Archive for the 'Trading' Category

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

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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

09
May
14

MCX: Good contra buy..

Multi Commodity Exchange (MCX) today fell sharply in the initial trade to 481 but recovered in the late trade to close at 497. Arrest of Jignesh Shah last evening had triggered this fall in MCX. His arrest won’t have any direct impact on MCX stock but its stake sale process could be further delayed. With FMC declaring FT group not fit and proper to run any exchange, it had to divest it’s 24 percent holding in MCX. But now all that stake sale process could take even more time.

MCX is the country’s biggest exchange in terms of market share. Despite all the troubles after NSEL crisis exchange has been able to hold market share around 84-85 per cent. Since the introduction of Commodity Transaction Tax (CTT) in last year’s budget, volumes have dipped drastically. MCX is leader in bullion trading (Gold & Silver) and with the introduction of duties to curb bullion demand also had an impact on exchange volumes.

I was bit late in buying into MCX stock with my first buy at 394 Rs rather than below 300. But after that I kept on buying at every decline. Today was no such exception. My reason for buying was simple – Monopoly position, clean balance sheet, depressed volumes which should recover, lifting of gold import curbs, biggest of all -change in FCRA which will allow MCX to offer trading in options.

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.

18
Aug
13

Dream market for option writers

It’s a dream market for any option writer like me. It is extremely bipolar market where sectors like IT, Pharma & FMCG continue to see strong out-performance and everything else is under-performing. In fact, current Nifty levels are held due to strongly performing sectors otherwise rest of the market is below 2008 lows. Although now even these strong sectors are coming in for some selling. Accident continue to happen with heavily indebted companies like JP Associates and its group companies. There is carnage across mid-cap stocks. Infra major like L&T continue to struggle and report poor results. Capex cycle and new projects have completely stalled or postponed. Rupee continues to remain under pressure and RBI continues to douse fire over it. Indian Economy is in shambles and with each passing day , new data point continues to confirm that. Recent HSBC Services PMI also point towards contraction. May be it is just confirming the already known trend. I would be extremely surprised if GDP growth rate for FY13-14 is more than 5 percent.

After L&T quarterly results I had aggressively sold its call options. I have squared off these options and now moved onto other stocks like Titan, Ambuja cements and Power grid. Return wise August has been my best series till date.

Disclaimer: 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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