Confusion on SNS stock options
All your SNS are belong to us. In a swift move the Dutch state nationalized the bank and insurance group SNS Reaal on February 1st. It was in the air for a while, but still shocking to see shares drop from 84 cent to, well, zero.
As expected, trading in shares SNS is suspended at Euronext. The option market on SNS Reaal (SR) has been closed as well. Not possible to trade through the prof market facility nor exercise any options.
The big question mark is what will happen with the existing option contracts in SNS. The last closing price of the stock is still 84 cent. And exercising put option contracts isn’t possible. There has been some speculation in the news (fd.nl) and by Cees Smit on IEX (both Dutch). I believe both of them missed the point.
There are rules. The latest set of rules regarding corporate actions doesn’t have a paragraph on nationalization issues. But let’s suggest this is what we would call special circumstances.
6.9 Special Circumstances
If the underlying Share of the options and/or futures is no longer tradable and/or deliverable due to circumstances not described in the Corporate Actions Policy, NYSE Liffe will decide on a case by case basis what the consequences for the options and/or futures will be, and will inform the regulator of the relevant NYSE Euronext Market Undertaking on which the options and/or futures are traded before issuing a Corporate Action Notice.
In any other scenario (regular delisting), cash settlement would be the road ahead. Here Euronext Liffe can decide what to do. Settle all the options with the stock at zero will most likely be their decision, against intrinsic value (see rules, 6.5 Liquidation). Any other scenario against the closing price of Thursday would harm the confidence of investors in the market. The cautious investor being long stock with put options as protection can’t be ignored.
Another possibility would be to resume trading in SNS claims, which eventually could get some little value after legal battles in the coming years. And in the meantime, everything could be settled as normal. Euronext Liffe has got two weeks to go before the February expiration to announce their solution.
Typical gamma long vega short scenario
Of course the options settle with a stock price of 0. That’s the only fair reflection of the market.
How will the 17% or so that has been sold short be dealt with? Buy-in? 🙂
‘Typical gamma long vega short scenario’
what scenario is this?
‘Of course the options settle with a stock price of 0. That’s the only fair reflection of the market.’
you are sitting short and crapping your pants aren’t you?
‘How will the 17% or so that has been sold short be dealt with? Buy-in?’
and expect law suits if that be the case
New underlying should be the claim. No cash settlement.
It’s not like Euronext can just issue SNS “claims” because they feel like doing so. Without any sort of legal basis for a claim, Euronext would be opening up themselves for claims for issuing (potentially) worthless securities. Imagine what the prospectus for such “claims” would look like. Good luck to Euronext if they want to solve such issues withn two weeks. In plain English: that’s not going to happen. In fact, stock trades are due for settlement already by this Tuesday at the latest.
“Of course the options settle with a stock price of 0. That’s the only fair reflection of the market.’
you are sitting short and crapping your pants aren’t you?”
No. I’m long the .80 put and deltahedged it with 40% long stock.
so you are sitting short with partial long hedge and crapping your pants aren’t you?
It’s a takeover at price zero, nothing more nothing less. Euronext should use the fair value method, they always use with takeovers. The outcome is the most desireable and justifyable. And yes, I have puts.
and you have long hedges against it, you can get badly fucked on both ends, are you still crapping your pants?
don’t worry, reach out for the roll and clean yourself up, this is the easiest decision in the world, you’ll get paid fair value on the puts, you don’t need to start ranting off your stupid little worries on this stupid blog, stop worrying and get some sleep. Worst case is you don’t get paid and then you have to file a law suit, it be good exercise for your tiny little brain
so does All Options have a bumper year on this again ?
I used to have a mortgage in SNS Reaal
You don’t have to repay your mortgage to SNS then, since they are effectively bankrupt. A co-worker of mine told me so.
Yeah sure, and Sinterklaas really exists my parents told me so. Where have you been hiding?
In the co-worker’s defense, he acquired this knowledge while working at a Turkish bank 🙂
SNS stock was hard to borrow, and with a possible emission of new shares every market maker is long stock (with long put and short call). This is a riskless position, the reversal.
When stock is settled at 0, and options at 0.84 ; it would hurt all market makers and maybe putting some out of business.
If the stock is hard to borrow (i.e. short stock costs are high and priced in the options), why would anyone bother to be long stock? Wouldn’t you try to keep your stock position as close as possible to 0?
Also, hard to borrow doesn’t mean impossible to borrow. Ask GLG Partners (http://www.afm.nl/~/media/Files/registers/register-shortselling-040213a.ashx) They can also answer the question of 6.20 pm…
‘When stock is settled at 0, and options at 0.84 ; it would hurt all market makers and maybe putting some out of business.’
yeah some moron was already crapping his pants last night, pitching his balls out, it ain’t going to happen, you can bet your ass on it
The true value of the shares is what the Dutch government will compensate the shareholders.
Probably 0,000.
In that case all shares, options, shorts and turbo crap should be settled at an underlying value of 0,000.
‘Wouldn’t you try to keep your stock position as close as possible to 0?’
People do stupid things, ask them why?
‘They can also answer the question of 6.20 pm’
you are smart enough, so you can answer this, how much was the pnl for glg on this short and how much is the aum for the fund?
‘In that case all shares, options, shorts and turbo crap should be settled at an underlying value of 0,000’
are you the guy with 0.80 put hedged with 40% stock?
No, I’m the guy that was lucky enough to make the last trade ever in SNS by selling a lousy 15K & 10K short in the after closing on Jan 31…
@Short SNS:
“I’m the guy that was lucky enough to make the last trade ever in SNS by selling a lousy 15K & 10K short in the after closing on Jan 31”
And exactly how do you expect to settle your shorts?
A buy-in will follow in a couple of days, which will of course fail. Then in about three weeks time, LCH will entertain cash settlement in lieu of the delivery of shares. Which effectively means you will end up shorting at 0 (or selling at 84 cents less the premium of the buy-in). Either way, you’re not going to make a dime.
“The true value of the shares is what the Dutch government will compensate the shareholders.
Probably 0,000.”
We’ll find out in a couple of years. In the mean time, Euronext’s hands are tied. Rest assured, the Dutch ministry of finance couldn’t care less about the market makers, the hedge funds and what have you not.
[…] Bescherming kopen Gelukkig kan het ook anders, door bescherming te kopen op de bestaande aandelenportefeuille. Dit kan bijvoorbeeld door hefboomproducten in de vorm van shorts te kopen. Bij een scherpe daling beschermt dit vaak en beperkt zo het verlies, zodra de onderliggende waarde in handen van de staat komt te liggen zou dit een ander verhaal kunnen zijn, maar dat is nog even afwachten (lees hier over de gevolgen voor beleggers in aandelen SNS en voor optiehouders is dit artikel erg interessant). […]
who made big $$$ on this? all options? optiver? webb?
making big $$$ and webb traders are synonymous.
All short positions have been removed by the broker today.
Consider it case closed, thanks for the few euro’s…
“AMSTERDAM (Dow Jones)–De waarde van openstaande optiecontracten SNS Reaal (SR.AE) zal worden bepaald op basis van de schadeloossstelling die de rechtbank toekent aan de onteigende aandeelhouders, maakte derivatenbeurs NYSE Liffe dinsdagavond bekend.
Volgens juristen en optiehandelaren komt die waarde waarschijnlijk uit op een paar cent, schrijft het Financieele Dagblad (FD) op zijn website.
Om de afwikkeling mogelijk te maken, verschuift NYSE Liffe, onderdeel van NYSE Euronext, de expiratiedatum van de lopende contracten naar de dag van de rechterlijke uitspraak, die nog wordt bekendgemaakt.
Na de onteigening van de aandelen waren beleggers in verwarring over hoe de optiecontracten moesten worden afgewikkeld. Voor beleggers die speculeerden op een koersdaling van het aandeel SNS Reaal, door middel van put-opties, is de beslissing van Euronext goed nieuws. Als de contracten zouden zijn afgewikkeld tegen de laatste slotkoers van vorige week donderdag, of niet zouden zijn afgewikkeld, zouden zij de verwachte winst mislopen.
Voor professionele beleggers, zoals hedgefondsen, die op een koersdaling van SNS Reaal speculeerden door aandelen te lenen van andere institutionele beleggers, is nog onduidelijk hoe de onteigening uitpakt, schrijft het FD. Deze speculanten kunnen door de onteigening mogelijk niet aan hun leveringsverplichting voldoen. De partij die zulke shortposities afwikkelt, ABN Amro Clearing, noemt de kwestie ‘voer voor juristen’, aldus het FD.
Door Archie van Riemsdijk; Dow Jones Nieuwsdienst, +31-20-5715200 ; amsterdam@dowjones.com
(END) Dow Jones Newswires
Easy money
“AMSTERDAM (Dow Jones)-The value of outstanding option contracts SNS (SR.AE) will be determined based on the compensation claim that the court assigns to the expropriated shareholders, NYSE Liffe derivatives was announced Tuesday.According to lawyers and option traders that value comes probably from a few cents, writes the Financieel Dagblad (FD) on its website.To settlement permit, shifts NYSE Liffe, a subsidiary of NYSE Euronext, the expiry date of the current contracts to the day of the judgment, which is still being published.After the expropriation of the shares, investors are confused about how the options contracts to be settled. For investors speculating on a fall in the share SNS, through put options, the decision of Euronext good news. If the contracts were settled at the last closing price of last Thursday, or would not have been settled, they would miss the expected profit.For professional investors, such as hedge funds, on a decline of SNS speculated by borrowing shares from other institutional investors, it is still unclear how the expropriation unpack, writes the FD. These speculators can by expropriation may not fulfill their delivery obligations. The party that such short positions settles, ABN Amro Clearing, called the issue “food for lawyers,” said the FD.By Archie van Riemsdijk, Dow Jones Newswires, 31-20-5715200; amsterdam@dowjones.com(END) Dow Jones Newswires
all those puts with partial stock long hedges can finally stop shitting their paints?
http://fd.nl/beurs/815635-1302/clearing-breekt-handel-sns-open
Hopefully the short was settled already…..