OPEN interest on the Hang Seng Index options market is ready to pass its all-time high after just eight trading days this month, leading dealers to predict a good response to the options on individual stocks planned for next year.
Last week's record trade of 6,301 contracts equals 17 per cent of futures trade and nearly 15 per cent of equity trade, and works out at an equivalent daily average of $500 million.
Open interest, which rises during the month and falls back as each series of contracts expires, stood at about 16,000 contracts on Friday, just 1,500 off the record of 17,571 when the August contract expired.
''Trade is picking up quite a lot,'' said Leon Christianakis, director for dealing and derivatives at W.I. Carr. ''Investors are getting more confident.'' On the launch of individual stock options next year, Mike Gorham, director of SBC Derivatives (Far East), said: ''A lot of the road has been paved.'' W.I. Carr is ready to join the four existing market makers in the middle of next month. These market makers, known as registered traders, quote prices on all options and ensure market liquidity.
However, Credit Lyonnais' plans to start market making by the middle of this year have been delayed.
One British-based dealer said the 2,021 contracts traded on Thursday, the second busiest day since the market was opened in March, were swelled by arbitrage activities by Morgan Stanley.
He said the US investment house wanted to make a major arbitrage play when the Hang Seng Index was standing substantially above the September futures, and turned to the options market because the futures market could not offer a single price for dozensof contracts.