Archive for August, 2015

22
Aug
15

Covered calls in USDINR

On Friday, USDINR closed at lowest levels in the last 2 years at 65.83. Intraday INR touched lows of 65.91. EM currencies across the board have been hit by Yuan devaluation last week. Coupled with prospect of US Fed rate hike in September, global markets are nervous about EM currencies. Lot of currencies like MYR (Malaysian Ringgit), ZAR (South African Rand) and RUB (Russian Ruble) have been hitting multi-year lows. MYR has gone below 1997-98 crisis levels. Few other currencies like Kazakhstan Tenge and Vietnam Dong have been competitively devalued. In Tenge case it has been allowed to free float from peg against USD. All Oil exporting economies are suffering hard with current levels of $ 40-45 per barrel.

Don’t know if these are signs of currency war but it might turn out to be so if CNY (Chinese Yuan) depreciates further. Recently RBI governor, Raghuram Rajan commented about CNY devaluation (http://in.reuters.com/article/2015/08/20/india-rbi-rajan-idINKCN0QP09L20150820). As per him maybe CNY devluation is not a concern at current levels but if it depreciates further it might be a cause of worry in future. INR has been an island of calm among EM currencies and is one of the out-performer till now. I had bought August and September series USDINR futures and sold 66 calls. Buying USDINR future means you are paying roll cost which during panic scenarios like the current one turns out to be 1 percent. This was my main concern while buying USDINR futures. This was the reason I had sold 66 calls, otherwise I would have carried naked future position.

11
Aug
15

Sun Pharma poor Q1 FY16 – Ranbaxy integration blues

Sun Pharma announced its Q1’FY16 nos. post market hours today. As expected, they were bad on profitability front on account of Ranbaxy integration charges. On account of Ranbaxy integration issues the drug major had already issued profit warning on 20th July. Net profit fell 60 percent YoY to 479 crore in Q1. Although revenues grew 6.7 percent YoY and EBITDA margins at 27.5 percent were also better than what market expected. Last quarter margins were disastrous at 14.5 percent.¬†All in all, it was a mixed quarter for Sun Pharma. Ranbaxy continues to be the pain point for the drug major. Market already knew about the poor results on account of profit warning issued by company last month. So stock should not react in a big way tomorrow.

I had entered into ratio spreads in Sun pharma in July – Bought one lot of 940 call and sold 10 lots of 960 & 980 calls August series. Looks like tomorrow will be the right time to square off these ratio spreads.

Disclaimer: These are my personal views and you should do your own due diligence before acting on anything written in this blog. Please take reasonable care while trading in options, especially while selling. I am not advising anyone to sell or buy options. My purpose of writing this blog is to highlight my trading strategies




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