Friday, April 30, 2010

Postponment in Introduction of Gold BEES Futures & Option

NSE has deffered the introduction of GoldBees Futures & Options, as Queries were raised and Clarifications were sought by market participants.

We do not have privy to this inference, but it may revolve round the queries raised by us in previous articles. 

Monday, April 26, 2010

Introduction of Futures on GOLD BEES

NSE is introducing Futures & Option on GOLD BEES (Gold Bees is an ETF with underlying as gold) from 30th April, 2010.

It is a good step on the part on NSE & It will increase volumes in the market. The traders will be able to take position on gold using Equity market.

The Option to be introduced will be European option; FUTETF will be for the Futures. It will open plethora of Arbitrage opportunities between Futures, Spot, ETF , NCDEX, MCX & International Gold Prices.

It is a clever move by NSE to increase volumes, and also cross selling of its IISL products.

But Does it also mean that NSE is creating an indirect business for benchmark mutual fund,  as there are other gold ETF in India (Including Reliance, Kotak & SBI) which are not introduced in F&O segment. Also because of this Benchmark will be able to sell its other ETF and Mutual funds products.

Also it is an indirect entry of Option in Commodity trading which is still not prevalent in commodities market,  Also FMC & MCX may cry foul. Also it would mean there can be ETF on all other underlying commodities (Silver, Crude, Zinc etc) where there is huge speculative interest in MCX & NCDEX or it should be seen as a precursor of introduction of Options in commodities market..

Also one critical issue will be valuation of its Expiration price, The exchange say that all contracts will be settled at NAV declared by Benchmark. But Benchmark's process of valuation is not precise and there can be probability of mis-pricing , as they carry physical gold and  value it on LMBA price. Also current spot prices in Indian market are not considered which often quotes at premium or discount to International prices. Also the NAV is declared by Benchmark late in evening and not at the close of our market. Does that mean we carry a blind risk of settlement price for almost 4 hours after the closing price.

Thursday, April 22, 2010

Introduction of Options in Currency Market.

RBI has given permission to Exchange to introduce Rupee/ Dollar options. With this matter of time , introduction of Currency option seems imminent.

NCDEX & MCX have recently introduce other currency for trading (EURO, YEN & Pound) making these market very liquid. In fact the volumes on these exchange are more than Equity cash market.

It is worth looking at this market, because

a) Volumes are huge.
b) The   trading is volatile & spreads are very narrow
c) The trading cost is very low
d) With introduction of Options, Many other players will enter the market
e) Volumes will move from OTC market to this market
f) These operations are part of many bank treasuries
g) There wont be any STT in these markets

Considering the above reason,
a) Scalping is possible, by giving both bid - ask rates
b) These market cannot be manipulated hence we can trade on Macros
c) Arbitrage can be big business with many players, Depth & Lesser Costs.
         It can include i) Normal carrying of underlying ii) Calendar Spreads iii) Delta strategies
         iv) Arb between NSE FX & MCX SX v) Abr between FX in Indian market & NDF in Singapore
d) Algorithm trading is possible & could give better results

But It would be like pitching against Goliath's which are banks who have the might of Money, Infrastructure & also better access to orders in spot markets. But they are better equipped to trade on Phone rather than Machine

Tuesday, April 20, 2010

Demerger in Kalyani Steel, Kirloskar Oil & Enkei Alloy.

The record date of these 3 companies have corporate action on 21st & 22nd April. All companies are demerging their Investment in different company. All the stocks have move up before record date leaving no room for abnormal returns hence none of the looks impressive to bet for demerger story.

Nifty View

Nifty has reached a crucial level, The Stochastic has reached oversold level & the fast line is above slow line signalling upward move. We can try going long at this price of 5255 but we can have committed move above 5307.

Stocks to bet will be NELCO, Unitech, M&M, RPower & Essar Oil. We may hedge it with short position in ZEE below 293/-

The SL for Nity would be 5235

Thursday, April 15, 2010

Differential Voting Right (DVR)

SEBI has given nod for issue of Differential voting Rights, synonymn to different classes of shares in many developed countries.

Internationally such DVR trade at a discount to share price, but the dicount is not very steep. The discount is arount 5 % to 10 % in European countries & not more than 20 % in US.

These products if the voting rights are less , than the dividend is little higher or the returns are more sweetened than normal equity.

There are 2 companies listed companies who have issues shares with differential voting rights. They are TELCO & Pantaloon retail.

Both DVR has not performed in tandem with its share price, hence Investors who are bullish on underlying can bet on DVR as it will have lower downside.

It is not advisable to do arbitrage between DVR and underlying ie buy DVR & sell the stock futures, because the price discovery between CASH & DVR may take a longer time.

Guj NRE Coke has also decided to issue right DVR & Bonus DVR , but the dates are not fixed.