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S.Korean shares rebound on option expiry

01-12-2012 16:28 BJT

SEOUL, Jan. 12 (Xinhua) -- South Korean shares rebounded Thursday as investors delayed their liquidation of option-related positions despite the option expiry, analysts said.

The benchmark Korea Composite Stock Price Index (KOSPI) rose 19. 02 points, or 1.03 percent, to close at 1,864.57. Trading volume stood at 471.02 million shares worth 5.31 trillion won (4.59 billion U.S. dollars).

The KOSPI started higher, but turned into negative terrain during the morning session as investors were weighed by concerns over Europe's debt crisis. The global credit appraiser Fitch Ratings urged the European Central Bank (ECB) to purchase more government bonds in a bid to save Italy and prevent a "cataclysmic " euro collapse.

The key index, however, shifted into positive terrain, and extended its gains throughout the session on hopes that the U.S. economy was continuing its moderate recovery trend. According the Federal Reserve's beige Book, the U.S. economic activity increased "at a modest to moderate pace" in the last month of 2011.

There have been big worries about the possible selling spree on the option expiry, but investors delayed their liquidation of option-related positions as prices of reversal, or the position taken by selling index futures, buying call options and selling put options, soared during the trading.

"There were unexpectedly no liquidation of option-related positions as foreign investors took to the sidelines. Long arbitrage position was expected to be massively liquidated, but that was estimated to be delayed to the next month's option expiry, " Lee Choong-ho, a derivatives analyst at Dongyang Securities in Seoul, told Xinhua.

Long arbitrage traders built up huge conversion, or the position taken by buying index futures, selling call options and buying put options, in a bid to liquidate their arbitrage positions, but the conversion was offset by the reversal after the prices of reversal rose sharply during the trading, Lee said.

 


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