OPTIONS FOR NEW BEGINNINGS

Shipping magnates deal steel, bankers and brokers deal paper and vast sums of money are made and lost on correctly or incorrectly predicting the ever present but never constant shipping cycle. An inveterate “whale” said it best at Marine Money’s Ship Finance Forum – Hong Kong last November, “Where else do you get the volatility of shipping, ninety percent gearing and the forex play in a single pack- age?” Unquestionably, the glamour that attaches to shipping more stubbornly than barnacles to hulls is first in controlling the assets, seconded by control- ling the paper, but to the suave speaker’s rhetorical question reminiscent of a scene from The Graduate, the response is not “Plastics, my boy, plastics” but “Equity options, my boy, equity options.” In pure dollar terms, equity options may look like AA ball com- pared to the Major Leagues of globe-bounding bottoms buying, but in terms of potential return on investment, they are often the champions, depending on how they are used. As our planet’s original global industry continues to evolve towards larger shipping groups in order to access public equity markets, exchange traded equity options effectively offer punters a third way to play the shipping markets.

Originally, one needed to ante a ship to sit at the ship- ping cycle poker table. Then came shares in shipping companies, a liberalizing exercise for both owners and investors. Now come options on the shares in shipping companies – high- ly leveraged derivative instruments on the back of equities riding the shipping the market. It’s enough to enable smart pilot fish to swim circles around the whales.

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