Last week, traders witnessed a derivative tracking the SIA shares going to $0. This derivative was 5x Short DLC on SIA (SGX:DSLW).

As SIA is undergoing a complex rights shares and rights MCBs exercise, there was some contention about what the theoretical ex-rights price (TERP) should be.

Traders felt that the TERP should only consider rights shares conversion while the issuer (SG), considered both rights shares and rights MCBs dilution. SG’s TERP was $3.71, lower than what the traders understood to be at $4.16.

The matter was made worse when SIA share price continued to climb on the ex-rights day and a Short DLC would lose money since it bets on a falling SIA share price.

The Short DLC began with a lower value due to the lower TERP used and hence had less runway to cover the losses. The Short DLC eventually went to $0.

Affected traders