Ann: Westpac announces $3.5 billion off-market share buy-back, page-176

After a little more thinking about the situation, I know it's so terrible for many to have huge "unrealised" losses as WBC tanked over 8% over the last 2 days. It is a kick in the gut. Westpac management is partly to blame. If they announce that they would buy on the market, it might go down but not terrible like this. I find it a huge opportunity for myself though. So, I'd like to share what I think people can do if they still have some cash on the side to deal with this disaster. The idea is that you don't sell when things like this happen to bank shares. Classic play with bank shares is to hold until you get a profit and you collect dividends in the meantime.

1/ If you have cash on the side, buy more shares and sell them to Westpac to get a "loss" recorded for future CGT purposes and get the franking credit if the situation suits (you don't have to pay much tax or you have SMSF or if you have a big capital gain from other stocks or sources). Just keep your existing shares. In bank shares play, exiting at a loss is a permanent loss. Never exit with a loss. If you don't have spare cash to top up or buy shares and sell to Westpac, just sit still and hold the shares to get a dividend.

2/ If you can trade options, it's perfect. Sell puts across Dec 16 strikes 23, 24, 25 now to cover ALL of your shares (it does not require much capital to do this). Sell all your shares to Westpac to get a "loss" recorded for future CGT purposes and get the franking credit if the situation suits. On Dec 16, you could either buy back all the shares at a big discount due to assignment or you just keep the huge amount of premium as your profit (then decide if you want to buy the shares back from the market). Make sure all the cash from the sale must be kept ready to take any assignment (option exercise by the put buyers). Without the cash to take the shares, the option game will crash and probably will cause a loss.

I myself am already into the game. On Dec 16, I either buy WBC shares at a big discount to the current price or I just have a big profit from put option premium without having to buy any share at all. I will continue to sell more puts SLOOOWLY until WBC share price turn around (probably in 2 weeks) to set up my game. Of course, I will only know for sure in a few weeks. If I am not wrong, in 2 weeks, I will start to see an unrealised profit. The option game is best played monthly with a slow setup period of 1-2 weeks. I have waited a long time for this opportunity to trade WBC. Due to the big drop, the put premium is so good now! This will not last for long. Will be happy to share info if anyone is unsure how to use options to deal with this situation.