At Apple Tree, we are sometimes asked why we only write options on indices and not on individual stocks. The answer is simple: the risk is simply too great. For example, consider the story of Dutch pride ASML from October 15, 2024. Click here to read the full article (Dutch only).
The site iex.nl headlines on Tuesday, October 15: “Shockwave on the stock market: ASML sees 15% of its market value evaporate after disappointing figures leak, AEX -2.5%.” Furthermore: “ASML’s share price plummets after the leak of disappointing figures and a lowered forecast. Chip sector crashes globally. Oil prices plummet.”
ASML, a cyclical yet rock-solid company, loses 15% of its market value in just a few hours. The reason? Some disappointing and leaked figures. We're not even talking about a factory explosion, poor governance, or fraud.
Such large fluctuations in individual stocks are not only unpredictable but also difficult, if not impossible, to manage. A result like this certainly impacts the index that the company is part of, but it's an impact that is manageable.
Sources: iex.nl, Bloomberg, the Economic Times (blog picture), ChatGPT (translation)
Comments