11
Jun
11

Why did I trust this Congress government…

In one of my previous post https://writingoptions.wordpress.com/2011/06/08/why-congress-government-rocks/ , I had written about benefiting from this inept government.

Two weeks back, somehow I believed this government and thought, they would take decision on Cairn-Vedanta deal. Deal has been big overhang on Cairn India stock and it has under-performed in a big way, given, where crude oil prices are trading. I thought that after deal clearance, Cairn would move big way in either direction. I created long strangle (bought 320 put & 360 call). In case government approved the deal with riders and made royalty cost recoverable, valuations would come down and share price also. But if the government approved the deal without any conditions, share price would rally Rs. 30-40. In between came our Baba Ramdev, government being preoccupied with him, didn’t find time to take decision on  the deal. I was losing precious time on options bought, hence decided to sell both the options and cut my loss. Yesterday, the Oil Minister said, cabinet will take decision on Cairn-Vedanta deal in  the next week or the week after. I wonder, which week will that be and I can’t afford to take any chances. From now on, I will be doubly careful about taking positions on the basis of government decisions. Can no longer say congress government rocks…

Pay-off diagram of my long Strangle:

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3 Responses to “Why did I trust this Congress government…”


  1. June 11, 2011 at 9:29 pm

    Interesting thought process but a risky one, as you experienced. I read somewhere that predicting the news is a very risky proposition. I got my fingers burnt during the Mahindra-Satyam result announcement. And oh yeah, the current government is totally inept and laidback. Expecting a big drubbing for the Congress in the next Lok Sabha elections.

    • June 11, 2011 at 10:21 pm

      Yes..predicting news is risky proposition..that is why i took position on both sides..but the problem here was govt. didn’t took any decision..but yes learnt my lesson…congress is gone in next election..


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