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HEDGESTREET LAUNCHES UNIQUE CONTRACTS BASED ON REVENUES AND EPS OF LARGE CORPORATIONS
Small binary option contracts allow traders to hedge or speculate
short-term risk around quarterly earnings announcements
SAN MATEO, CA, June 25, 2007 --
The HedgeStreet Exchange announced today the launch of its unique
new "Corporate Actions" contracts that enable investors to trade on
the anticipated revenues and earnings per share (EPS) of large
publicly owned corporations, starting with Wal-Mart, Inc. (WMT) and
ExxonMobil (XOM). These contracts began trading on Friday, June 22
and will settle on the date of each company's quarterly announcement
of financial results.
In addition, the HedgeStreet Exchange intends to list for trading
Corporate Action contracts on earnings (EPS) of the following
companies. Listing on June 29: 3M (MMM); Amazon.com (AMZN);
Apple (AAPL); Boeing (BA); Caterpillar (CAT); Citigroup (C);
Ford Motor (F); Genentech, Inc. (DNA); Google (GOOG);
Halliburton (HAL); Intel (INTC); McDonald's (MCD); Microsoft (MSFT);
Motorola (MOT); Pfizer (PFE); Yahoo (YHOO).
Listing on July 13: Bebe (BEBE); Costco Wholesale (COST);
Dell (DELL); Electronic Arts (ERTS); Hewlett-Packard (HPQ);
NYSE Euronext (NYX); Time Warner (TWX); UAL (United Airlines) (UAUA);
Walt Disney (DIS).
"These contracts are unique and we believe they will be a valuable
addition to the trading strategies of several types of investors,"
said HedgeStreet Exchange Chairman and CEO Stephen Race. "For the
first time, anywhere in any market, traders will be able to zero in
on a specific and crucial number in a corporate financial report that
highlights the overall financial condition of the company and the
health of the overall industrial sector. In these ways these
products are economic derivatives that enable investors to transfer
more focused risks found in their investment portfolios."
The new contracts are binary options, with a payout value of $100
each. As with all binaries listed on The HedgeStreet Exchange,
traders have the opportunity to "buy" if they believe the reported
value of a company's earnings will be above a certain level, or "sell"
if they believe the number will be reported at or below that level.
If, on the expiration date, the reported EPS value is greater than
the payout criteria value, the "buyer" receives $100. If the
reported value is equal to or less than the payout criteria value,
the "seller" receives $100. For example, traders could buy the
"ExxonMobil EPS > $1.75" contract for $20, and if they are
correct they would receive $100, for a total profit of $80 per
contract. If they are incorrect, they lose their initial investment
of $20. A trader's risk is limited to the cost of acquiring a
position, such that the risk and reward of the trade is known in
advance, and it is not possible to lose more than was intended.
Additionally, participants may trade out of their positions prior to
contract expiration in an effort to take profits or cut losses.
Liquidity on the exchange is provided by professional market makers
including Susquehanna International Group (SIG) and DRW Trading
Group (DRW).
Russell Andersson, Vice President of Instrument Origination and a
co-founder of the HedgeStreet Exchange, said interest in the
Corporate Action contracts has been growing since HedgeStreet
announced its plans to offer them in May.
"Investment professionals and traders asked us for simple trading
instruments to meet their short-term risk-management and
profit-enhancement needs," Andersson said. "The response to these
products, even before launch, has been impressive, so much so that
we are going to launch Corporate Actions contracts on 16 more
companies on June 29 and nine more on July 13."
About The HedgeStreet Exchange
HedgeStreet Inc. is the first U.S. regulated exchange that lets
online investors trade innovative financial instruments based on the
outcome of economic events. A designated contract market (DCM) and a
registered derivatives clearing organization (DCO), HedgeStreet is
subject to regulatory oversight by the Commodity Futures Trading
Commission (CFTC). For more information, visit
www.hedgestreet.com.
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