Читать книгу The Guts and Glory of Day Trading - Mark Ingebretsen - Страница 20

Instead of gold stocks, this time Lo chose an even more exotic instrument: options on Japan’s Nikkei stock index. Options of any sort are difficult for many beginning investors to understand. And to really learn about them you should read a book such as Getting Started in Options by Michael C. Thomsett.

Most people are even less familiar with index options. Very few active traders ever dabble in the ones written on U.S. stock indexes like the Dow or the NASDAQ. Even fewer trade options on foreign stock indexes such as the Nikkei.

For that reason, options require a brief explanation. Options come in two varieties: calls and puts. A call gives you the right to buy a security at a certain price, called the “strike price.” What’s more, you can exercise that right at any time before the option’s expiration dated. A put is just the opposite of a call. It gives you the right to sell a security at a predetermined strike price at any point between the time you buy it and the put option’s expiration date.

If all this sounds complicated, there’s an easy way to remember it: If you’re bullish on a stock buy a call; if you’re bearish, buy a put. Conversely, if you think a stock is going down, you might sell a call. And if you think it’s going up, you might sell a put.

Unlike stocks, which will likely always maintain some value, options become totally worthless if a trader fails to exercise them before the expiration date. If you buy options, any losses you sustain will be limited to whatever price you paid for the option in the first place. However, if you sell options, your losses can be devastating. If the stock rises past the strike price of the call you’ve sold, you’re still obligated to hand over that stock at the strike price called for by the option contract. That means you may have to buy those shares at their current market price and then turn them over to your broker, who will settle the option for you. Conversely, if you sell a put option at a strike price of $50 and the stock drops to $10 per share, you’re still obligated to purchase those shares for $50.

Options on foreign stock indexes are an order of magnitude more complicated. For starters, most trade on the Philadelphia Stock Exchange, a market few people outside the trading profession and outside of Philadelphia have even heard of. The mechanics of index options differ slightly from equity options, too. In certain instances, an index option gives you the right to acquire the entire basket of shares making up a particular index, such as the S&P or the Nikkei. However, in practice people simply sell the options – either at a gain or a loss – before they expire.

Why do people trade foreign index options? One reason: Institutional investors may use index options as a hedge against their foreign stockholdings. For example, if you’re a mutual fund manager with heavy holdings in the Japanese stock market, you might purchase some puts as insurance in case the Japanese stocks in your portfolio crash. Since puts give you the right to sell stock at a specific price, any downward move in the Nikkei Index would result in the put increasing in value. In this way, gains made on the eventual sale of the puts would help offset any losses in the stocks you won. Of course, if the Nikkei were to surge upward, the puts would decline in value until eventually they expired worthless. But remember, you purchased these puts as a kind of insurance policy. If the puts expired worthless, it means that your portfolio as a whole would have grown in value thanks to the increasing price of its component stocks. For prudent investors this is a win-win strategy if executed properly.

By contrast, for individual speculators such as Teresa Lo, index options offer the prospect of fantastic gains or crushing losses. Both result from the huge leverage they offer.

From February to March 1993, that leverage seemed all the more enticing. The Nikkei had bottomed out. And Japan was wallowing in a recession that would last the remainder of the decade and beyond. With such a bleak economic forecast, no one expected a significant move in the Nikkei anytime soon. Therefore, call options on the Nikkei Index with strike prices well above the index’s current level were selling for practically nothing.

At the same time, Lo and other traders at Canaccord noticed that the charts tracking the Nikkei had seemingly bottomed out. “It was a major low,” she recalls. “All of the cycles were coming together on the daily, weekly, and monthly charts. One of the guys in the office said, “We’ve got to take a punt on this.”

Soon a small group of traders at Canaccord began buying calls with expiration dates from one to two months out. “We weren’t being very scientific,” Lo recalls. “We’d buy some for a month out and buy some for a couple of months out. We did it very slowly, because no one else was trading Nikkei calls at the time. And there was very little liquidity. We’d buy five each day, and we’d buy all kinds of different strikes so no one would figure out that it was us accumulating.”

Lo herself eventually amassed roughly 100 Nikkei calls. Some were selling for as little as 5⁄16 or $1. Which means she was paying $100 or less for the entire contract. All in all, she figures she wagered $15,000. That’s a huge bet when you consider that the options she’d purchased were highly illiquid, and that their strike prices were 100 to 200 points above where the Nikkei currently languished. The odds were that Lo’s options would simply expire worthless.

“Then one day I came into the office and there was a standing ovation,” she remembers. “People said the Nikkei was up 600 points. Some of the calls went from 5⁄16 to $15 or more.” As a result of the sudden and unexpected rise in the Nikkei, traders elsewhere around the globe who had shorted Japanese stocks now needed to cover their positions or face gruesome losses. The panicked short covering, of course, drove up the Nikkei Index further. Lo and her fellow traders held on to their positions as long as they dared before the option’s expiration in order to catch as much of this price rise as possible. Her $15,000 bet had returned roughly $100,000.