Bulls and bears slug it out for supremacy
A RALLY in October Hang Seng Index futures near the close of trading yesterday achieved a close in the cash above the psychologically important 10,000 threshold.
All day the cash and futures toyed with 10,000 as bulls and bears slugged it out for supremacy.
At the opening of trading the October contract fell from the close on Monday of 10,030 to 10,000 where it oscillated in contesting trading before bulls emerged supreme to take the contract back to where it closed the previous day.
Another bout of weakness met trading at the opening of the afternoon session where 10,000 support was tested once more before a strong rally took the contract to the high of the day at 10,100.
At the final close the contract was at 10,075, up 45 points on the day, representing a premium over the cash of 43 points.
In the November contract the close was 10,090, after a rise of 45 points.
Jardine Fleming said, in index options: 'Premium buyers began to look for back-month options with October expiry in two weeks time.' Overseas bulls lined up buying in November 10,000 calls and December 10,200-10,600 call spreads.
The brokerage said retail trading made up a large proportion of activity in the front month.
Futures volume was a moderate 15,750 contracts with 13,248 in October and 2,502 in November.
In index options, there were 1,055 traded. In stock options there was relatively brisk trading with 3,258 lots in HSBC, 2,232 lots in Cheung Kong and 1,011 lots in Swire Pacific A.
Implied volatility at-the-money in October index options was flat about 18.5 per cent, in December it was 23.5 per cent, and in March 1996 it was 24 per cent.
The lead in trading today again will be taken from New York trading overnight. Investors will be looking closely at the industrial production and capacity utilisation figures for any sign of buoyancy.
This could trigger new worries about inflation and an end to the three-week-old bull run in bonds.
Open interest in index futures for Monday recorded 39,994 contracts in October, 3,643 contracts in November, 155 contracts in December, and 25 contracts in March next year.