Posts Tagged ‘Oil and Natural Gas Corporation


ONGC follow up..

In one of my earlier post, I had mentioned about writing ONGC 240 puts for July series. There have been few positive developments for ONGC in terms of Cairn-Vedanta deal pre-conditions imposed by Government of India (GOI). As expected GOI has made royalty payments cost-recoverable as one of the pre-condition for approving the deal. It is difficult to say if the arm-twisting by GOI is correct and whether it would deter FDI in E&P sector in India on account of such ad-hoc policy changes. There was good article in BS on the same,

Someone on CNBC-TV18 commented, it looks like everybody in the GOI is working overtime to ensure success of ONGC Follow-on-Public Offer (FPO). One concern after other are getting resolved for ONGC and decks are being cleared for its FPO. Still one of the biggest overhang for the company, subsidy sharing formula is still pending. I think in a week or two clarity on the formula should come from GOI.

If one looks at ONGC July & August future contract prices (Rs 7 discount), it becomes quite clear that market is expecting ONGC FPO in August and not in July. I wrote some more ONGC July series 240 puts.


Interesting times ahead..

All the news flow makes case for interesting and tough times ahead. US Dollar Index rose  by 1.7% yesterday (the largest single day gain since Aug’10), resulting in all risk assets falling sharply, including crude oil. Why USD Index rose is a bit confusing for me, since report after report shows that US growth on life support system by QE is slowing. Yesterday, Federal reserve bank of New York manufacturing index dropped to its lowest level since November last year. Part answer of USD Index rise could be trouble in its biggest constituent, Euro (57.6%). It is like a tussule between who is weaker between Euro and US.

Indian market should be happy with commodity sell-off. There might be some knee jerk negative reaction, but if crude keeps falling it should be good news for the Indian market. Another major concern, Interest rates should be nearing its peak after RBI  rate hike of 25 bps today. Is Indian economy slowing down sharply? Yesterday some of advance tax numbers did not give evidence to that. Infact advance tax numbers from top 100 companies in Mumbai region has increased by 14 percent.

As option writer, what does all this news flow means for me. Lot of major stocks RIL, Tata Motors, SBI, Maruti and ONGC are looking weak and they have already come down quite a lot. Its difficult for me to write any OTM calls since premiums are low and also there might be some rebound from oversold zone. Normally I don’t write puts and in this global turmoil I would be very cautious in doing so. Except for some oversold stocks like Reliance communications, I won’t write puts. Can’t do much at this point of time except wait and watch..Anyways for June series all my margin money is blocked in existing contracts.


Why did I trust this Congress government…

In one of my previous post , 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:

May 2018
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