BackHUL hedge costs jump to June high before Q4 results
The cost of HUL stock options jumped, reflecting caution a day before India's biggest maker of soaps and detergents reports quarterly results
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Mumbai: The cost of Hindustan Unilever Ltd (HUL) stock options jumped to the highest level in 11 months, reflecting caution a day before India’s biggest maker of soaps and detergents reports quarterly results.
Implied volatility on HUL’s at-the-money options, a key gauge of prices, jumped to 36.07 as of 3.44pm in Mumbai, set for the highest level since 3 June. The stock, the most expensive among the CNX Nifty index’s 50 constituents, rose 0.9% to ₹ 866.25 at the close. The Nifty fell 0.5% to 8,057.30, this year’s lowest close.
The company, a unit of UK-based Unilever Plc, will probably say its fourth-quarter net income rose 9.4% from a year earlier to ₹ 950 crore on Friday, according to the median of 27 analyst estimates compiled by Bloomberg. Its shares have risen an average of 3.3% one day after quarterly results going back to 2005, according to data compiled by Bloomberg.
“Implied volatility is rising as traders price in earnings-day volatility," Hemant Nahata, derivatives analyst at IIFL Holdings Ltd in Mumbai, said by phone. “Demand for options is rising and so the volatility is increasing."
HUL shares trade at 39.1 times its projected 12-month earnings, compared with 14.9 times for the Nifty and a multiple of 23.5 for the MSCI EM Asia Consumer Staples Index. The stock is rated a buy by 13 analysts and a sell by 20, with 16 recommending a hold.
HUL’s 900 calls and 840 puts were the most popular by the number of outstanding contracts. Total open interest in puts was at 1,988 contracts, compared with 2,725 call contracts.
The India VIX Index, a gauge of Indian equity option prices, fell 0.1% to 19.65. The 30-stock Sensex lost 0.44% to 26,599.11. Bloomberg
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