Betting against the bank

He has bought $2,950 worth of “put” options on the financial conglomerate Macquarie Group (MQG).

He has done this before, with mixed results. 

Put options give you the right to sell the shares at a predetermined price over a certain period of time – even if you have never owned the shares. This time, the Punter has opted for options giving him the right to sell 10,000 MQG at $77. (The options have the ASX code MQGJM7).

If the MQG shares do not fall significantly below $77 before June, The Punter’s pennies will evaporate like a puddle in the summer sun.

Everything in Macquarie’s garden appears. But it thrives in a world where stock markets are rising, companies are eager to borrow from its bank, and there are lots of mergers and acquisitions requiring lots of finance and fat-fee advice. If the next six months prove a little rocky, taking a punt against the MQG share price while it is at record levels should be a good option. Macquarie shares are highly volatile. A year ago they were about $83, and crashed to $60 by the middle of February. By June 24 they climbed back to $77 only to slump to $65 four days later. At the time of writing, Macquarie shares are about $84.50. At that price the $4 dividend gives a gross yield of nearly 5 per cent, not much below the likes of Westpac or CBA, and they sell for less than 14 times earnings, not outrageous for a company with a long growth record. Meanwhile, cash-strapped Carbon Energy (CNX) has called in administrators. Carbon’s key investor, Kam Lung Development Corporation, has agreed to take over Carbon’s $10 million convertible loan from the Pacific Road Group, but the Pacific subsidiary that handled the loan has been liquidated. Sorting out the mess has taken so long that Carbon’s shares have been suspended indefinitely.