Sie sind auf Seite 1von 1

Insight

www.etfiasia.com

Synergising ETFs
A menu full of options
By Imran Ahmed asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date). 2 Option contracts are used by investors in different ways. Being able to buy and sell options on a particular ETF security adds a tremendous amount of flexibility to the ways investors manage positions in specific ETFs. For example, option contracts permit investors to create leveraged positions in underlying securities. Take an investor with US$10,000 cash. They may buy less than 100 shares in the SPDR S&P 500 (SPY ) ETF at SPYs current price of approximately US$136. However, with SPY August US$137 (stated as options symbol, expiry date and strike price respectively) call options trading at US$420 per contract an investor may purchase over twenty call option contracts effectively giving the purchaser exposure to over 2,000 shares of SPY. Thus, up to maturity in August, the potential profits associated with the position is much larger than an outright cash purchase of SPY.3 Given the wide reach of ETFs, investors may use options to speculate in asset classes previously unavailable to direct equity investors. An investor with a strong view negative or positive about gold or the euro can translate these views into practical investments. They may purchase put or call options on the ETFs which track the performance of the two assets, SPDR Gold Shares (GLD) and the CurrencyShares Euro Trust (FXE), respectively. Investors may undertake similar trading strategies with other commodities, currencies, sectors, countries and sub-asset classes. Options have many purposes. They are not merely used for speculation. Amongst an options primary uses is risk management at both the individual security and portfolio level. Again, combining the breadth of ETFs with the features of options places a large amount of flexibility in the hands of investors. The simple act of insuring a portfolios value by buying a put contract on a relevant market index is one easy solution. However, at the individual security level, creative uses of ETFs can help reduce portfolio risk. Many individual stocks, particularly for small and mid-cap companies, have low levels of option open-interest (or sometimes no options trading facility). Although not the same as an options liquidity, open interest provides an indication of the activity in a particular months put or call contract. Open interest is defined as the number of outstanding contracts at the close of a particular day. For these stocks, it may be more efficient to utilise option contracts in the companys sector. For example, if no (or expensive) put options are available on a small, local bank stock then one solution, albeit imperfect, to managing downside risk is to purchase put options on a banking sector ETF. If one is quantitatively inclined, the number of put option contracts purchased may be determined mathematically by using correlations between the stock and its respective sector index. ETFs have brought into play entire sectors and asset classes which were hitherto unavailable to many classes of equity investors. Separately, options traders are aware of the operational flexibility that put and call option contracts add to a portfolio. Combining ETFs and option contracts may be a classic case of the whole is greater than the sum of its parts. However, options are financial derivative instruments and carry unique risks. Investors should familiarise themselves with these risks and costs before introducing options to ETF portfolios.
Imran Ahmed is a principal at Deodar Advisors LLP. He can be reached at Imran@deodaradvisors.com

xchange traded funds (ETFs) 1 have dramatically altered the landscape for both investors and traders. As the hybrid offspring between mutual funds and stocks, the ETF contains characteristics from both its parents, including the low fees and fund structure of the mutual fund, and the trading characteristics of a stock. Much has been written about the easy access provided by ETFs to hitherto inaccessible specialised asset classes, such as commodities, foreign exchange and niche equity and debt products. Less is written about one important fundamental attribute of an ETF: the ability to buy and sell option contracts with an ETF as the underlying security.

ETFs have brought into play entire sectors and asset classes which were hitherto unavailable to many classes of equity investors
To be sure, not all ETFs are optionable but most of the larger and more significant ETFs have liquid options markets attached. Certainly, this is the case for ETFs such as the SPDR Gold Shares (GLD) and the SPDR Dow Jones Industrial Average (DIA). Even specialised sector specific ETFs like the Energy Select Sector SPDR (XLE) and the Financial Select Sector SPDR (XLF) have vibrant options markets attached to them. An option is a financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial
1 2 3

For the purposes of this article, the generic term ETF refers to exchange traded portfolios comprised of various structures, including exchange traded notes (ETNs). Investopedia, accessed May 11, 2012. http://www.investopedia.com/terms/o/option.asp#axzz1uXKNEHdW All options prices from Yahoo! Finance. Accessed on May 11, 2012.

ETFI ASIA 2012 Q2

Das könnte Ihnen auch gefallen