Fascinating implications of both articles put together. Some execs may have potentially hedged personal risk (against say the company share price going down dramatically) but company does not hedge a similar market risk that has actually been recognised by some senior execs.
This is one simple cap & collar scenario to hedge against a falling share price. It is 21 December 2008 BNB closes at $26. You write a one year call option on BNB at close ie $26 on 2 million shares, earn say $3 per option written. You simultaneously buy a one year put option at $26 on 2 million shares at a cost of say $3. So you subsidise cost of put option by writing call - but either way you have effectively sold your shares. Figures will probably not work out exactly, but you can fine tune by changing one or both strike prices.
With the multitude of financial derivatives existing such as Contracts For Difference (CFDs) any transaction may not even pass through the market, but be entirely off market. But if you did as above you would financially have effectively sold your shares, but may technically still hold them!
- Forums
- ASX - By Stock
- BNB
- interesting commentary article on bnb...
BNB
babcock & brown limited
interesting commentary article on bnb..., page-6
-
- There are more pages in this discussion • 1 more message in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add BNB (ASX) to my watchlist
Currently unlisted public company.
The Watchlist
RCE
RECCE PHARMACEUTICALS LTD
James Graham, MD & CEO
James Graham
MD & CEO
Previous Video
Next Video
SPONSORED BY The Market Online