Sunday, May 30, 2010

Bulls ‘short’ on Sesa Goa as they see limited upside: Is it True?

 I was reading this news article on friday morning which came in 
since thursday is expiry day one can expect there will be some amount of volatilty in stocks..but what made me intresting to spend some time on this is i like sesa goa very much coz there is lot of volatility in this stock...when ever there is ba of news of economy going slow or demand from china is reduced this stock will tank and when good news comes in the form of economy growing ,more demand from china or any other news..this will rise rapidly. These economic times very reporting that
Shares of Sesa Goa rose sharply on Thursday on the back of short-covering, but traders used this pullback to build short positions on the stock, as they feel the upside is capped

See the options data on sesa Goa on Thursday one can clearly see that 320 put has huge open interest that clearly indicates the down side is limited and the article on Thursday says upside is limited Thursday it ended at 337 . Since there is huge built up on 320 put it means the support is at 320 and not the resistance 

 Now see this data on Friday 320 Put as has almost same OI and other out of the money PUT are also started to rise . Guess what happened on Friday ..Sesa Goa had highest amount of % increase in List A Stocks ..10% rise in a single to check for sesa-goa price on friday
  now do u call this as Upside Limit ? Still unable to believe economic times reporting like that. I have a feeling that i might be a paid news from brokerages .

Monday, May 24, 2010

Chance of India Defaulting?

Everyone is talking about Greece default and Euro region problems..including naive like myself. But why there is less noise on India defaulting. One reason might be  India is pretty much safe ,thanx to RBI for restricting  FII to hold India's debt. Greece holds much of its debt in form of External Debt ,mean foreign banks used to fund its balance sheet and as its time to repay them back and unfortunately they don't have the resources to pay back..alternatives for Greece are going default..or restructure the debt and let the future generation face the sufferings.I guess the chance of happening later is more 

Now coming to India, we also have debt ,but majority in the form  internal debt. Government borrows money from market by issuing securities called G-secs (long term) T-bill (short term) and it will pay the lender at specified interest rate until the securities mature after which  it has to repay the money back.

RBI will do these kind of transactions,apart from this RBI also has tools like MSS to increase the liquidity in market by buying back the government bonds and decrease the liquidity by selling the bonds.Generally RBI has calendar in which it gives dates on selling government securities
Here is the link for this year RBI Calendar

So Where are we Standing on G-sec till many outstanding securities does Indian government hold.
How much interest are we paying out?Here is picture which gives some understanding on Gsecs size and Maturity .Y Axis shows Gsecs amount in Crores and X-Axis shows Maturity Date
 The Larger the Bubble means the higher the security value which government borrowed and it needs to repay that amount at maturity . We see in 2010 and 2011 we have small bubbles mean government has to repay less  amount this year, They can do this by using new dated securities or selling government stock,increase taxes etc ..Problem is if they issue new securities say 2040 bond, then they have to pay the interest till then which is a burden and if they go for selling there stake in PSU's then they will miss out the dividend  and also face political pressure. Am not still not sure of which way to support coz issuing a new bond is like a ponzhi scheme and selling a stock is like killing golden goose

Till now we havent faced the real problem coz its a small repayment in 2010 an  2011, it expected good chunk from 3G revenue and sale of Govt Stock. But the real problems for govt starts when they to repay the amount in 2013,2014,2015. Larger bubbles start from then and real interest burden will start .And if they issue new securities to cover up them then interest burden will increase .See the below graph on Interest payment by government (budget estimates)

 See the rate at which Government is paying the interest ,there is a sudden spike around 2007-08 and 2008-09 which might  be attributed to government issuing more bonds for more spending on farmers loan waiver and pay commission.Slope got a bit horizontal for 2010-11 because government planned to issue less number of bonds and expected more revenue in from 3G and sale of stock..But 3G cannot happen always right, from where does the government gets revenue to fund the balance sheet apart from issuing new secs and increase the interest burden and if this burden continuous in coming years ..then i believe there will some be some turmoil in future ..hehe. :) It has another option...Printing Money, but where will it lead? Will cover up later..

Tuesday, May 18, 2010

Game Started

Am wondering at myself for writing to this . Guess ? FIFA World Cup ..nopes Games are yet to start..have to wait for another 23 Days. So something made me to write this.right?.Yes, we do see Games Daily in our life and  Games are played between Two players who take decision or combination of decisions for a particular outcome ,but the fate of player is not only dependent on his decisions but also on other players,but most of them seem to be important to us .

But off late am finding few games to be interesting ,one such is the game played between Player A consisting of traders ,investors,speculators,bankers,officials of(on) EURO Region and Player B of the same pool of (on) Non-Euro region in Order
Player A thinks Player B is playing with there market and making its currency and market to go down ,yields on bonds up etc..And Player B thinks Player A is in Bad shape and it will default and pulls out all his money from there market.Since Player B is pulling out his money from there market ,Player A also starts pulling out his money from the market there by making the market to go down south in first few days of this month

Another Set is by Officials who think that players are taking away money afraid of countries going default in turn making with Euro hot , Here comes the Officials who in-turn want to cool the temperature by infusing 
1 Trillion Package,Central Bank buying the bonds, and giving cushion to euro by arranging swap with dollars.

Again the Player B feels conditions are improved,confidence is back then he  brings back the money into market expecting that Player A's Debt problem is solved  in-turn Player A also brings money into market cause player B has brought  money into market after the debt problem is solved for now

Here if both the players think they are Safe than they make the market to go up like anything and both can win,We have 3 possibilities
1) Both Winning
but once a player gets suspicion or not confident then we will have 2 other possibilities
1 ) One player might win other will loose
2) Both might loose if no one has confidence on each other

For now Officials brought peace into market ,but there are always people looking in  microscope to identify the defects .Once this confidence is gone..we might see another leg of turmoil in near future

Apart from this am playing another game whose pay off is not in favor of me right now ..hehe :)

Thursday, May 13, 2010

Volatility Ahead with High OI and Volumes

 While i was looking at Open Interest in options  on NIFTY was bit surprised by seeing the volume of futures increased in last few days ,average volume in April is around 5 Lakh contracts and now we are trading above that..will see how it goes till Volatility index came of from lows..we might expect more volumes in coming days.

Date Index Futures
No. of contracts Turnover (Rs. cr.)
03-May-10 349631 8451.55
04-May-10 570849 13736.02
05-May-10 714820 16977.22
06-May-10 784241 18544.8
07-May-10 880349 20520.97
10-May-10 745870 17846.47
11-May-10 651926 15681.6

Todays NIFTY Futures contract details, we had a Price rise with increase in Open Interest in market with good volumes when compared to average of last month,,

581001 1492615.74 27492350 713300

Looks like its enough to judge the direction still i will do some more research and will come up with another post some time later

Here is how we interpret Open Interest with Volumes and Price Rise

Price  Volume Open Interest   Interpretation
Rising Rising Rising Market is Strong
Rising Falling Falling Market is Weakening
Falling Rising Rising Market is Weak
Falling Falling Falling Market is Strengthening

for me it looks markets are Strong for now..Lets compare them with Options Data
From the Graph we can that 5000 and 5100 put had a increase in OI..means Options Writers are writing the puts in expectation that market might go up.. that indicates for short term we are having support at those prices and also one can see that there is a  decrease in OI for 5300 Call ,mean option writers closed there positions in expectation of market going upwards..for now we have resistance at 5300

Even though global cues are weak we will where it heads in coming bet is towards going up :) will see

Tuesday, May 11, 2010

Buying and Selling of FII vs DII

Here we can what exactly happened during this week with respect to purchase and selling of FII and DII.
I didnt capture the swing in index price,just placed closing price for the day for now..but its enough to make a few inferences about NIFTY.

Nifty was around 5250 at start of month then greece problems were taken seriously by markets around the world and started to slide we see that Domestic Institutional Investors were net buyers on  5th and 6th and 7th and FII were selling inturn pulling the market down and making good returns. Again on Mondy they were the net buyers and made the market to go looks like FII's are buying at low price and selling at high price and DII's are buying at high price and selling at low price we expect FII to sell around 5250 and DII;s buying at the levels...will see in coming days :)

What is the next BlackSwan?

What a wonderful month so far for markets a swing of near 6% downside in a week and a 4% upside in a day ,Credit goes to European Officials single handedly making the markets to dance according to there tune and also we yet to know the reasons for 1000 point swing of Dow Jones..rumors in market are mistake by iIbank in selling e-mini S&P worth 15Billion USD, large Europe bank liquidated its positions. and high frequency trading ..any way leave it...we will get to know more on it in few days..

So What exactly happened during the past week and weekend ? what made europe for the changes in there policy towards bailing out countries all the while opposing towards that idea. I guess this weekend will be recorded in history for sure. European Bank offered a trillion dollars package to weak countries?  Will this solve the current problem? From where will they bring 1T $ ? Print Money.if so..haha..LOL..that will have ripple effect in coming days for sure ..if not ..Why didn't they do this much earlier? when bonds were yielding much lesser..Now when they are higher they are buying them..pretty bad i guess ..its like buying at high price and selling at low price...If thats not the case..then Markets are doomed to come down again...for now europe went up..but still there are problems around euro..i dont think in a weekend all there problems are solved ..May be am wrong..will see..

So what next for markets..inch higher for now until we see another blacksawn. If there arent any events like that then by default we have the great driver of our ENGINE ...yep its China..Many are suspicous of China coz they dont reveal much data to the rest of world and we have to speculate a lot on its conditions..
I personally feel China is the ultimate culprit for making Metal Prices ,Oil to go up in 2008 coz of Olympics it conducted  which lead to massive cornering of build the stadiums,roads,infrastructure..and it drove Oil prices like anything coz it piled up huge reserves of Oil to use as backup fuel  in case of occurrence  of  Earth Quake. Once the event is over we had a oversupply of commodities,Oil and it crashed. Now again if  oil or metals to go up we need such a kind of demand...

So even without any real  demand metals going up..means expect a fall in near future which is already happening in China..Thats why am bit worried of China Throwing a Bomb on us..Have to be carefull in knowing the next BlackSwan timing

Friday, May 7, 2010

Greece is BlackSwan for Markets

I was bearish on NIFTY for a long time cause of variety of reasons like high P/E Ratio, High Interest Rates in near future,China Factor,Greece Problem etc Most of the factors are negative to Nifty  and i am still wondering why all of sudden  my view on market got changed after the last expiry and overnight i went from highly bearish to moderately bullish side.

I Guess it was  a big mistake of changing my stance, though i was bit bearish and bought 5100 put and sold 4800 put and was kind of gamble cause am selling a put (Unlimited Risk). Then comes the Black Swan in form of Greece and made the market to drag down. And i was bit lucky to have 5100 put and made good return in it and squared of it expecting the market will not go down much.But am wrong the market is dragging down daily and my position of 4900 sell is making losses and i will be bankrupt if it breaches 4900 before that i have to make a decision.

Here are some snippets at which i made certain decisions which i like to share over here
At position A in the above pic was Expiry time in April Series and my view on market got  changed from highly bearish to bullish coz the chart appeared to go up and earnings results of companies were Good and Greece was not there in my mind, cause Greece problem is made tougher by speculators who are expecting it to go bankrupt( will talk about this in another post) .Can see from A position that SMA crossed each other which was ignored by me somehow...regretting for it..anyway that's what happens to retail investors..they will be wrong in identifying the patterns..ok.. leave that for now,,

In the Fourth Rectangle is Williams indicator and highlighted region is marked in Black box with letter C , This was the time at which i was highly bearish cause the indicator touched 80+ for many days..that indicates its highly overbought and anytime it can sell off...its not that easy to predict sell off at least for me and only from historical data we can see it ..It was in overbought state for one month and for whole month of march to mid april i was bearish ,during that time market went up and i was made wrong.

Coming to the last rectangle marked with D which is the current week where we have slide in our market and Williams R is  in region 0 that shows its in oversold region and now again  for how long it will be that zone before there is bounce off and market going up 

I expect the market to come down a bit till 4900-4800 and then expect to go up..only in-case if Greece problem is halted for some time. Will get  some status on Greece by Monday Morning and hope peace prevails in market

Wednesday, May 5, 2010

Options Trading with Charts

yep finally made some progress on data collection and had some tough time in automating it but not done as of now..So here are some technicals of Todays Markets

below is the chart of nifty got from nse website

It all started from 2 pm IST and market started sliding
from then, initially i thought its a normal slide and when it went from 5220 to 5200 but once it breached 5200 there was some choppiness in the slide and it could not withhold the pressure of bears( or weak hands or SL got triggered) and blood was flowing for next 90 mins and even in last mins of trading also it didn't show any respite

We will see how Options were Traded and which holds the maximum open interest. Options Trading is generally used for hedging ,but there will be traders who take positions in expectation of making profit...(u know what 90% options traded will expire worthless )

Another important thing we need to see in options is Many people(includes myself until some time back) considered option buying is what determines the market direction but that notion of direction is wrong . why?
Its option writer (seller) is taking maximum risk and writing the option in return for the premium by expecting  that market will not close above strike price + premium in case of CALL and Strike Price - Premium for PUT option. Since option writers doesn't want to loose money(in fact who one wants to loose money? No one) .The Market direction is effectively decided by them. In case if any unwanted situation arises then writers may close there positions and might go for another strike price..This is how Open Interest Changes from Day to Day on Different Strike Prices

Here is what happened in Options on May 4th 2010

U can see from the below graph that there is good change in Open Interest in 5000 put ,5100 put and 5200 put that means market may settle anywhere between these values in coming days, Today there is Good change of Open Interest of 4800 put which indicates that lot of put writing happened at that strike price and market may reach that position and at expiry and we can say that market has Good support at 4800
5100 put has Good accumulation and one can see that 5100 is having some support for now

Coming the CALL side..we have good Open Interest (RED COLOR) in 5300 CALL which means there are many writers over there expeccting that market will not cross 5300 and that means Market has a near Term resistance of 5300. Good number of contracts were written for this lot which can be seen from change in open interest (GREEN COLOR)

The below Graph shows Contracts Traded Today and change in OPEN INTEREST

One can clearly see that IN THE MONEY PUTS were closed that lead negative change of OPEN INTEREST for 5200,5300,5400,which indicates that market may go down in coming days( This observation needs to be checked again). Reason why i made such a statement is why will option put buyers will close there IN THE MONEY PUTS.???.if they expect market to go down..they will  earn good return right?...Here comes..its not options buyer who wants to make money..its option writers who will make money...and now if market goes down ...IN THE MONEY positions will be huge loss...that's the reason they(Option Writers) closed there positions..(but anyway i will check this hypothesis again)
Wantedly  i didn't talk about the Blue Bars as i need some more clarity to understand it

P.S: I Made a honest observation from the Data Available at NSE india Site , Kindly forgive me if i made any wrong assumptions and analysis

Tuesday, May 4, 2010

Market Today

Today's Market was flat till 1.30 pm and latter part of session we had a huge volatility that led to market crossing critical resistance point of 5180 as told on News in the  morning. So what exactly made this market to fall  in the last  hour,We know market movement is based on supply and demand. At first instance it appeared to me that "EURO Crisis" which is happening in that region made our index to fall ,mean investors are afraid of index going down anytime soon and sold of in a hurry and might have exited once it breached 5200 . But of late FII are buying into nifty for quite some time inline with corporates showing good results with few exceptions and we had 30+ consecutive net buy sessions by FII..that indicates FII are not here to sell anytime soon..So what Exactly made this fall ? who knows? only thing we can do is speculate and see if we are lucky ...

So here is what i speculate of today's happening

Euro region has few problems which i clearly don't understand apart from the budget deficit which i hear in news and amount of money needs to rollover to close that GAP..Of which Greece is having a major problem for now and it might go for bankrupt and taking a few countries along with it . This will make demand for metals to fall . why metals? Metals are basic  raw material for majority of  industrial products..right from toothpaste to buildings...So fear of Greece and weak demand for metals made most of the metal stocks investors to close there positions which in turn gave pressure to other sectors and made a weak market sentiment.

But other thing which is coming into my mind is ..recently metal producers(Steel Mining companies went for Price hike of metals) Now what made them to increase the price at this time? Are they Expecting increase in Demand for metals in coming days? If so then today's fall might be reversed in coming days(How many Days?one month?..Two months?... :) who knows)

More Statistics coming in another post later in the day