Posts Tagged ‘Naked call writing

16
Sep
11

ONGC FPO deferred ???

If some news report are true then it looks like on account of pricing difference with i-bankers, government has decided to defer ONGC FPO by 15 days. Government wanted FPO price band to be closer to 280 whereas i-banks were saying price of 240-250. I don’t know what will change in the next 15 days. Everything has been turned into a joke by this government. ONGC FPO has been deferred several times. In this volatile market, who will buy ONGC at Rs 280 ? I guess only LIC and Public Sector Banks (PSB’s). If government wants so, they can do private placement as well. I guess there are better stories in market than buying ONGC at 280. First of all you, can’t decide on subsidy sharing formula and continue milking company as per your whims and fancies. Arbitrarily you change subsidy burden of upstream companies from 33% to 38.8% and expect market to pay top dollar for issue. May be government is expecting that market will realize true potential of ONGC in the next 15 days and they will be able to price issue at 280 rupees.

I was positive on ONGC issue at 245-250 rupees and at that price it was a compelling long. In fact, I am long on ONGC (bought one November future) and was planning to build further long positions after FPO price band is declared. I also sold ONGC 280 call (thankfully I have not written any naked call). It’s a covered call strategy. But surely I won’t buy ONGC shares at 280 rupees. Hope better sense prevails in Delhi and the issue is priced attractively.

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09
Sep
11

Coal India News Update..

In some of my previous posts, I had written about selling Coal India 420 and 440 calls. Recently, there have been some news regarding increase in domestic coal price to align with international price (http://www.business-standard.com/india/news/plan-panel-for-raising-coal-prices/448331/). Planning commission argues that Indian coal prices are significantly lower than the international prices, which should be done away with over the next 2-3 years. This would have significant positive impact on Coal India. But recommending increase in prices is one thing and implementing the same, is different. There have been several panel reports on diesel price deregulation, but still nothing has been done. In this high inflation scenario, I don’t think government will have the courage to increase coal prices.

There have been some news report about decline in Coal India output decline in last month (http://www.livemint.com/2011/09/01152408/Dengue-takes-toll-on-Coal-Indi.html). These are operational issues which do come up during rainy season.

CAG report on Coal India was released recently (http://www.moneycontrol.com/news/business/cil-operates-239-mines-without-environmental-clearance-cag_583851.html). It says Coal India is operating large number of its mines without environmental clearance. I don’t think this will have significant impact on PSU stock. All of us have seen what happens to CAG reports ? Government and the Ministry involved question the assumptions, and opposition parties blame the government. End of the day nothing happens and report bites dust.

Given all this news environment, I still think Coal India will find it tough to cross 410-420 level in September series. But I have bought one 400 call to protect my sold 420-440 call options.




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