Skip to main content

Ranbaxy

THERE’S never a dearth of conspiracy theories in financial markets, particularly in times of big events like the current open offer in Ranbaxy. With Daiichi’s open offer extending into September, Ranbaxy derivative contracts — expiring in September — have suddenly become unusually active, given that we have around 15 sessions of even the August series to go. September futures of Ranbaxy are trading at nearly Rs 400, a discount of over Rs 100 to spot, indicating that the stock is likely to trade around that level once the open offer is through. But what has baffled many market watchers is the increased activity in the 400 September call, which ended at Rs 106.40 on Thursday. The obvious question being, “Why would any one pay such a hefty premium for it, when the market has all but concluded that Ranbaxy would trade around Rs 400, post the open offer?”
And given that traders are still buying it, will they try and jack up the price in the cash segment sometime between the tendering of shares and their acceptance? The answer to these concerns is simple. Since, equity options in India are American and not European (like index options), they can never trade below their intrinsic values (the difference between the spot price and the strike price in case of a call and the reverse in case of a put). As a result, Ranbaxy 400 September call options got to trade above its intrinsic value of Rs 103.50, given that Ranbaxy ended the day in the cash segment at Rs 503.50. So, both the buyer and the seller of the call are simply using this as a surrogate to the cash segment, given that the break-even for both the buyer and the seller is very close to the cash market price of Ranbaxy, and given that its price is unlikely to move much till the open offer. Therefore, the buyer is likely to scoot any moment and probably has no intention of holding this call till its scheduled expiry — much to the dismay of the call writer, who thinks he/she has a free bearer cheque. So, don’t be surprised if the entire open interest in the Ranbaxy 400 September call option is unwound much before the expiry of the September series — much to the dismay of conspiracy theorists.

Comments

Popular posts from this blog

Your Bill Amounts Are Going To Increase From June 1, 2016

Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994. Union Finance Minister, Arun Jaitley, in his budget announcements proposed to impose a cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services. The present rate of service tax will be hiked to 15 per cent from June 1, 2016, from 14.5 per cent. Take a look at what gets expensive:



Phone Bills: Your phone bills are going to go up. So, pay a good 15 per cent now on service tax on phone bills.

Restaurant Bills :If you are dining in a restaurant that already has service tax applicable, you are going to pay more on your eating out. Though 0.5 per cent on a single bill may not mean much, frequent diners may end-up paying a lot during the year.

Travelling: You will have to pay more for air travel, as there is a service tax on tour operators and travel agents.

What is Gold ETF - Gold Bees, Reliance Gold,Kotak Gold

What is Gold Bees or Gold ETF?

Gold ETFs are open-ended mutual fund schemes that will invest the money collected from investors in standard gold bullion (0.995 purity). The investors' holding will be denoted in units, which will be listed on a stock exchange.They provide returns that would closely track the returns from physical gold in the spot market.

An investor can buy and redeem the units either directly from the mutual fund or from the stock exchange.Presently there are many Gold ETFs traded in NSE India. Some of the listed Gold ETFs are GoldBees,Reliance Gold,Kotak Gold,UTI Goldshare



Why choose Gold?
Gold holds its own in any investment evaluation on its strengths as a hedge against inflation, value in the event of political uncertainties and its traditionally negative co-relation with other asset classes such as stocks, fixed income securities and commodities.

The value of goods and services that gold can buy has remained stable unlike currencies that have seen significant…

What is NIFTY BEES - ETF?

NIFTY BEES - is the first ETF (Exchange Traded Fund) in India, which seeks to provide investment returns that closely correspond to the total returns of securities as represented by the S&P CNX Nifty Index. It gives you the most diversified exposure at lowest possible unit size. Approximately value of Nifty bees will be 1/10th value of the prevailing Nifty price.

ETFs are one of the latest financial innovations and any new concept takes time to be known widely. Globally it took more then five to seven years before it could be of any significant size. In India, it was introduced with Rs 21 crore in size , a fraction of the mutual fund industry, it has come far with more than Rs 700 crore in size with six ETFs.




The Nifty BeES also scores over other index funds due to its low tracking error and expense ratio, apart from easier tradeability as it is listed in the NSE. One can also consider doing an SIP in Nifty BeES.

Some of the reasons to invest in Nifty Bees : Investing in Exchange …