Put & on : Full Guide
In the dynamic world of stock trading, offer investors flexible strategies to hedge risks, speculate on price movements, or execute corporate deals. If you've ever asked, Explain Involving Stocks Traded in the , this guide breaks it down. We'll explore definitions, mechanics, Bursa-specific rules, and insights from Malaysian court cases—generally speaking, as this is not legal advice.
, the nation's primary stock exchange, facilitates trading through its . Options here are typically tied to listed stocks, governed by and exchange rules. Let's dive deeper.
What Are Put and ?
grant the holder the right, but not the obligation, to buy an (like Bursa-listed stocks) at a predetermined before or at expiration. Conversely, give the right to sell the asset at the .
These are where the seller (writer) receives a from the buyer. As explained in general financial contexts, Options are contracts and are of two kinds i.e. Call Option and Put Option. Options contracts written by the Seller that conveys to the buyer the right, but not the obligation, to buy (in the case of a call option), or to sell (in the case of a Put Option) a particular asset/commodity, at a particular price (/Exchange price) in future. In return for granting the Option, the seller collects a payment (the ) from the buyer.2012 0 Supreme(Bom) 2139
In , these options often involve shares of listed companies, settled via CDS accounts. No formal options exchange exists like in some markets; instead, they appear in private agreements for hedging or M&A.
Put and in Trading
Stocks on are traded electronically, with ownership recorded in CDS accounts managed by Depository Sdn Bhd. are contractual rights to buy (call) or sell (put) stocks at set prices within a period. They become exercisable upon meeting conditions like and CDS deposits.
For instance, - These are contractual rights that give the holder the option to buy (call) or sell (put) stocks at predetermined prices within a specified period. In , such agreements become once certain conditions are met, including compliance with Depository Sdn Bhd's rules and deposit procedures into securities accounts.
Trading is subject to Bursa rules: The trading of shares on the Respondent's platform is subject to the Respondent's terms and conditions and the Appellant's CDS account is subject to the provisions of Depository Sdn Bhd.
SYED MUDZAFFAR SYED ZAINUL ABIDIN vs KENANGA INVESTMENT BANK BERHAD & ANOTHER CASE - High Court Malaya Kuala Lumpur
Key Mechanics and Settlement
- Payment: Buyer pays upfront; no obligation to exercise.
- Exercise: Via CDS transfer— deposit shares to buyer; puts withdraw them.
- Expiration: Typically short-term, aligned with stock listing status.
Examples include PCB shares: no other counters in were traded under Jamal's Trading Account and Margin Trading Account (other than the PCB Shares). ... On , PCB was listed on the Second Board of and subsequently, on , PCB's listing status was transferred to the Main Board of .
SURUHANJAYA SEKURITI MALAYSIA vs DATO AMINUDDIN MD DESA - High Court Malaya Kuala Lumpur
Real-World Examples from Malaysian Cases
Court judgments highlight options' use in disputes:
Call Option Agreements: Parties Entered Into Call Option Agreements 8 On , the 1st and 2nd Defendants entered into a Call Option Agre....
ABLE OILS & FATS SDN BHD vs TAN SEE MENG & ORS - High Court Malaya Kuala Lumpur
In oil-related stocks stuck at refineries, calls were invoked amid defaults.Call/Put Option Agreements (CPOA): The 2nd respondent and the 1st appellant entered into the dated where the 1st appellant agreed to grant a call option to the 2nd respondent in respect of its shares in SHS. ... payment for such put option shares.
DETIK RIA SDN BHD & ANOR vs PRUDENTIAL CORPORATION HOLDINGS LIMITED & ANOR - Court Of Appeal Putrajaya
This involved SHS shares, with Federal Court references to .Strategic Trading: Some traders enter via large option-linked purchases: References to NGGB shares and notices to exercise.
LIM THIAM HUAT vs GA SKYLIGHT BERHAD - High Court Malaya Kuala Lumpur
Listing Impacts: Transfers like Second to Main Board affect options: PCB's listing status was transferred to the Main Board of .
SURUHANJAYA SEKURITI MALAYSIA vs DATO AMINUDDIN MD DESA - High Court Malaya Kuala Lumpur
SURUHANJAYA SEKURITI MALAYSIA vs DATO AMINUDDIN MD DESA - High Court Malaya Kuala Lumpur
These cases show options in hedging (e.g., oil stocks
ABLE OILS & FATS SDN BHD vs TAN SEE MENG & ORS - High Court Malaya Kuala Lumpur
) or share acquisitionsDETIK RIA SDN BHD & ANOR vs PRUDENTIAL CORPORATION HOLDINGS LIMITED & ANOR - Court Of Appeal Putrajaya
.Regulatory Framework and Compliance
and the oversee these. Options must not violate :
CDS Rules: Essential for settlement—the agreement in source
specifies that completion must adhere to 's rules, and the options are settled through the .
Not Always Derivatives: while contracts may contain , they are not necessarily classified as derivatives or illegal, provided they follow legal definitions and regulations.2023 Supreme(Online)(BOM) 24878
Prohibitions: Manipulative trades, like small volumes influencing indices, are scrutinized—though Bursa focuses on listed equities. 2018 3 Supreme 257
Deep in-the-money options can drive volume but require approvals, especially in privatisations. 2024 0 Supreme(Guj) 1261
SURUHANJAYA SEKURITI MALAYSIA vs DATO AMINUDDIN MD DESA - High Court Malaya Kuala Lumpur
Key Compliance Tips (general guidance):- Ensure CDS account compliance.
SYED MUDZAFFAR SYED ZAINUL ABIDIN vs KENANGA INVESTMENT BANK BERHAD & ANOTHER CASE - High Court Malaya Kuala Lumpur
- Document clearly.- Avoid unapproved buy-backs mimicking options: The in the present case does not result in an option being traded or sold. The arrangement is directly with reference to shares and is not an option contract.2012 0 Supreme(Bom) 566
Risks and Strategic Uses
Options enable:- Hedging: Protect against drops (puts) or capture upsides (calls).- Corporate Exercises: In M&A, like SHS shares.
DETIK RIA SDN BHD & ANOR vs PRUDENTIAL CORPORATION HOLDINGS LIMITED & ANOR - Court Of Appeal Putrajaya
- Speculation: But thinly traded options amplify risks.Risks include non-exercise ( loss), disputes over conditions, or suspensions: APSB would also likely be sued by its customers for default in supplying the refined oil per the contracts as APSB's stocks are stuck at the 4th Defendant's refinery.
ABLE OILS & FATS SDN BHD vs TAN SEE MENG & ORS - High Court Malaya Kuala Lumpur
Traders like those in ICON shares faced liability via CDS.
SYED MUDZAFFAR SYED ZAINUL ABIDIN vs KENANGA INVESTMENT BANK BERHAD & ANOTHER CASE - High Court Malaya Kuala Lumpur
Conclusion and Key Takeaways
Put and are vital for stock strategies, blending flexibility with CDS efficiency. Options contracts on are integral financial instruments that enable investors and corporations to hedge, speculate, or execute strategic transactions involving stocks. These agreements are governed by ’s rules, including deposit and settlement procedures via the CDS.
Key Takeaways:- Calls: Right to buy; Puts: Right to sell. 2012 0 Supreme(Bom) 2139- Settled via CDS; comply with Bursa Depository rules.
SYED MUDZAFFAR SYED ZAINUL ABIDIN vs KENANGA INVESTMENT BANK BERHAD & ANOTHER CASE - High Court Malaya Kuala Lumpur
- Used in cases like CPOAs for SHS, PCB listings.
DETIK RIA SDN BHD & ANOR vs PRUDENTIAL CORPORATION HOLDINGS LIMITED & ANOR - Court Of Appeal Putrajaya
SURUHANJAYA SEKURITI MALAYSIA vs DATO AMINUDDIN MD DESA - High Court Malaya Kuala Lumpur
- Regulated to prevent abuse; seek professional advice.This overview draws from case precedents but is for informational purposes only—not legal advice. Consult a qualified Malaysian lawyer or advisor for your situation. Stay informed on Bursa updates for smarter trading.
#BursaMalaysia, #OptionsTrading, #StockOptionsMY
