高盛-亚太期权研究-卖出汇丰期权 10.03

October 3, 2007
Pan Asia: Options Research
TRADE IDEA
HSBC - sell covered strangles

HSBC – sell options to enhance returns as stock ‘inches’ higher

Enhance returns on a core holding
Our analyst raised his HSBC 12-month price target to HK$161 from HK$158
(based on 1.81x 08E BVPS), expecting shares to “inch up” over the next six
months (risks to target price: aggressive US rate cuts, sharply rising
NPLs/losses on subprime mortgages). He sees value with HSBC (sum-ofparts
of HK$162 and HK$148 assigning zero value to Household), yet
expects shares to grind, not jump, higher. Despite a potential tailwind from
further US Fed rate cuts giving him a positive bias, the long-tailed
Household (HI) overhang, a slowing US and Europe, and the “why bother,
too many moving parts” factor should slow upside momentum.
Options expensive, in our view
HSBC 6-month ATM implied volatility (19.5%) is at its 3-year high and well
above 1-, 3-, 6-, and 12-month realized volatility, which contrasts with the
average HK stock where 6-month implied vol is currently below realized.
Implied vol is also at a premium to its London listing (HSBA.L) for the first
time in three years, despite lower realized volatility.