Posts Tagged ‘Baba Ramdev

11
Jun
11

Why did I trust this Congress government…

In one of my previous post https://writingoptions.wordpress.com/2011/06/08/why-congress-government-rocks/ , I had written about benefiting from this inept government.

Two weeks back, somehow I believed this government and thought, they would take decision on Cairn-Vedanta deal. Deal has been big overhang on Cairn India stock and it has under-performed in a big way, given, where crude oil prices are trading. I thought that after deal clearance, Cairn would move big way in either direction. I created long strangle (bought 320 put & 360 call). In case government approved the deal with riders and made royalty cost recoverable, valuations would come down and share price also. But if the government approved the deal without any conditions, share price would rally Rs. 30-40. In between came our Baba Ramdev, government being preoccupied with him, didn’t find time to take decision on  the deal. I was losing precious time on options bought, hence decided to sell both the options and cut my loss. Yesterday, the Oil Minister said, cabinet will take decision on Cairn-Vedanta deal in  the next week or the week after. I wonder, which week will that be and I can’t afford to take any chances. From now on, I will be doubly careful about taking positions on the basis of government decisions. Can no longer say congress government rocks…

Pay-off diagram of my long Strangle:

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08
Jun
11

Why Congress government rocks..

Yesterday, I read an article on Kirtan’s blog (http://www.insearchofnirvana.in/) on politicians. Sometime back, I used to share same level of frustration about politicians but not anymore. As an option writer Indian government is my best friend because they allow me to play on time decay. They will never be able to take any decisions and even if they will, it would be too late in the day. As per congress government, it is extremely difficult to decide on what is of  national interest in Cairn-Vedanta deal. After several months of delay, they are yet to decide on the deal with ball moving from GOM to CCEA and back. I could easily sell Cairn India 320 Put in April with confidence that government won’t take any decision soon.

The Government is too busy with Baba Ramdev and they don’t have time to decide on diesel price hike. One can easily create short strangle in Oil marketing companies. I haven’t done that, since my plate is currently full with Sun TV, R Comm, Tata Motors. After destroying investors wealth in Oil marketing companies, government is all set to do the same with ONGC by increasing its subsidy share just before Follow-on Public Offer (FPO).

They still cannot decide on the best way to dilute stake in Public Sector Units (PSU’s). FPO has become a dreadful word which, if associated with any PSU, becomes target of bears and option writers like me. I don’t think FPO is the best way to dilute stake in PSU’s with government not getting best possible value. I made money by selling SAIL 180 Call in May, 160 Calls in June. I missed the chance in Power Finance Corporation (PFC).

When UPA got clear mandate in 2009, market gave it a big thumbs up by rallying 10% plus. Market thought, with comfortable mandate, government would be able move faster on reforms. After 2 years, we are still waiting for any kind of reforms with many important bills pending. With BJP ruled states opposing, one important tax reform Goods and Services Tax (GST) can’t find its way. GST has the potential to add several bps to India‘s GDP growth. Next 1-1.5 years is the best possible window for government since as they go into the election mode.

Our Finance Minister(FM) still says investors should not be negative on India. I agree, but that would be because of private companies and not the government. I wish the government was a listed entity then one could have entered into Pair Trade (Short government, Long private corporations). Congress government rocks!!!…please keep adding some more scams to your already long list!!!!




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