The best option trade I’ve ever seen

The market cap destruction of Russian equities is one of the most amazing things I’ve seen in capital markets.

Gazprom’s market cap 2 months ago was $65 billion.

This a screenshot from my phone last night, while trading was happening in Gazprom’s London listed GDR equities.

Last night’s low was 2 cents per share (from US$9.00).

It’s market cap was $250 million.

Trading was halted more than 15 times in the first couple hours during Wednesday’s trade.

The stock closed at 60 cents.

An asymmetric trade

The mind boggles as to the money lost and the speculators (market makers) who made 20 times return, from the low by the end of the close of the day’s trading.

So, let say $1 million was outlaid (which is just as you’d own 0.5% of all of Gazprom) and the asymmetric bet was…buying at 3 or 5 cents means that this stock EITHER goes to Zero (so you lose $1 million) OR it works its way back to $2 (not $5 nor $9), thus making you $40 million.

Easy to say, if you don’t fathom a 100% loss or if the exchange halts trading or your broker no longer allows you to trade the stock or provide custody. (see sizing your bet appropriately)

But, all in 1 day, You are up 12 times….Hmmmm, so what’s next ?

Halve it, Hold, Cut it or something in between?

#asymmetric

* this is a capital markets post, in no way is any humanitarian insensitivity meant.

March 3, 2022

by Rob Zdravevski

rob@karriasset.com.au

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: