Santander Central Hispano Asset Management has written a roughly EUR300 million (USD264.74 million) exotic put on shares of Banco Santander Central Hispano. The sale was designed to provide equity exposure in a EUR300 million guaranteed note the asset manager launched last week.
Maria Pintado, head of derivatives and guaranteed funds in Madrid, said the asset manager wrote reverse cliquet puts with six semiannual strikes set at the at-the-money forward rates. This strategy generates more premium than selling plain-vanilla puts. In a reverse cliquet the seller of the put receives the premium at maturity minus the losses on each of the puts, but losses cannot exceed 100% of the premium earned. By selling the options, the asset manager will earn a maximum premium of 39% over the three-year maturity. BSCH shares closed Monday at EUR10.94. The 52-week high was EUR12.69 and the 52-week low was EUR9.32.
The note is designed to profit from projected growth in BSCH's share price. Pintado is bullish on the banking sector as a whole and thinks BSCH is in a good position to benefit from the growth. She added SCH Asset Management issues guaranteed notes regularly but said now is particularly good time for this product because European investors are expecting an upturn in the economy, but are interested in downside protection.
Pintado declined to name the counterparty in the trade, but said SCH Asset Management's minimum credit rating for derivatives counterparties is double A minus. After a bank has satisfied this criterion, price, service, research and trading ideas are equally important, according to Pintado.
The product is aimed at Spanish retail investors and the minimum investment is EUR60.
