The Private Investor: I may push the boat out with a little punt

What with ICI, the bell-wether of UK industry, plummeting 40 per cent in a day, and Reuters' riveting 24-hour real-time-war-window, a dealer's world seems surreal or plain scary. Certainly a day in front of the screens is leaving my broker friends reeling; they do not know whether to hit the fire or retreat button.

At lunch with two, best known as Alf and The Vicar, the chief topics were, of course, how long war would last and lack of business. Investors have mainly left the market to the big traders, who are shoving shares around for profits to make up for lack of fee revenue. Conversation turned to options, as a provider of insurance and as a market for small punting.

The Vicar, from ODL Securities, pointed out that if I thought Shell, at 400p, looked too cheap, I could pick up a June "call" option which would provide a sell opportunity at 420p, for a mere 12p a share. Or if I thought Shell would dive, say to 360p, I could go for a "put" option. If the share price rose before then so would the price of my "call", or if it fell my "put" option price would rise. The aim being to lay out no more than a few hundred pounds, and to make a profit on the price of the option rather than the underlying share. Dealing charges would cost £16.80. Or if I wanted to protect my solid (if shrinking) blue-chip portfolio I could take out an option on the FTSE index.

I like the punting story, but I do not think I will go for ICI; the range of share prices set by the major brokers is too wild, from 80p from Credit Suisse to 220p from Lehman Bros.

Weekended in Dusseldorf for a wine fair. On the return journey, in Heathrow I bumped into my former investment banker friend, George Nianias, another successful deserter from UK markets. He is running a booming Russian investment house and fund, the Denholm Hall Russia Arbitrage Fund. Diving into this top-performing emerging market is undoubtedly safer via a fund, despite solid attractions of the likes of Sperbank, the leading retailing banker, one of his picks.

Denholm Hall's accounts earned a net 39 per cent return last year, helped by its neat arbitraging between the neglected retail exchanges and Moscow for international investors.

Pension scandals have nudged me to run the life insurers through my calculator. The FTSE-350 life-assurance index has halved over the past year as investors fled on solvency worries, a severe underperformance. There is just about nothing the majors can do right in market eyes now. On the fundamentals, they do not seem to have many worries. They have cut their equity holdings from two-thirds of assets to half or less. The best test must be revenues over costs, and there the future looks bright. With the UK population aging but living longer, and Government and the corporate sector so determined cut their pension bills, demand for private pensions should soar.

But the market is obsessed with the dreaded S word. Insurers cannot win. It has been punishing any insurer whose basic solvency ratio looks like slipping nearer the UK Financial Services Authority's minimum free-asset ratio, £104 in assets for each £100 of liabilities. Any hint that an insurer might apply for an FSA waiver (allowed from February to stop insurers further damaging equity markets by dumping share portfolios for bonds) is being rewarded with a share-price battering. Yet Legal & General, Aviva and the Pru are solid and all announced better-than-expected profits.

The shock and awe expected in the Budget is already headlined in market predictions. Wages are barely rising but household costs, such as council tax, are soaring. I have scuttled for some yield into a Charles Stanley recommendation of International Leasing's 6.635 per cent 2008, which, at 99p, offered a gross yield of 6.8 per cent.

And in the belief that Selfridges' fall from 360p to 228p over the past year is overdone, I am thinking of buying a few. Manchester is still shopping, and the return of the Central line should boost sentiment. 2003's EPS should rise to 19.6p, and brokers are setting a 277p target price.

Sean O'Grady is away