The FTSE100 index has already dipped below the strike price of the £100m put option purchased b...
The FTSE100 index has already dipped below the strike price of the £100m put option purchased by Jupiter Dividend & Growth split-capital investment trust earlier this month.
Jupiter last week revealed the strike on the option was 3,350, which the index fell below on 12 March when it fell 5% to 3,277.5. The market has since recovered some ground but remained only 6.5% above the 3,350 level in early trade on 14 March, when it read 3,569.3.
The option is exercisable only at maturity on 18 March 2005, but any fall in the index below the strike price leads to a concurrent increase in the market value of the option, which is then reflected in the trust's NAV.
Jupiter head of investment trusts Andrew Watkins said the trust could realise the value in the option during a market fall by selling it in the open market. However it is expected to simply hold the option until expiry unless the market climbs strongly and appears unlikely to fall to these levels again.
'If the market went to 3,000 and the option was worth say £25m, we could exercise the option, but we won't because it would be a one-off benefit and the market could then fall even further,' he said.
The premium paid for the option is £13m, which has been charged to the capital account.
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