Credit Suisse Opinion....

Action : BUY
Exchange : NSE
Contract Details : OPT-GMRINF-31-Jan-2008-250-CA
Quantity : 1250
Order Type : Market
Last Traded price : 6.10#
Estimated Order Value : 312,500.00
Estimated Premium Value : 7,625.00
Contract Expiry Date : 31-Jan-2008
Order Validity : 10-Jan-2008

the above is the order details. now if the stock price reaches 250 , how much will i get the profit or if it reaches 220 how much will i loose.
Could any please elobarate on the order and explain how we can make money in options .

You've bought an Out -of the money call option, i.e. is strike price of rs 250 call option at a premiuim of rs 6. So you should make money once the GMR trades above 256(250+6)

Thats only in theory. Lets assume GMR is now at 225 and u have the 250 call option. Over the next trading sessions if GMR approaches let say 245 u still make money as the premium amount on the 250 call option would increase to let say rs 15, you still make money as u can sell the call option.

Net profit=(15-6.1)*1250

could u please tell us how to trade in futures and options ( like the strike price etc...)

and which is better futures or options and there pros and cons

thanx in advance .

Trading in futures and Options is just like trading in shares. i.e. in terms of trading per se.

Only difference is leverage and qty.

Ex. Take RIL's futures

Lot size is 150 (LOT size is nothing but a minimum and mutliples of shares/contracts one hase to purchase. In the cash market one can buy 2 or 3 shares of RIL but here one has to buiy a min of 150 or multiples thereof)

Assume RIL is trading at rs 3000. So the value of the contract is rs 3000*150= 4,50,000

But while purchasing I pay only ony 15% of the total value of the contract. Why 15% ?? That is decided by the exchange based on the volatility and liquidity of the stock.

So I paid rs 67,500 and took the benefit of a Rs 450,000 position.

Now if RIL moves to RS3300 i.e. is a 10% appreciation , the value of the contract would be rs 3300*150=495000

Profit is rs 45,000 but that profit is on an investment of rs 67500. Thats a return of 66%. Even though RIL just moved 10% So basically assuming most shares of have a margin of 30% every one percent move in futures price is almost a 3-4 percent return on your money.

Pros - Leverage
Cons- Margin money. If anyone out here is a Equity Dealer he would know the pressures of margin calls being triggered i.e. of the share price drops the customer/trader has to bring in more money to cover up his Mark to markt positions.

So thats one pain in days like today. If one doesnt bring in the required money your position will be sold off based on the risk measures taken by your broker. And thats what happened in May last year when a lot of long undwinding of psoitions happened and traders consistently shorted the market.

Options:- Without Complicating matters I'll take my own Ex.

I bought 4 lots of Nifty Dec 2007 6200 call option at a price of rs 15 per lot. The lot size is 50 here for the Nifty and rs 15 is the strike price or the premium I pay for the right to bet on the nifty moving towards 6200

The reason why I bought this is I believe tomorow with some sort of short covering and overselling of positions that happened today that market would bounce back.

If the Nifty moves an x no. of points the value of my option increases by Y. In options one can regularly see 50% appreciation in the value of their options.

But here the risk are huge as in my whole capital could be washed away but the return is huge. The premium value rather strike price or the price u pay to buy an option can swing drastically. It is very normal for an option to move from a premium amount of rs 15 to rs20 depending on what traders are willing to buy/sell. So thats almost 33% return in a day.

Also Options are used in Arbitrage opportunities. Would dwell much into it as it would confuse matters.

@ Amit, A very Comprehensive analysis. Just thought to add something.

Future Groups Private Equity Businesses. Other than Ksthij they have an International Fund known as Horizon worth $350mn and a hospitality fund of $300mn.

Also the stock has seen a run up in the recent past on account of Future Capitals' 10% Equity Dilution wehre some analysts have valued it it rs 80 and another venture Future Media @ rs 66 per share.

But @ rs673 it is grossly overvalued. One may argue that stocks across the board like we have seen in power and capital goods have discounted growth.


I do'nt believe that the argument holds any water. Pantaloon is no educomp that has almost a 100% CAGR for 06-08e. Also with new entrants and also strong players in terms of management and their respective abilities to deliver in new ventures, pantaloon may find it touigh going forward not just on the margin front but also in terms of their ability to competively source.

The stock has potenial but question is whether current valuations justify a buy. Also reports in August and the one post December have shown that sales estimates/expectations have dropped and have not been upto the mark. Maybe one can attribute this to interest rates. I guess thats fair.


But assuming its does an EPS of rs 8 for 208 it trades at a PE of almost 80!!. Assume it grows 50% for FY09 i.e. at rs 12 tha stock then trades at a PE of 50 times.

Even if one takes a DCF value of the retail business at rs450 odd and rs 200 for other businesses like Insurance, Future Money and the IPO valuation rs 650 SOTP Value seems fair value for this stock

I have been uploading some reports on the Equities Thread.

Thought would upload some here as presumably this is what most who are perusing the CFA course would endeavour.

One of the Analyst's in this Lb's report is from IIM-C. The LB report seemsn a little shabby which is no comment on its content quality.

And in my Experience I've noticed the worst reports are made by Goldman Sach's and HSBCs and the so called FII's barring Merril Lynch and Citigroup. The term Worst here would express quality of accurate forecasting and reasons presented for the 'BUY/SELL Calls"

The best Reports are made by some local brokerage house in terms of their accuracy of calls like SSKI and Motilal Oswal. And for those who would laugh at the opportunity of working or aspiring to work for them remember their reports are the best in the business be it in their analysis or accuracy.

CLSA is would be easily be among the best in terms of its accuracy but its always put an underperform rating on L&T;!!! And the stock has kept beating their estimates and price targets consistenty. Maybe its too good a co. to get it right!

Lehman Brothers

More importantly I would stress ppl to search for stories/Concept in a particular scrip. Whether its the Carbon credit story (as in Cairn India, JSW...) or the new M&A; story in the pipeline (like that happened in Havells...) etc....So guys...watch out for the stroy...innovation...by a company....it will be this attitude which will take your scrip into uncharted territory !

Pipes is an underplayed sector. Cos like PSL and Welspun Gujrat. The stock was and is a multibagger but like they say, lacked momentum till Welspun started showing the 6-10% moves the way Punj LLyod did(another under played stock)

Also was going thru the bulk deal reports for 3 dec. Lehman and Citi have picked up huge stakes in IDFC at 204 levels. The last time the Lehman's of the world picked up stakes in a certain stock was Indo Asian Fusegear and since then the stock been on a tear.

I've attached some reports on the pipes sector and Citi's report on Punj LLyod.

Will post later on Lehman Brothers's views on PSU banks.

Thought to share some Reports I have

Excellent acandemic knowledge transferred. Thanks vinit for the above post.

I have a question for you:

1) Genpact is hiring investment banking analyst to support a very reputed bulge bracket IB firm based in NYC. The main duties are: Comparable analysis, Company/Industry analysis, financial modelling, pitch book creation and database management.

The job responsibilites are same just like an analyst in NYC. The only difference is the location difference. Now an investment banking analyst in NYC works for 80-100 hours a week. Is it true there are long shifts in KPO industry dealing with investment banks? May be you have an idea...thats why i asked you.

Babu, to begin with I must say that the trend for various higher end KPO/invesment analysis profiles/processes are usually seen in NCR/Gurgaon as in cos like Genpact and evalueserve. And yes its got to do with movement of skilled labour. There is no dearth of conusltancy firms in Mumbai i.e. as a CFA obviously one would wanna work where exposure is directly related to the domestic capital markets.

I mean brokerage firms today have in-house invesment research/analysis teams that offer an advisory role to manage portfolios. So here u not just doing financial operations but it is leading to portfolio structuring and invesment management. I mean take the insititutional side of equities or for that matter HNI's, its a huge opportunity! So an MBA or CFA isn't restricting himself to financial operations as PnL and finacial anaylsis but all leading to advisory services. Take Wealth management, Insitnal(said b4), PCG, PMS,all operative not on financial consultancy but a lot has to do with portfolio management.

The KPO firms in Mumbai among a few are Gridstone Research, Integron that actually deal with quality research work. ABN AMRO also has few processes that have high end research work.

Anyways ur qn. was about long hrs. Yes, ABN AMRO shifts i.e. for the higher end(or so called higher end) officially are 9 to 6 but people extend it to 9 pm on even normal volume days.

At kotak securities, its a standard qn they ask during interviews-"Are u comfy with late sitting?". I was like whats that? Oh ...Okay its where u aren't paid for overtime:satisfie:. So long hrs are associated with KPOS processes or for that matter operations here that I know of.

2) I am doing lot of google searches understanding IB industry- Both global market and domestic market. Am i true in my opinion written below ? My opinion is:

Within IBs, M&A; and corporate finance have the longest hours while research and sales and trading desk still decent hours. I mean once the market closes sales and trading team should head back home.....:)

True and also Depends on which part of let say M&A.; Abn Amro again has a process that is post handling of m&a; for which they require a decent MBA. I'll explain post handling with a reference for those who don't.

Fund manager takes an invement decision and once the trades are booked, post all of it as in funds for the trade, pay-in and pay-out, MTM, NAV priciing is done by the fund accounting team. So post handling of M&A; here is at the operational end i.e. post the decision, so basically backend work. But shift/no of hrs are okay.

And yeah like u said, trading team can back home a little later once the market closes. Usually timings for dealers even on the insititutional side is 8.30 to 5.00. But dude they don't have time during the day days especially on heavy volume days. So its very demanding once ur at the desk. On a lighter note its a great way to get rid of ur nicotine habits like my friends have.

vinit bhai
thanks a lot for giving such a detailed reply..
now coming to your questions about me..
lemme tell you my complete profile.
people please forgive me if this goes on for too long...but its important for vinit bhai to know so he can answer me properly

i have been self employed since the last year...after graduating i started a properitership firm and i mainly provide iron ore fines to big export houses who export these fines to china... i have worked with companies like jaguar which is a part fo the jindal group of companies...i have done a turnover of Rs. 2 crores in 1 year but generally unhappy with things...my father has a firm of his own but i work seperately and i am not involved in family business..

i have genuine interest in finance but other than the routine stuff i learnt in collge i know little about it..i want to get a cfa or a ms finance not only to value add to my cv but also generally to know more about finance..after all isnt this knowledge going to be benificial even when i decide to have my own enterprise...and ideally if i could complete it with mba or after 1 year of graduating then well and good...

coming to time i could devote..my scenario is just that sometimes i can devote 5-6 hrs in a day and sometimes i can go weeks without devoting a hour...but i am in the process of winding down my present deals and not taking up any more work so i can concentrate more on studies...

Okay dude going by what u mentioned u need an MBA. You for ex. wouldn't need to know how a derivative is priced or would ever employ the butterfly spread used in derivatives.

And I don't think what u need to know interest rate swaps et al or a credit default swap. The first 2 levels should be sufficient to u even in terms of appreciating ur MBA. What u need is business management rather than invesment management. Unless u do look at it at a personal level for the course to assist u in terms of knowledge and employing it in ur cos portfolio.(okay I think I am getting a bit far). In a nutshell u need MBA for than a CFA.

I'll paste an email response that I received way long backfrom Kazi amin,board of directors of CFA AIMR.

What I wrote.-

Hi Kazi,
My name is Vineet Amin. I came across your email ID on the CFA website and this email is with regards to the CFA course. My query is very basic in nature and the usual one as to why should one pursue the AIMR CFA course as compared to the one offered by ICFAI.

I do understand the obvious benefits of doing the US course is the international aceptance of the course as compared to the one offered by ICFAI. But what would be the other reasons for one to undergo this course and not the one offered domestically.

I do intend to pursue an MBA in finance and currently working with Abn Amro. I want to know how it would play out if one wants to get into Investment banking operations. Would it suffice if wants concentrates on his MBA or does a CFA like the one from AIMR as in does it add an advantage when intends to get into Investment Banking.

I am 22 years old and like I said before do intend to go in for an MBA but would you suggest anyone to complete the CFA course and then go in for an MBA or should one get into an MBA. What would be the pros and cons of doing a CFA(and the one from ICFAI) and would also like your views on how a CFA is perceived in the job market.

His response

Dear Vinit

Am offering my personal opinion - i think the MBA finance is a fulltime post grad qualification which the indian market understands well and therefore CFA, US or ICFAI are no subsitute for that. The CFA Program is very useful as a professional membership over and above a fulltime post grad qualification such as MBA or CA, particularly as you have pointed out, in an international context.

Please also note CFA is more from an investment management perspective
(fund management, portfolio management, equity research, etc) rather than an
investment banking perspective.

Hence suggest you definitely do an MBA. Pursue CFA in addition to an MBA either now or later depending on your time availability.

Rgds
kazi

Obviously the suggestion of MBA over CFA is with the assumption of having made it into a grade a school.

@vinit

thank you vinit bhai for your answers...
would you suggest to me that i try and clear the first 3 levels of cfa or ms finance depending on whatever course i decide to pursue before july next year and then take it from there...clearing those 3 levels wont only value add to my cv but also right now i do have the time to study because normally on weekdays i am just giving a hr to my cat preparations..and that leaves me atleast 2 hrs to study for cfa daily making it 10 hrs a week for 6 monthsfor level 1..saturdays and sundays i devote to taking mock cats and solving practise tests so leave the weekends out of the equation..

come january,all the tests would be over and done with and i'd again have good time to
prepare for the july exams!!

then if by the grace of god i do get through a good b school..you are right in assuming that sydhenam,kjs and nirma are the minimum i'd be aiming for i can ascertain whether i am able to clear the remnaining levels along with mba else i can always clear these levels after graduationg from the b school....

Dude I also Assumed that u wouldn't be working. Working and clearing CFA is huge in itself. Working and then preps for bschool exams are again a challenge in itself. U've kinda decided to shoulder all tree tasks.

I'll cut it short and put it this way. First evaluate whether u can be consistent in ur efforts and not to scare u it difficult and has been for most to pursure work and CFA. So like I said evaluate ur self and then decide.

But atleast do give a proper shot at the first 2 levels and I've seen... u've ....comm.... hons......as they as well add value i.e. cv dressing especially during MBA entrances.

And dude please do'nt mind this but since u mentioned that u've quit ur current b-school and that obviously would be to get into a better institute so please be clear on what u want.

If u've quit ur bschool in search of a better insititute then just concentrate on ur bschool. U wouldn't lose a hell lot net effectlively just 6 months of a 30 yr career if u pend ur preps for CFA till jan next yr. till ur done with bschool entrances. Once ur done with bschool entrances then start CFA full swing.

Also may I add, please mention whats ur work ex. Cause thats impt. And also please do mention the reason for the current profile as in a brief Job Description. And also please mention why r u doing CFA as in whats ur objective? Just CV addition wont take u anywhere.

I at no point intend to de-motivate but would be glad if u could answer what I posted... it'll help other better to advise.

Things like Why MBA and why CFA, these qns seemed stupid to me for a long time and also was irritated once, I must admit when Manan aka tumtum asked me why research.

But trust me these are very impt qns!! Period. In knowing what u want and why u want it.