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- My obsession for Futures and Options – the trader in me raise its head off and on, pushing me to dabble around with F&O and every time I take an Option position I just feel I will be the next Warren Buffet, knowing very well that he’s a fundamental investor
- Just to test waters I pick up a couple of lots and start day dreaming of multiplying my returns, generating core capital out of the profit that I will generate out of options and then investing for long term. I forgot to mention I’m not an option writer but option buyer with a limited loss and an unlimited dream
- The first lot always give profit and entices me to get into multiplying my positions and by the time I’m into the third lot from a lower put buy and a higher call buy I find myself on one side – either with all put lots or all call lots – and I don’t call it caught on the wrong foot but getting trapped into a web for greed, ending as nearby tea seller who gets into F&O without knowing what F stands for and what O stands for
- Why is it that on a day when US inflation should have been the opening statement, I’m setting the context w.r.t. equity derivatives. Nifty is at all time high and I find many a guys coming across who are in the process of buying put options, in a way trying to protect their portfolio downside
- As long as they don’t sell call, I mean turn into an option writer it’s all fine, but there is so much of conviction around that market will fall that they don’t want to miss out on money multiplying opportunity, without realizing that market can remain irrational for longer than you can remain solvent
- Even I’ve been writing in a cryptic manner in my write ups that I see the market coming off and that’s the reason I’m going slow on my buying, to the extent of deferring as long as possible and I may have the conviction as well but I will not touch a weapon of mass destruction
- Another life time high on nifty as the index closed 110 pts up at 22755, touching a high of 22775 during the day. With all kind of global headwinds coming into play, the last leg of the rally is a bit baffling and while today the market is closed there is every chance that it may see a gap down opening tomorrow, unless and until some reversal takes place in US tonight
- The question coming my way – and a cover story that outlook money has also run, is it time to invest in gilts? The answer is yes and let me elaborate when the new 10y 2034 gained to close at 7.08% on a day of lackluster trade when volumes were hardly INR 320.00 bn
- With all the hue and cry going around in the US on inflation, I have a feeling that in India at least the upside is capped – the fiscal situation is in control, the demand funnel is widened at the moment and any upside in yields will be used to accumulate
- However there is one catch – the rate rally as it looks as of now, will be short lived one with best case scenario being 6.50% on 10y or may be another 25 bps towards next year as the RBI will be wary of a sudden fall in yields. I’m reading Dr. Subba Rao’s book right now and he’s beautifully explained the concept in detail. Quite insightful
- Now the big picture – the US inflation data – contrary to expectation the CPI inflation for March stood at 3.5% vs an expected headline number of 3.4% in a way dashing the hopes of a rate cut in June. Despite all odds Fed had indicated a 75 bps cut in 2024 but wanted to see more evidence of inflation coming off, that for now according to them is not happening
- There is an instant reaction to the same – Dow has lost 570 pts and Nasdaq is down 200 but the ramifications are more on bond market as the Treasury yields have spiked beyond imagination. 10y US treasury hits 4.57% spiking by 20 bps and the 2y getting into striking distance of 5.00% spiking 22 bps
- This is not enough, the dollar index gained 1 full point to trade at 105.03, after a long gap we are seeing a 1.1 point run and in the process Gold slipped below USD 2350 mark. Fed minutes are yet to be released at the time of finishing this write up and that may also have some ramifications, though I feel it may be positive now
- Having said that, a debate is on – what is the future of Gold and other precious metals and answer to that lies in Fed action. I still believe that these transitory data points may delay the policy reversal but there is no denial that that has to be on cards
- As and when it comes, Gold will turn out to be the beneficiary and the run may restart once again. If at this level, having gained almost 40% since October if it takes a breather there is no harm.
- More than gold this time people are pegging their bets on silver and that may be for two reasons. One it is yet to attain previous high and two it is both a metal with some storage value and also an industrial commodity and even overnight there was no fall in silver price; on the contrary it moved up only
- The data is out, but at the time of finishing this write up Fed minutes are yet to be released. Thankfully it’s a holiday in India and market gets a chance to see how the US comes back. Irrespective of what happens in the US today evening I’ve a feeling we may have a gap down opening tomorrow
- Closing remarks – off the cuff – have been reading Who Moved My Interest Rates. While I will share a detailed review of the book I’ve two observations to make. One was I reading Rewards of a Shortchanged Life or the book by Governor. And the statement by Dr Subba Rao that Central bankers don’t have the luxury of hindsight that analysts have. A good book to read though
Stay safe, stay healthy, God bless you all, have a great day and a profitable year ahead of you all!!
Regards
Vikas
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Vikas Miglani writes 