Christo Wiese buys SSFs

[sponono]

R6 million worth........now that's honey badger that will lead to a pot of gold

[THRESHOLD]

Careful - these are probably part of a settlement in a "rolling" collar arrangement. Understand the transaction before you act on it.

[SimonPB]

an it is petty cash for him ..

[Penny_Pincher]

For my benefit too, what is a rolling collar arrangement and what does it aim to achieve?

[partridge]

Drawing any conclusions from a 6M sideshow like this is to put it mildly a high risk strategy.

[#6]

It is a strategy of hedging. Let's say, for example, that Christo Wiese has a considerable interest in Steinhoff, and that he entered into some short positions earlier in the year to protect his position. Now, he would have made a size-able return on his short, probably now with accelerated gearing if he used warrants. Now, it looks like Steinhoff is rallying again, and, because of time decay on his short, his losses on his warrant are likely to exceed the gains in his actual portfolio, so he needs to re-adjust his exposure. Make sense?

[THRESHOLD]

SHP He sells a put on his long and a call on his resulting implied short-interest to cover. The net effect is that he limits his upside and downside to a range within the two strike prices. The interest received on the short is largely offset by the interest paid on the long and the remaining costs are the fees for establishing the short as levied by the finance house (the counterparty.) It is really pretty cheap insurance against a large drop in the market. The large "purchase" or "sales" are actually - for want of a better description - notional.

[THRESHOLD]

So - long a put and short a call.

[THRESHOLD]

Oh yes - and the beauty of it is that the cost should be available for income tax as insurance on the portfolio.

[#10]

apologies - that explains the collar - I was explaining the 'rolling'