A successful self trader – Rule # 30
According to a global study, over 90% of people who buy options lose money. It may appear that selling options is a safer proposition. Not exactly! When you buy options, there are components to that decision. What strike to buy; at what premium to buy; how much time value to pay etc. Unless you understand these finer points of buying options, you will be on the losing side. How to join that other 10%?
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As we write this blog, the price of Vedanta (formerly Sesa Sterlite) has corrected almost 60% from the highs achieved last year. In fact, since the merger between Cairn and Vedanta was announced a couple of months back, Vedanta has corrected close to 30% and is already at a yearly low. The merger deal has run into rough weather because of large shareholder institutions like LIC and United India Insurance Company (UIIC) raising doubts about the validity of the 1:1 swap ratio. Continue reading
Over the last few days, there is a sense of euphoria in the global markets due to the belief that the Greek problem has been resolved for good. India has been no exception and the Nifty has celebrated the resolution of the Greek problem by jumping nearly 300 points. The question, however, is whether the Greek problem has actually found a solution? Or is it that just the inevitable has been postponed and markets worldwide are celebrating too early? Continue reading
The Fed rate hike now looks closer and surer than originally anticipated. Janet Yellen had identified 3 critical factors which could impact the decision to hike rates. She called for a pick-up in GDP growth, fall in unemployment to 5% and inflation above 2%. The GDP has surely shown signs of picking up in the US. The rate of unemployment has been falling consistently since 2009 and is now close to 5%. Inflation is still below 2% due to the effect of cheap oil, but that may not be a sustainable rate. If the recent statements of Janet Yellen are to be taken at face value, then a rate hike may actually come as early as September this year. Continue reading
In the past few months three independent pointers have once again raised the specter of bank loans to the steel sector. A report by a leading brokerage has raised serious questions about the steel exposure of Indian banks, which runs close to $45 billion. In another event, the highly conservative HDFC Bank preferred to hive off its Rs.550 crore loan to a steel company at a discount rather than participate in a recast. A few days ago, the Finance Secretary sent an SOS to the Steel Secretary on the exposure of Indian banks to steel companies. Continue reading
