Institutional investors last week clamored in vain to buy at-the-money puts on shares of Deutsche Börse, which sold shares via an initial public offering a week ago. Cosme Osborne, equity derivatives trader at Citibank in Frankfurt, said the bank declined brokers' requests to sell puts on the stock because there is not yet a listed market on which it can hedge out the risk. Stock options are typically listed on the Eurex a month after an IPO.
Options on Deutsche Börse likely will be listed on Eurex on March 19, which is the next opportunity for new derivatives to be added to the exchange, according to a Deutsche Börse spokesman. Deutsche Börse shares were issued at EUR335 (USD307.87) and closed at EUR381 on Thursday.
Demand for options on Deutsche Börse shares was higher than usual because so many of the shareholders are institutional investors, which are more likely to hedge than retail investors, said Citibank's Osborne.
Another equity derivatives trader in Frankfurt said institutional investors phoned him for one-year at-the-money puts on Deutsche Börse shares, but he also turned them away because he could not hedge the contract. Traders speculated that investors bought the shares because if Deutsche Börse is admitted to the DAX index the price will rise. But if the stock is not admitted, it could fall, and hence they wish to protect their downside.
