Have a good weekend. And inflation is at 12.6%.
Disclosure: I know it's repetitive but I have to do this - I have a short pos on the Nifty. Don't trade this please, it's only for educational purposes. This is not portfolio advice.
So I'm buying Nifty puts for 4400, for August - which will expire next week, so it's a short term trade. The puts were last traded at 139.05, and I will put 40% of hte net portfolio on it - that's 20L. Since each contract (50 Nifty) is 2.2L in size, I'll be buying 8 contracts - or 400 Nifty puts.
The cost is 55,000 and I expect to close this trade next week. Let's see how it goes.
Disclosure: Short the Mini-Nifty today. Just to check something out.
A year or so back, there were a number of posts of how this was the next big thing and how Northgate would take the world by fire and become the next youtube. I had this chat session with a person advertising the company asking him - so why is Yogesh Patel, the COO, selling all his shares? And there was no answer.
Turns out Mr. Patel (or at least, someone named Yogesh Patel, who sits on the board as an "independent director" - looks to me like the same person) has continuously been selling shares nearly every month, 10,000 at a time.
And so have other insiders, as the BSE announcement archives will tell you.
While the company had a 1:1 bonus last August, the stock price has shown no signs of being very excited. From a high of (an adjusted price of) Rs. 760, the stock is now near 52 week lows - at about 290.
And insiders are still selling. Patel sold another 30K shares on 14 August 2008. Sure, one can't predict much using insider selling - but I've now seen a pattern in two other stocks. ICICI Bank and FirstSource.
Insider sales can be misleading when insiders sell to generate cash. But sustained selling, or selling a large chunk of one's stake has to be viewed with caution. No?
In its balance sheet for the year to March 2008, the Unitech management has sounded a cautionary note. “It is quite clear that after a fairly long bull run, the real estate sector in India has begun to show signs of slowing down to a more realistic equilibrium rate of growth. The first signs of market slackening were evident in the second half of FY08. The correction has become more pronounced thereafter.”It's refreshing, coming from an RE company, but the writing is now on the wall: Housing and Commercial Real Estate have peaked, and it's going to take a little more time when the downturn becomes prominent. With no proper price discovery structure - like the Case-Schiller indices in the US - there is no way that we can easily figure out where prices have declined, and where they're holding up. Everything is hearsay. Until we actually want to buy or sell.
A friend recently called up the "broker" who he bought a piece of land from, and asked him what the going rate was.
Broker: Fantastic, sir, it's currently at Rs. 2000 per sq. ft. and lot of people are picking it up. Great investment sir.
Friend: Okay. I want to sell, so why don't you tell me if someone shows interest.
Broker: [Complete change of tone] Er..Sir, real estate is getting to become a tough market, you know...and interest rates are this high...very difficult to sell nowadays, but I'll try my best.
My friend is like, what the F? Tones change in a sentence. Unitech's gone through this once - I remember their foray into Bangalore in 1995 types and their exit after the subsequent bust. They'll have learnt, but the question is: will they still remember?
Disclosure: No positions. Short in the Short Only Strategy.
Amid a choppy international market, the country's second-largest bank, ICICI, has pared a slice of its volatile, high-risk exposure. The bank has sold about $275 million from its credit derivative portfolio in its foreign branches. The transaction, closed a few weeks ago, will enable ICICI Bank to cut its mark-to-market losses (which arise when market prices of securities held in the bank's books dip).So they've sold off some CDOs. Interesting. This is not a huge change as they've already written down some amount earlier. But earlier they were confident of the credit quality - now it seems they are not.However, the bank has decided to retain the credit derivatives where the underlying loans are to Indian companies.
...
According to ICICI Bank's balance sheet for last year, it had a total credit derivative exposure of $1.6 billion. This included various instruments like credit default swaps (CDS), credit linked notes (CLN) and collateralised debt obligations (CDO)-derivatives where the underlying is plain vanilla loans. (Loans are packaged into various marketable securities like CDO and CLN, and there are deals in which a second bank sells a default protection to the original lender. These protections are like insurance premium and the product is called CDS). The recent sale pertains to CDOs.
But they're still confident of the Tatas and Bharat Forge. Will that be vindicated? Will the global credit squeeze and recession impact the creditworthiness of the Indian Giants? (Who, it must be said, aren't giants compared to the likes of Bear Stearns) Time will tell.
Delhi/NCR is a weird place that way - lot of black money, and very good roads/infrastructure. Still, there is enormous amount of housing becoming available and literally everything hinges on Diwali. With interest rates staying high, Unitech is bound to suffer - at least as much as the others. Brigade and Sobha have suffered hugely - P/Es are now down to 10 or so - and DLF is also valued at a lower P/E. Yet, I believe these companies tend to overstate earnings, which will only take them so far.
So, another short. Future traded last at 167.7, and the lot size is 900, for which I can short three lots with a 10% exposure.
The spreadsheet is now open for view.
Ignore the small profit on ICICI - it's too early to gloat. Note also that I don't have price targets. I don't have a "system" way to trade this. In fact I have no real positions on it in my personal account, because I only trade systems nowadays.
And as usual, disclosure: No positions, but I could have any position, even the reverse (long), because I trade only what my computer throws out. This "strategy" is not meant to be advice and is purely educational.
Copyright (C) Deepak Shenoy 2005-2012
Nifty options dated 25 Dec 2008?
Categories: Commentary
Don't tell me they didn't know. October 30 is the last thursday for Oct 08, but the exchange is closed because it's Diwali - but the October options are dated 29 Oct, which is a working day. So someone bothered to correct October, but not December? Someone fire the December person or get him/her trained by the October person, please.
This kind of stuff destroys computer algorithms designed to back test based on data. If the data says 25th, I would expect some trading to happen on the 25th. Otherwise it throws my algos out of whack. But this kinda thing is important to note.
I have an idea for a "clean data" project. Something that does all adjustments, cleans out data for spikes in the open/close and also adjusts for bonuses and splits, going back to say 2000. Just end of day data, for stocks, futures and options. But I'll need help, in the whole process. If anyone's interested talk to me.
Posted in Commentary