Posts Tagged ‘Election May 2014 series

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.

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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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