Publications
Partners
THERE is still plenty of profit to be made on the world equity markets.
All you need to do is follow the "clever money".
Towards the end of November 2008, Bernard Kantor, the CEO of Investec plc, entered into a zero-cost collar on Investec plc shares.
He bought a put option to sell one million Investec plc shares at an exercise (or strike) price of R40 a share. To pay for the put option he sold a call option (or option to buy) on two million of the shares at a strike price R50 each.
The proceeds from the sale of the call were sufficient to cover the cost of the put option, hence the term "zero-cost collar".
At the time of the transaction, Investec plc was trading at R40.50.
His bet that Investec plc's price would move down towards R30 rather than above R50 was correct and paid off handsomely.
Investec plc ordinary shares trade at just below R30 and the zero-cost collar can be reversed at a very nice profit of more than R10m.
This is not a bad return, especially where Kantor's cost was zero.
Just follow the insiders.
- Fin24.com
