INTELLECTUAL TRADING

Traders, Why do options trade at lesser than theoretical value on the last day of expiry? Why is it important to square off ITM (in the money) options rather than let them expire on the expiry day? Not knowing the answer to the above questions can cause a potential loss and hence the reason for writing this blog. I am assuming that all of you reading understand the basics of option trading. Many of us would have had the following 2 questions or faced similar scenarios at some point of our trading career Nifty is trading at 5950 and today is the day of expiry. At around 2:00 PM, Nifty 5900 calls and 6000 puts are trading at around Rs 45. Ideally it should be at least 50, so why? I had bought Nifty 5800 calls and Nifty closed at 5803 on expiry day. I could have sold it on the exchange but thought otherwise and let it expire assuming I will get back at least Rs 225 (Rs 3 x 75)/lot. To my shock, the contract note sent to me by the broker in the evening showed a debit of Rs 200

 World Bank Commodities Price Forecast Report (nominal US dollars) - Oct 2016                                                                Download

A mutual fund is a collection of stocks or bonds or combination of both. Such collections are sponsored and managed by asset management companies (AMC) like HDFC mutual fund or ICICI asset management company. These companies collect funds from the general public and invest the amount in a sponsored collection based on the terms and conditions agreed by individuals while making the investment decision. AMC’s make money by charging fees on the amount individuals invest. There are different kinds of fees, mutual funds charge: Expense ratio  : An AMC incurs various expenses like marketing & distribution expenditure, administrative cost and research expense. All these outlays are combined together and are passed onto the investor in the form of expense ratio. Expense ratio tells you how much you pay AMCs in percentage term every year to manage your money. For example, if an investor puts in Rs 10,000 in a mutual fund with an expense ratio of 2%, then he/she is paying the fund Rs 2

Mid-cap equity funds offer investors the potential to generate significant wealth. However, the risk is substantially magnified. In the bull periods, mid-cap stocks tend to outperform their large-cap peers by a significant margin. Unfortunately, in the bear periods, mid-cap funds can lead to deep losses as well. This is evident in the table below -                 Data as on December 6, 2016  Returns over 1-Yr are compounded annualised If you have appetite for high risk, you may invest a higher proportion of your equity portfolio in small-and-midcap funds. We suggest don't base your decision on myopic speculation, instead focus on the long-term. Stocks, more often than not, move up over the long term. Hence, such dips in the market may be a good time to invest a small portion of idle cash for the long term (i.e. five years +). If you are investing for long-term goals, mid-cap funds can form part of your portfolio. The current fall in the market, makes it a good t

Trading Natural Gas Natural gas in it most natural form is a gas as opposed to a liquid.  Many are confused and equate this product to gasoline which is refined from crude oil and part of the distillation process.  Natural gas is found within the earth and is produced by drilling into the ground for extraction.  Over the past 10-years the process of hydro-fracking has increased the availability of natural gas by drilling and then driving water and silica into the ground in an effort to break up shale and release methane. Natural gas prices are domestic.  Since natural gas is in gas form, it is hard to move or store.  To transport natural gas it is generally pushed down a pipeline.  This means that either private or government groups need to build pipelines to move it from one location to another.  In the United States, who is the largest producer of natural gas in the world, private companies build and own pipelines and generate income from tolls that are paid to the company ever

What is Counted in GDP? GDP or Gross Domestic Product is the total value of goods and services produced by an economy. To calculate the GDP, you add total consumption, plus investment, and government spending to the difference between exports and imports.  (C + I + G + (E – I)). Example:  The GDP is a backward looking measure of economic growth as it is usually released 4-week after a quarter has ended. What is PMI? The Purchasing Managers Index measures the economic health of the manufacturing sector. The data is collected through a survey of 400 purchasing managers in the manufacturing sector and based on five different fields: Production, news orders, inventories, Supplier deliveries and employment level. The PMI can provide information about business condition. Example: The PMI provides analysts, purchasing managers and company managers with the current economic activity What is CPI? The consumer price index is an inflation index, that reveals ch

Everything you hear, see, smell, taste, and touch involves chemistry and chemicals. The Indian chemical Industry comprises upstream commodity products, intermediaries, and specialty products. Analysts divide this sector into two segments - bulk chemicals and specialty chemicals. Bulk chemicals  are building blocks. The production of these chemicals usually requires large investments in plant and machinery and technology. Investment and pricing in this segment is driven by the demand-supply scenario. This segment is typically cyclical. The bulk of chemicals produced in India are for either upstream products or intermediates with a variety of manufacturing applications. This includes fertilizers, pharmaceuticals, textiles and plastics, agrochemicals, paints, and dyes. Specialty chemicals  are high-value, low-volume chemicals recognised for their performance-enhancing, end-use applications. Specialty chemical companies focus on chemistry or technology and invest a large amount of

                Post Demonetization Sector  Report : It is always darkest before the dawn!         by IDBI DIRECT                                                DOWNLOAD

Conspiracy theories normally accompany all big-game changing events. The decision of the Modi government to demonetise Rs 500 and Rs 1,000 notes, from the midnight of November 8, 2016, is one such event. It is now being said that a section of the population knew in advance that demonetisation was coming and high value notes of Rs 500 and Rs 1,000, would no longer have any value. Anecdotal evidence in the form of WhatsApp forwards showing massive deposits made into banks before the demonetisation move was carried out, has been offered on this front. This suspicion becomes even more pronounced when one looks at the jump in deposits held by banks as of end September 2016, in contrast to earlier periods. Look at Figure 1, which plots out the quarterly increase in bank deposits, over nearly 15 years. Figure 1 This Figure 1 clearly shows that the increase in bank deposits between end of June 2016 and end of September 2016, was the maximum, in absolute terms, since March 2002.