrous broker? And what is the catch?
Click to expand...

Oh no, not advice! Just a suggestion... :)
And the fees would have been $3 to purchase the long call and $6 for the two short call trades. They also constantly advertise on ASF...

Interactive Brokers - US based but have made it possible to use them for Oz trading. Here's the link to the commission page: http://www.interactivebrokers.com/en/accounts/fees/commission.php?ib_entity=llc

There are a few catches with them - one big one is if you are writing options and get assigned AND if you don't have the money or stock to cover the assignment. That can do a lot of damage to one's account if you don't know the rules and abide by them. I think you have to have some experience before trading with them, so suggest you check that out as well.

IB also have data fees of $37.50 per month and I think a $10 per month inactivity fee. Please check it out for yourself as I am not an IB rep and don't know what is applicable for you personally. You also might find the account opening process a bit frustrating.

Otherwise, there are other cheaper brokers than $75 min. If you are just doing long trades such as your STO trade, Trader Dealer has a minimum of about $26 + ACH fees - website here: http://www.traderdealer.com.au/. However, they have not been keen on credit spreads and certainly not uncovered written options and they use Iress for trading which can be costly if you aren't doing a lot of trades per month.

Otherwise check out the likes of Etrade, Commsec.
 
But mate are you sure about these prices? I mean a contract in the US is 100 shares and here it is 1000 shares. It's gotta be a mistake, who does not EVERYONE use them here? All brokers here would be out of business as they charge 10x or more....
 
emilov said:
But mate are you sure about these prices? I mean a contract in the US is 100 shares and here it is 1000 shares. It's gotta be a mistake, who does not EVERYONE use them here? All brokers here would be out of business as they charge 10x or more....
Click to expand...

hi emil
thought about signing up with them myself but on further investigation i think you have to open with a minimum balance of 10k usd which as about 13.3k au and i am not postitive but i am not too keen on having my money tied up with an overseas broker

there are dedicated threads on brokers and am sure you will find more trustworthy information in them

gary
 
Top