01
Jun
12

IGL zooms 29 percent..

Today, the Delhi high court decided in favor of IGL (Indraprastha Gas Ltd) and said that regulator PNGRB cannot fix tariffs. It was a huge relief for the company and its shares surged ahead 29 percent to close at Rs 249.15. On April 9, Government regulator had asked the gas utility company to reduce gas prices retrospectively from 2008. This order, if implemented would have eroded complete net worth of IGL.

Given the current market scenario, I am not selling any puts. But in case of IGL, I would be making an exception and sell some puts. Quashing of PNGRB order has removed the existence fears about IGL. Even if there is meltdown in markets, I would assign very low probability to IGL stock going below 200 again. This sharp up-move in IGL stock has significantly increased Implied Volatility (IV). One thing that has to be kept in mind is that PNGRB might appeal against this order in Supreme Court. Hence, I would also be selling OTM calls also. Effectively, it would result in short strangle strategy.

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