Author Archive for Ankush Jain

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.

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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

24
Jun
15

Options in Cairn India

Couple of weeks back Vedanta group decided to merge Cairn India with Vedanta Ltd. It didn’t come as a surprise and it was only a matter of time before the group went along with a merger. I guess since the acquisition of Cairn India in 2010, Vedanta group had their eyes set on the cash of Cairn India.

I am not a big fan of Vedanta group corporate governance standards. But to be fair to group, sharp crude oil price fall in last 8-9 months coupled with Rs 20k crore demand from IT department had suppressed Cairn India valuations. So in the changed scenario, proposed merger might even benefit Cairn India shareholders. On the other hand, only pure play oil E&P company in India would be saddled with metal assets. Some shareholders might not like it. One of the biggest institutional shareholder LIC has opposed the merger on valuations front.

Given the sharp share price fall in Cairn India it makes sense to sell some puts of July series.

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

07
Dec
14

Booked profits in Bharat Electronics (BEL)

In my last post I had written about my recent buys (https://writingoptions.wordpress.com/2014/08/27/my-recent-buys/). I had mentioned about Bharat Electronics (BEL). It was clear beneficiary of composite FDI+FII limit being raised to 49 percent. Usually I don’t like PSU’s and don’t invest in them. I firmly believe they are inefficient allocator of capital. But BEL was a good trading buy at that point of time. Company had 5-6k crore cash on books, MCap was 16k crore and close to 1k crore of annual profits. Stripped of cash company was available at 10 PE.

Recently BEL has rallied sharply to hit high of 3140 on Friday(5th Dec) but closed lower at 2894. I think stock has moved too sharply and valuations are also not as attractive as earlier. I have booked profits in BEL for now and will look to re-enter at lower levels.

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

27
Aug
14

My recent buys..

Indian markets are the second best performing market in 2014. BJP led NDA absolute majority in 2014 General elections has changed outlook for Indian markets. FII’s have pumped close to 10 bn USD in Indian equity markets since the beginning of 2014. It’s a shame that retail investors are not investing in equity markets the way they should have been. I have no doubt in my mind that we are going to see reasonably good run for Indian markets in the next 4-5 years. I have been consistently buying in the cash segment and stepped up my purchase after 16th May verdict. Some of my recent buys are:

1. Ashok Leyland – CV cycle recovery candidate.

2. Bharat Electronics – Composite FII+FDI limit hike to 49 percent in defence. BEL is the best proxy for it.

3. Crompton Greaves – On recovery path

4. Edelweiss financial services – Expecting strong earnings growth for next 2-3 years

5. Grasim – Cement sector exposure

6. Icici bank – Comfortable with valuations of icici bank among private sector banks

7. Jain Irrigation – Balance sheet repair, Agri exposure

8. L&T Finance holding – Trading buy

9. MCX – Sold some portion but still holding

10. Suzlon – Balance sheet repair and growth recovery

I have leveraged trades in Tata Motors Cairn India and Infosys. I have squared off Infy trade but still carrying Tata Motors trade. Cairn India is 2-3 months covered call trade. Given current brent crude levels I don’t expect Cairn India to rise sharply in short term.

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

26
Aug
14

Tata Motors covered call..

It is difficult to find reasons for not being bullish on Tata motors. One of them could be that it is currently over-owned stock and slight disappointment on quarter end earnings front or negative news could trigger big correction. Tata motors is more about JLR than standalone Indian unit. Any slowdown in Chinese sales number or regulatory action from Chinese authorities could also be big dampener for Tata motors stock price. China contributes close to 25 percent of JLR sales. JLR maufacturing facility in China will begin production by 2014 year end. Tata motors CV & Passenger car business in India are struggling. In case of CV cycle revival in India Tata motors along with Ashok leyland will be key beneficiary.

I am quite bullish on Tata motors for quite some time. I am holding its Futures and keep on rolling them month after month. For September series I have also set up covered call. For every lot of bought Tata motors Future, I have sold ATM (At The Money) call option. Given the sharp recent movement I have also sold OTM calls of Tata motors.

Read more about JLR: http://www.forbes.com/sites/greatspeculations/2014/07/10/riding-on-china-growth-jaguar-land-rover-could-reach-one-million-annual-sales-by-2020/

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

05
Jul
14

MCX is still a hold..

Couple of months back I had written about MCX being a good contra buy (https://writingoptions.wordpress.com/2014/05/09/mcx-good-contra-buy/). Friday closing price of MCX on NSE was 670.

Is it time to book profit ? I don’t think so and I am still holding every single share in my investment book. I had bought few shares in trading book around 520-550 which I sold at current price. Other way round, Is MCX a buy around current prices ? I would hesitate to buy at current prices and would prefer to do so on declines. Although it’s a different question, whether one would get a sharp decline now. There was a news report recently that Kotak might prefer to buy MCX shares from open market rather than buying stake from FT. I don’t know if it is true or not, but if it is than it might provide further support to MCX share price. Corporation bank has also completely sold its MCX stake. It held 1.77 percent stake as on 31st March, 2014. Along with Corporation Bank one more public sector bank, Bank of Baroda has also sold its entire stake in MCX.

There is still no news on the stake sale of FT’s 26 percent stake. I hope clarity emerges on this front shortly and it gets done quickly. New promoter might be able to focus on improving trading volumes at MCX. But as I said in my last post on MCX, biggest trigger for MCX remains amendment to FCRA.

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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