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11
May
14

NSE buys 5 percent more into NCDEX..

Shree Renuka Sugars pared down its 7.5 percent stake in NCDEX from 12.5 percent to 5 percent. Total sale amount which sugar company received for NCDEX was Rs 66.54 crore. With this stake sale, India’s second largest commodity exchange, NCDEX has been valued at 887.2 crore. Important thing to note in this stake sale was that NSE bought 5 percent into the commodity exchange. With recently changed FMC guidelines about shareholding of commodity exchange, stock exchange can hold up to 15 percent. NCDEX stake buy gives NSE hold in the commodity space.

In my previous post I had written about MCX being a good contra buy (https://writingoptions.wordpress.com/2014/05/09/mcx-good-contra-buy/). MCX holds close to 85 percent market share versus 14-15 percent market share of NCDEX. MCX holds cash & cash equivalents of 1200-1300 crore and zero debt. There are few concerns about potential liabilities in terms tax penalty and listing agreement violations. But despite all these concerns, MCX remains a great buy and NCDEX stake confirms my belief about value in it. I think BSE might be interested in buying into MCX.

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

Squared off Nifty Strangles

What an unexpected up move it was today !! It was a trailer of up move which we might see on 16th May if NDA gets 270 seats. In my previous post I had mentioned about buying into Nifty strangles (https://writingoptions.wordpress.com/2014/05/06/update-election-strategy-on-nifty/). IV’s at that time were around 34-35, but with today’s up move they have shot up to 44-45. I thought it was prudent to square off Nifty strangles with current IV’s. Nifty is factoring in up move of 9-10% on D-day.

I haven’t squared off my bull call spread & bear put spread on Nifty (https://writingoptions.wordpress.com/2014/05/02/election-strategy-for-nifty/). I will continue with this position till election results.

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.

06
May
14

Election strategy for USDINR

Given the binary outcome of 2014 General elections I have also decided to take positions in USDINR options. Election outcome is extremely crucial. Clear mandate for NDA which is perceived to be business friendly will be positive for Equity & Currency markets. Any fractured outcome or BJP tally of less than 180 seats will be extremely negative for markets. NDA tally of 250-260 plus will be extremely positive. Volatility will be the central theme.

I have bought USDINR 60.5 straddle (60.5 call & 60.5 put) and sold 61.5 call & 59.5 put. I need movement of 1.6 per cent to make money. USDINR should see the movement more than 1.6 per cent and break its current range of 60-62 on either side. If NDA comes to power with resounding majority than INR will appreciate below 60 and fractured mandate will lead to sharp INR depreciation. In case of fractured mandate, India’s sovereign  credit rating might be downgraded. But on the other side if INR appreciates sharply RBI might intervene and slow the pace of appreciation. One thing is certain, current USDINR range of 60-62 is about to be broken on 16th May and we are in for some exciting times rest of May.

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.

06
May
14

Update: Election strategy on Nifty

Continuing with the theme of increasing volatility after completion of the last phase of polling on 12th May, I have bought further strangles on Nifty. I have bought May series Nifty 6500 put & 7000 call. Although Implied Volatility (IV’s) is already high at 34-35 but it should go further north after 12th May. One thing is absolutely clear, Options are the way to play for elections rather than Futures. Also, I want to avoid taking one sided position because I don’t have clue which way results will pan out on 16th May. Given the unexpected outcome of 2004 & 2009 General elections and violent market reaction I don’t want to be caught on wrong foot with one sided position.

I might square off these strangles before 16th May if there is significant increase in IV’s.

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.

03
May
14

Election strategy on L&T..

In my previous post I had written about strategy on Nifty (https://writingoptions.wordpress.com/2014/05/02/election-strategy-for-nifty/). Volatility should increase after last phase of polling on 12th May. With this thought process I am thinking about initiating similar strategy as in Nifty on Larsen & Toubro. Capital goods giant had a good run till last couple of weeks when it started correcting from its high of 1388 on NSE. Correct way to put it would be to say stock witnessed some profit booking ahead of an all important event on 16th May.

Since I am not sure which way election results would pan out, I am not initiating one way position and seeking to benefit from increase in volatility. I am planning to buy L&T 1260 straddle (1260 call & 1260 put) and sell 1400 call 1120 put. You need movement of 7.7% in L&T stock to make money from this strategy. Given the fact that stock had corrected from its recent high of 1388, it looks very much possible that L&T will go beyond 1400 on favourable outcome on 16th May. L&T is high beta and proxy play on Indian economy so its stock would react violently in negative direction in case market doesn’t get what it thinks as favourable outcome.

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.

02
May
14

Election strategy for Nifty

Outcome of 2014 general elections is one of the most keenly awaited event this year. Gross mismanagement of the economy by the present Congress government has resulted in strong anti-incumbency this time. It’s anybody’s guess whether that anti-incumbency will result in NDA government led by Mr. Narendra Modi or it will be a Third front government. We will get to know on 16th May who is forming the government at centre. But one thing is certain that there will be high volatility with the end of last phase of polling on 12th May. Exit polls will also be aired on news channels starting from 12th May evening.

Indian markets also reacted violently after 2004 and 2009 general election results. But the big question is will there be such big reaction after election results on 16th May ? I doubt if market reaction is going to be any different and we are headed for another roller coaster ride beginning 13th May. If you take position and get it wrong then you will have tough time digesting those losses. I don’t want to take any one-sided position. With this thought process I have initiated spreads on Nifty. I have bought 6700 straddle (6700 call & 6700 put) and sold 6200 put and 7200 call. You can argue why I need to sell OTM call & put option (7200 call & 6200 put) ? I am confident about increase in volatility but also trying to reduce the cost of trade. In case the event does not pan out as I expect, my losses will be reduced. In this strategy I need Nifty movement of 5% from current spot levels of 6700 to make money.

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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