Individual StocksDiscussion Forum for Individual Stocks. If you have query/suggestion on more than one stock, which are UNRELATED TO EACH OTHER, USE SEPARATE THREADS.
It is heading towards south. I hope it can hold 198 or 200 at least.
Is this because investors are speculating loss or no profit in Q2?
REC would come out decent set of numbers, which company gets Funds at 6.5 interest through its tax free bonds, as in interest moves higher, REC would report even better numbers, FPO is on cards, Govt would ensure the share price is much higher to get getter valuations
have 50 shares @ 50. Should i book profits and enter again when the FPO hits the market or wait for the FPO to create an interest and help the stock surge up even more???
have 50 shares @ 50. Should i book profits and enter again when the FPO hits the market or wait for the FPO to create an interest and help the stock surge up even more???
Rural Electrification Corporation (REC) is in a pretty stable uptrend and if you have invested for the long-term, I suggest you don't sell it.
Unless, you have a strong reason to sell your long-term holdings, don't sell them.
Trying to trade your long-term investments isn't a good idea.
The FPO will be done close to the market price and I don't expect the FPO to have any significant impact on the stock price.
Issue Period Feb 19, 2010 to Feb 23, 2010
Issue Size 171,732,000 Equity Shares
Issue Type 100% Book Building
Face Value Rs. 10/-
Price Range : Floor Price Rs. 203/-
Minimum Order Quantity : 30 Shares
I am Surprised why the FPO is faring badly, at Rs. 203/- the shares are literally given at throw away price.
At 203/- REC quotes at an PE of 9.10, FY10, wheras its nearest comparable peer PFC quotes at PE of around 12, based on its FY 10 earning, With comparison to PFC, REC should quote at around 260/ to 270/- levels, and a point to remember that PFC has also come down after REC floor price was announced, it was quoting at a much better PE before.
I feel REC is a steal at the price of 203/- and a must apply FPO, Don't look for listing gains, apply as an investment, its bound to do well
If there's not much difference between the FPO price and the secondary market price, the FPO may not be attractive to small investors.
Very difficult to price a FPO, If the Govt had fixed the price at Rs. 100/-, the price would have drifted down closer to those levels, One has to look at the valuations, I feel it is offered at very cheap valuations, sooner or later its only the valuation that matters.
If the Govt had fixed the price at Rs. 100/-, the price would have drifted down closer to those levels,
That wouldn't have happened as institutions would have started buying at lower levels.
---------------------------------
If I were to decide on the FPO, I would do the FPO without a floor price.
Once a floor price is declared, it is viewed as the government's estimate of the "fair price" for the stock and the stock starts drifting towards that price.
If there is no "estimate" given by the government, buyers would be more enthused to bid for the shares.
That wouldn't have happened as institutions would have started buying at lower levels.
---------------------------------
If I were to decide on the FPO, I would do the FPO without a floor price.
Once a floor price is declared, it is viewed as the government's estimate of the "fair price" for the stock and the stock starts drifting towards that price.
If there is no "estimate" given by the government, buyers would be more enthused to bid for the shares.
Agreed brother, but here in case if there is no floor price, retail will be fooled by big operators into buying at higher price, My view the Govt should have taken the QIP route.
Very difficult to price a FPO, If the Govt had fixed the price at Rs. 100/-, the price would have drifted down closer to those levels, One has to look at the valuations, I feel it is offered at very cheap valuations, sooner or later its only the valuation that matters.
I wasn't arguing about the valuation and future prospects relative to other opportunities in the market (which can be quite subjective).
What I meant to get across was that there was not enough difference between the FPO and CMP. Given the uncertainty of subscription levels and hence allotment, I felt that small investors may prefer to sit this one out or buy from the secondary market exactly how much they want and not tie up excess cash for the period.
If whatever holds for IPO's is true for FPO's then:
Quote:
According to SEBI's guidelines, for book built IPO's, the allotment/share credit and refund process has to be completed within 15 days of the closure of the issue. (For fixed priced issues, the limit is 30 days).
The listing has to be done within 1 week of the completion of allotment process.
Thus next time you have doubt on when a stock will list after IPO is closed. Just add 22 days to the closing date of the IPO (book built).
I see REC is quoting around 218. And 210-CA option for March is available at around Rs 8. Feb CA-210 option also has approx same rate. I can understand the rate for Feb option, but for march, why it quoting around 8, when there is full month left.
I see REC is quoting around 218. And 210-CA option for March is available at around Rs 8. Feb CA-210 option also has approx same rate. I can understand the rate for Feb option, but for march, why it quoting around 8, when there is full month left.
Am I missing something?
Options are priced on basis of futures and not the cash market price.
March futures are trading at a significant discount.
February futures are trading at 217 and March futures are trading at 212.5.
Once the shares from the FPO hit the market, there will some pressure on the stock and that is the reason why the March futures are trading at a discount.
Options are priced on basis of futures and not the cash market price.
March futures are trading at a significant discount.
February futures are trading at 217 and March futures are trading at 212.5.
Once the shares from the FPO hit the market, there will some pressure on the stock and that is the reason why the March futures are trading at a discount.
Few observations:
1. Assuming the market participants price options based on the Black Scholes model (reasonable assumption), option prices are NOT based on future prices. There is no "future price" variable in the Black Scholes model, only SPOT prices.
2. If near options price is equal to the far option prices as in the REC case, all other variables remaining constant (standard deviation, risk free rate of return), there is an arbitrage opportunity.
Buy REC 210 March option and Sell REC 210 Feb call option.
Why would you buy a REC 210 Feb option at all when the REC 210 March call is quoting at the same price? If nothing, you have an option to hold a call option for an additional month at the same price! And you can sell the March option just as easily if you so wish. There is NO additional benefit that you gain buying Feb calls over March calls, except maybe LIQUIDITY. I guess you could pay a premium for Feb liquidity but that's not something Black Scholes mentions.
Secondly,Theta (refer to Greek letters in option pricing) is now acting strongly against the REC 210 feb option with expiry just 2 days away.
I assume once arbitrageurs start selling the Feb option and buying the March option things will be normal again.
1. Assuming the market participants price options based on the Black Scholes model (reasonable assumption), option prices are NOT based on future prices. There is no "future price" variable in the Black Scholes model, only SPOT prices.
There are far too many assumptions in the Black-Scholes model and it doesn't work in practice.
(e.g. It assumes the option is a European-type option).
Speculators don't value options on basis of any theory, but on basis of their outlook about the price of the underlying.
March futures are trading at 3% discount because the market believes REC's price would correct in days to come.
Theoretically, even the futures discount shouldn't be there.
Stock holders can just sell in the cash market and buy the futures at a cheaper rate.
In reality, the discount is there and it actually widened today.
The same logic flows into the options markets.
--------------------------------------
Till yesterday, February call was cheaper than the March call, but the strong response that the FPO got, has lead to short covering in the options and futures market.
The prices of February and March call options are converging because
- Call writers are covering in the February series.
(the open interest is going down in the February series).
The urgency to cover in the February series is more.
Prices in March would adjust as the new supply of shares hits the markets and thus option writers have less inclination to cover their March calls.
- Many bigger traders, who expect to get allotment from the FPO are writing March calls and shorting March futures to hedge their positions.
Further to my message yesterday, I would assume that at positive opening bell today, the Feb REC calls would almost halve or more while Mar calls would actually rise a little bit if REC cash also opens in the positive. Let us see how many points someone could have earned arbitraging yesterday and squaring off positions today without exercising.
With 210 calls deep in the money, retail or small participants would hesitate to sell options because of the margin requirements and institutions could not be less bothered with 10 points.
My point is, there is an opportunity if someone wishes to take it.
P.S. I wonder if such situations arise with all the deep in the money options close to expiry? With most categories of market participants refusing to sell near month options for some reason. hmm..
Last edited by Rainman : 25th February 2010 at 07:35 AM.
Reason: Addition
Further to my message yesterday, I would assume that at positive opening bell today, the Feb REC calls would almost halve or more while Mar calls would actually rise a little bit if REC cash also opens in the positive. Let us see how many points someone could have earned arbitraging yesterday and squaring off positions today without exercising.
With 210 calls deep in the money, retail or small participants would hesitate to sell options because of the margin requirements and institutions could not be less bothered with 10 points.
My point is, there is an opportunity if someone wishes to take it.
P.S. I wonder if such situations arise with all the deep in the money options close to expiry? With most categories of market participants refusing to sell near month options for some reason. hmm..
Feb calls actually gained 50% on open I have half a mind to hold feb calls till the weekend in case there's another pop!
Can I sell the shares (allotted through FPO) on the same day, I get these in demat account. As this is already listed, I think I need not wait for 7 days for listing.
Can I sell the shares (allotted through FPO) on the same day, I get these in demat account. As this is already listed, I think I need not wait for 7 days for listing.
Can somebody confirm this?
As far as I know, no fresh listing is required in an FPO, You can sell the same day, the day you see it in your account, If the shares are partly paid only then a separate listing is required.
As far as I know, no fresh listing is required in an FPO, You can sell the same day, the day you see it in your account, If the shares are partly paid only then a separate listing is required.
That's true.
If one has the shares in the demat account, the shares can be sold in the market.
If one has the shares in the demat account, the shares can be sold in the market.
--------------------------------------------
@rajivka
when did you get the shares?
No, I did not get the shares as of now. I asked this because I wanted to sell all shares as soon as it reach my demat account. Just wanted to be sure that there would not be any issue in selling on that day.
Not yet, no allotment done till date, It's a daily affair, the stock opens down 3 to 5%, in the morning and bounces back to 240-243 levels late in the afternoon
Speculators don't value options on basis of any theory, but on basis of their outlook about the price of the underlying.
Let me give another example to explain my point.
In mid-December 2009, Great Offshore was trading around 510-512.
(Two open offers were running simultaneously at that time).
Next month futures (January) were trading at steep discount at around 440-445.
If someone would have used an option pricing model and used the cash price (510) to arrive at the price of options, he would an arrived at a price of 30 for the 510 Put Option in the January series.
Would it have made any sense to write a 510 Put for Rs 30, when the consensus was that the stock would collapse to 450-460 as soon as the shares would be come back to the shareholders?
The same case applied to REC.
Option traders were adjusting prices based on future price projections.
Rural Electrification Corporation (REC)
I have half a mind to hold feb calls till the weekend in case there's another pop!
Linear Mode
