Hindustan Unilever Options Traders Most Bearish in 2 MonthsSantanu Chakraborty and Adi Narayan
Options traders are most bearish on Hindustan Unilever Ltd. in two months after the stock’s best start to a year since at least 1991 sent the seller of Lux soaps to its highest valuation among biggest Indian companies.
Puts with an exercise price 10 percent below the company’s shares cost 6.9 points more than calls betting on a 10 percent climb yesterday, near the 16-month high reached on Nov. 14, data compiled by Bloomberg show. That compares with an average level of 1.3 points for the price relationship known as skew.
Hindustan Unilever has rallied 16 percent this month, set for the best January performance since 1999, after eight brokerages including Credit Suisse Group AG upgraded the stock, citing the slump in raw-material costs triggered by falling crude. The shares trade at 43 times 12-month estimated profits, the most among the 50 companies in the Nifty gauge.
“I advise investors to book profits in the near term as valuations are stretched,” Supreeth Shankarghal, a director at hedge fund QF Assets, said by phone from Bengaluru today.
The number of outstanding options giving the right to sell the stock versus those to buy rose to 1.42-to-1 yesterday, the highest since July 2013, data compiled by Bloomberg show.
Put options totaled 5,046 at 5:31 p.m., compared with the 20-day average of 1,187, the data show. Call open interest was at 3,922 contracts versus an average 1,585 contracts.
The Mumbai-based unit of Unilever Plc. will probably post a profit of 10.7 billion rupees ($172 million) on Jan. 19, little changed from a year ago, according to the median of 14 analyst estimates compiled by Bloomberg. Spokesman R. Rammohan declined to reply to an e-mail citing the silent period pending the release of third-quarter results.
Hindustan Unilever declined 1.3 percent to 884.55 rupees, halting a six-day, 19 percent advance. The stock has remained above its 12-month price target since May, according to data compiled by Bloomberg. Sixteen of 48 analysts have a buy rating on the stock, while 19 advise sell, the data show.