Busy profit-taking vaporises premium
THE strong premium of Hang Seng Index futures over the cash maintained in recent trading days vaporised yesterday as profit-takers got stuck in near the end of trading.
January futures opened strongly at 10,620, up 120 points over the previous 10,500 close in the wake of strong cash market buying overnight in London.
Further gains were made in early trading above 10,720 before profit-takers struck. The contract see-sawed through the remainder of the session to make about 10,650 at the lunchtime close after briefly touching a high of 10,725.
In afternoon trading the bulls were exhausted and the profit-takers got into stride, sending the January contract to 10,600 in the first minutes of trading. Two attempts to claw back some gains were stalled, taking the contract to 10,575, up 75 points on the previous close and at par with the market. The cash market closed at 10,573.9.
February futures were up 100 points on the day at 10,650, a premium over the cash of 76 points, against a premium on Wednesday of 153 points.
March futures leaped 270 points to 10,780, a premium over the cash of 206 points.
Turnover was relatively heavy at 20,651 contracts. In January there were 18,640 contracts, in February there were 2,000 contracts and in March there were 11 contracts.
Open interest for Wednesday recorded an open interest of 38,839 contracts with 34,822 contracts in January, 2,054 contracts in February, 301 contracts in March and 1,662 contracts in June.
In index options, implied volatility jumped to 17 per cent from 15.5 per cent on Wednesday. Jardine Fleming said trading in index options was dominated by bulls buying. The rise in implied volatility suggests the strong off-setting activity going on in the surge of the cash and futures on Tuesday and Wednesday was more moderate yesterday.
There was heavy trading in January 11,000 calls amounting to 1,325 lots. The 10,800 and 10,600 strikes were also busy. In the puts there was heavy focus on the 9,400 puts, amounting to 1,754 lots, indicating there were strangles being traded. Also busy in the puts were the 10,200 and 10,400 strikes.