DECEMBER Hang Seng index futures slumped in morning trading yesterday amid persistent overseas selling.
The contract closed 120 points off at 9,865, a premium over the cash of just seven points.
January futures fell 110 points to 9,925, a premium over the cash of 67 points.
Turnover was a modest 16,213 contracts, with 14,200 in December and 2,000 in January as roll-over activity picked up.
In index options, Jardine Fleming said: 'In December and January, premium sellers sold out-of-the-money options.
'Volatility sellers who speculated for a further decline in volatility in the coming weeks sold December 10,000 straddles.' There were 2,579 lots traded in the index variety of options while 830 lots in HSBC, 2,918 lots in Cheung Kong and 264 lots in Swire Pacific were traded.
Premium sellers are investors who do not believe there is going to be a rise in volatility. They sell options on the basis they believe they will not be exercised. They will count a gain on the income received on the back of the sales.
