This month has been full of events that both boosted the stock market and dragged it down sharply; it seems that the signs of a slight recovery are not enough. The IBEX 35 reached a high of 8.229,7 and a low of 7.788 this month, its lowest level since February. The IBEX was mainly affected by the following events:
• Telecommunications, with a strong weighting in the stock markets, are passing on their poor results to the IBEX 35. An example is Telefónica, which closed this quarter with a 74% decrease in its profits.
• The Argentine crisis continues to influence the results of large companies, so we are witnessing a policy of divestments (Repsol is selling its stake in Gas Natural and SCH, after Dragados, is selling Vallehermoso this month).
• Some agreements and mergers temporarily put the IBEX 35 in positive territory, such as the agreement between Prisa and Telefónica that managed to encourage the markets.
• The poor performance of the US markets and the weakness of the dollar against the euro (the euro reached its highest value against the dollar in 15 months) were among the factors that marked market movements this month.
Investor uncertainty about the economic recovery is the main reason for the loss of positions in the IBEX, dragged down by the blue-chip stocks. Many investors are transferring their investments to second-tier stocks as a cheaper and less risky alternative.
Given these market conditions, put warrants have been the standout performers in May, both for individual stocks and for country indices (Ibex35, S&P500). Leading the way is the 18-year put warrant on Gas Natural, which appreciated by 40,48% after the stock price fell by 9,63% during the month.
Next we have the 2 Put 9 Warrants on TERRA (with different expirations) with revaluations of 34% and 23% respectively.
Put warrants also predominate over the main Spanish "blue-chips" among the top 12 for the month, having been weighed down by these market conditions.
Conclusion: Through Put Warrants we can benefit from bear markets like the current ones.
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