Deutsche Bank clients have been selling April maturity puts on Vodafone shares and buying calls linked on the mobile phone company's stock with maturities between July and year-end at the bank's recommendation.
Jason Good, managing director-equity derivatives sales in London, said Vodafone shares are close to an all-time low and, since implied volatility in some maturities is also low, this is a good time for clients to increase exposure via the options market. While implied vol in other telecom stocks has collapsed--along with the share price of these companies--because of market fears over their high debt levels and business plans, Vodaphone is virtually debt free, he noted.
Deutsche Bank is recommending clients buy calls that mature in July or later because implied vol in the front months has risen to 51% last Wednesday to 43% in mid-January. Conversely, vol on options maturing between July and December has remained static at approximately 48% because of weak demand, Good explained. The trades can be done in either the listed or the over-the-counter markets. Vodafone's shares were trading at GBP1.9225 (USD2.7753) on Tuesday. The 52-week high is GBP4.00 and the 52-week low is GBP1.805.
