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SCMP Reporter

A BID to break through the psychologically important 10,000 threshold in Hang Seng Index futures failed in early trading yesterday.

  The intra-day April future came close to 10,000 twice in the morning only to be knocked off course amid profit-taking.

  On Tuesday dealers had predicted profit-takers would hinder the index advance beyond the barrier.

  ''People will remain keen to take some gains at or around 10,000. Without some big development to shift sentiment up a gear I do not see us going through just yet,'' said a broker with a British brokerage.

  The day's high in the April future was 9,980.

  At the end of the morning session the April future was at a 64-point premium to the Hang Seng Index cash.

  After failing to breach 10,000 or even hold 9,900 profit-takers took hold of trading and the April future fell to 9,720.

  A rally set in at this stage and April closed at 9,875, a premium over the cash of 122 points.

  The cash closed up 15 points at 9,753.

  Turnover was a healthy 15,492 contracts. Of this 15,470 was in April and 13 in May.

  The open interest was 30,540 in April and 77 in May.

  In index option trading, implied volatility, which has been steadily in decline since April 6, levelled off.

  Dealers believe this could be a plateau. If not, the implied volatility is more likely to rise slightly than to go down further.

  Many believe higher market activity could be triggered as sentiment in Hong Kong stocks today are expected to gain direction from London and New York overnight, after the issue of US inflation numbers.

  However, some investors did not take this view.

  Jardine Fleming said there was heavy turnover in options.

  ''The options market was very active, with turnover of 3,320 lots, some 21 per cent of futures turnover.

  ''Investors expecting a fall in long-term volatility actively bought May 9,800 straddles and sold September 9,800 straddles heavily.''   Open interest stood at 26,675 options.

  At-the-money call and put implied volatility in April options was 38 per cent and 39 per cent.

  This is well below that of the Hang Seng cash index.

  The 100-day historic volatility for the Hang Seng Index still stands above 39 per cent.

  Implied volatility in at-the-money calls and puts in May were both 40 per cent, in June they were at a similar level and in September they were 37 per cent and 39 per cent respectively.

  A straddle is where an investor buys at-the-money put and calls, allowing the investor to profit from any increase in volatility without actually having to decide which way the market will go.

  Those selling straddles believe the market is due to be flat and hope to gain from the premium obtained on the transaction.

  Many dealers believe there will be further volatility in the market at current levels as the rise from 9,200 since the Easter break has been in less than convincing sentiment.

  Fragile market sentiment could easily knock the index off 9,750, they believe.



10,000-mark withstands two assaults