Join our investing community

Help?- Hedging Position on Employee share options

Discussion in 'Investing Strategies' started by try anything once, 21st May, 2009.

  1. try anything once

    try anything once Well-Known Member

    Joined:
    8th Oct, 2008
    Posts:
    117
    Location:
    melb
    I am hoping someone who knows a lot about options strategies, warrants, CFD's etc can help me with this query...

    I am currently holding a significant quantity of employee share options which are performance based - that is they only vest if my company outperforms a predefined selection its peer group companies during the performance vesting period (5 years).

    My company is in Resources industry, so share prices have been hit hard by the GFC. Ironically, as my company is a blue chip, with conservative balance sheet etc, it has been hit far less hard than its peers, which has resulted in it significantly outperforming the peer group - so the options are now "in the money", but the official date for measuring the outperformance is August 2011. (end of the 5 year performance period).

    My concern is that if/when the GFC impact unwinds, and resources prices/stocks recover strongly then the value of my options will evaporate as the peer group will almost certainly outperform my company. I am not concerned about movement in the other direction (ie further downward price pressures) as my company should continue to outperform and I am only interested in hedging the vesting % not share price decline.

    So the question is what hedging strategies might I use to protect from declines in vesting %? - ie return to boom in Resources. Is buying out of the money (cheap) call options on the peer group the only way?
     
  2. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW
    If you are interested in hedging I would suggest you give the boys at CBS a call
    Commodity Broking Services
    Sydney Office
    Level 14
    309 Kent Street
    Sydney
    NSW 2000
    Australia
    Phone: +612 8221 8802
     
  3. try anything once

    try anything once Well-Known Member

    Joined:
    8th Oct, 2008
    Posts:
    117
    Location:
    melb
    thx Tropo will do