Bearish Hindustan Unilever Bets Reach 3-Month High on Hedging

Traders are buying the largest amount of bearish options on Hindustan Unilever Ltd. (HUVR) in three months to hedge against declines in a stock that surged 17 percent following a Unilever Plc offer to raise its stake.

The ratio of outstanding puts to sell the shares versus calls to buy was at 1.3 at 11:03 a.m. in Mumbai, the highest level since January 22, data compiled by Bloomberg show. Open interest, or the number of outstanding put options contracts on Hindustan Unilever, was 18,467 today compared with the 20-day average of 2,346, the data show. There were 14,621 outstanding call contracts, more than the average of 2,148.

Shares of Mumbai-based Hindustan Unilever, which makes soaps and detergents, rose 17 percent on April 30 after its parent said it will spend as much as 292.2 billion rupees ($5.4 billion) to lift its majority stake. The put-call ratio for ITC Ltd. (ITC), a rival of Hindustan Unilever, was 1.05.

“Traders are buying puts to hedge against their bullish stance on the stock and its futures contracts,” Manoj Murlidharan, vice president at Mumbai-based India Infoline Ltd. (IIFL), said in a phone interview today. “The stock is likely to get support at 550 rupees.”

Hindustan Unilever lost 1.3 percent to 576.1 rupees today. May call options with a strike price of 600 rupees and put options with a 560-rupee strike have the largest ownership among bullish and bearish contracts, according to data compiled by Bloomberg.

Puts give the right to sell a security for a certain amount, called the strike price, by a given date. Calls convey the right to buy.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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