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Expiring WYNN-C1 Trading at Slight Discount

The share price performance of Macao casino operator Wynn Macao Limited, which made its debut in Hong Kong Stock Exchange last October, has been spectacular.  The price of Wynn is now 22% higher than the closing price of its first day of HKD10.78.  

 

WYNN-C1 is a structured call warrant issued by CIMB last year on the first day the underlying share got listed.  WYNN-C1 closed at 25 sen on 9th October 2009, the day it first listed.  The warrant was then traded at a whopping implied volatility of 118% and a premium of 35.6%.

 

Had an investor bought into WYNN-C1 when it was first traded, there was no chance he could have made any money unless he disposed the warrant on the same day.  Investors of the underlying share also went through a rough patch when Wynn traded as low as HKD8.67 in late October last year.  Nevertheless, the share managed to pick itself up following better than expected earnings and is up 39% in 2010 as Macao gambling business enjoyed strong growth this year in the absence of any new supply (of casinos).

 

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