Logo of Phnom Penh Post newspaper Phnom Penh Post - Securities firm puts options on the table

Securities firm puts options on the table

Cambodian Securities Exchange's office.
Cambodian Securities Exchange's office. Heng Chivoan

Securities firm puts options on the table

Phnom Penh Securities is offering put and call options to its clients after becoming the first securities firm in the country to sell options on equities through a new partnership with US-based electronic brokerage Interactive Brokers.

Ong Sopheak, deputy general manager of Phnom Penh Securities, said that the company has made options available for stocks traded on over 100 foreign exchanges, providing a new tool to mitigate risk and one that could eventually be offered to investors trading stocks on the Cambodian Securities Exchange (CSX).

“Phnom Penh Securities is the first securities company to bring stock options for international stocks to Cambodia,” she said. “We started options trading for our clients when we partnered with Interactive Brokers early this year, but we only began promoting [equity options] this month.”

Sopheak said Cambodian investors may be unfamiliar with options as they are not yet available on the local market, but the securities firm is aiming to educate its clients on the benefits of using puts and calls to hedge their investments.

A put option gives its owner the right to sell shares of a stock at a specified price for a limited period of time, even if the stock falls below that price. A call option is the reverse, giving its owner the right to buy stock at a strike price until the option expires.

Investors pay a small premium to purchase these options, which can be used to protect the underlying stock from adverse price movements.

“If a customer purchases a stock, we will advise them to purchase a put option too,” said Sopheak. “If they buy the put option, they will have the right to sell their shares at a high price even if the price is going down.”

The Securities and Exchange Commission of Cambodia issued a prakas on the “Licensing and Supervision of Derivative Trading” in 2015 that covers the licensing of derivatives firms and the trading of derivatives. However, the regulations provide no details on specific derivative instruments, such as options, futures and forward contracts.

“We don’t have detailed laws about options, futures and forward contracts, just a general law to support the existing derivatives market like foreign exchange,” Sopheak said. “So we use international laws and practices from other countries.”

Lamun Soleil, deputy director of market operations at the CSX, said the exchange has no immediate plan to provide options on local stocks due to the limited number of listed companies and the exchange’s low turnover.

“For put or call options on Cambodian [stocks], I think it’s still far away since we have only [four] stocks and limited liquidity,” he said. “It is not suitable for the current market situation and investors given their limited knowledge.”

Sopheak added that options trading might not yet be viable for Cambodian stocks as there could be many investors prepared to buy a put option, but none to sell it.

“It is quite difficult to help someone sell the put option,” she said. “I bet there will be a lot of buyers for a put option, but none who will sell the option.”

MOST VIEWED

  • Seven positive for Covid-19, Hun Sen confirms local transmission

    Prime Minister Hun Sen announced that there has been local community transmission of Covid-19. However, he urged the people not to panic even though the Ministry of Health announced the discovery of seven new cases on Sunday. Among the victims are Chhem Savuth, the director-general

  • Cambodia at ‘most critical moment’, Hun Sen warns

    Prime Minister Hun Sen said the first community transmission of Covid-19 in Cambodia has led the country to the “most critical moment” that warranted urgent, large-scale operations to contain the pandemic. Hun Sen, who confirmed the first local transmission on November 28, said the source of

  • PM confirms community transmission, calls for unity

    Prime Minister Hun Sen has called on the public to stay calm, unite and follow the Ministry of Health guidelines after the wife of a senior official tested positive for Covid-19 in the Kingdom’s first case of community transmission. The case has drawn criticism

  • Over 110 garment factories close

    A government official said on November 22 that at least 110 garment factories had closed in the first nine months of the year and left more than 55,000 workers without jobs – but union leaders worry those numbers could be much higher. Ministry of Labour and Vocational Training undersecretary

  • Singapore group seeks $14M in damages from PPSP over ‘breach of contract’

    Singapore-based Asiatic Group (Holdings) Ltd is seeking a minimum of $14.4 million relief from Cambodia Securities Exchange (CSX)-listed Phnom Penh Special Economic Zone Plc (PPSP) for allegedly breaching a power plant joint venture (JV) agreement. Asiatic Group’s wholly-owned Colben System Pte Ltd and 95 per

  • PM vows to protect Hun family

    Prime Minister Hun Sen has vowed to continue his fight against opposition politicians who he said intend to smash the Hun family. Without naming the politicians but apparently referring to former leaders of the Supreme Court-dissolved Cambodia National Rescue Party (CNRP), Hun Sen said there