Reverse arbitrage: HeroMotoCorp

This strategy is only applicable if the futures price is comparatively cheaper to the spot price of the asset. i:e possibly the execution of the short sale should exceed the price of the futures contract and the costs associated with carrying the short position in the scrip.

For example:Let's take an scrip currently trades at Rs:100, while the one-month futures contract trades at Rs:96. In this situation, the trader or arbitrageur would initiate a short position in the scrip at @ Rs:100, and simultaneously buy the one-month futures contract at Rs:96. Upon expiry of the futures contract, the trader accepts delivery of the scrip/stock and uses it to cover the short position in the scrip/stock, thereby ensuring an arbitrageur or risk-less profit of Rs:4 excluding brokerage and taxes. 

HeroMotoCo: 


Which is trading at discount prices of Rs:86.05 in September series, which accounts for 
bps: (86.05*10000/1972.8) = 436 bps 

We can lock in the difference of 436 bps for September expiry at current prices. This will result in risk-free profit of Rs:86.05/share excluding brokerage and transaction cost.


Trade Execution:

Scrip Name	Buy 1 lot Sept Fut @	Sell 125 shares from demat @	Difference  (in BPS)	Gross Profit  (in Rs)	Holding Period
HEROMOTO	1886.75	1972.8	436	10752.05	Till Expiry

Buy 1 lot of Heromoto Sept futures @ Rs:1886.75 and sell 125 shares (demat holding) at @

RS:1972.8 Execute the arbitrage with a difference of Rs:86.05/share.

Things to watch out before executing Reverse arbitrage.

Happy Trading !

Intraday trades executed 23/8/13

Trade Capital	70000
Net Return	3.55%
Scrip Name	Entry Price	Exit Pice	Position	P/L
INFY	3009	2991	Short	2250
IRB	72.85	72.3	Short	1100
BHEL	111.9	112.8	Short	-1800
WIPRO	449.85	449.05	Short	400
WIPRO	451.95	449.1	Short	1425
TECHM	1368.95	1372.5	Short	-887
			NET	2488

PFB the trade record for the same,

Bank of India- Short/Medium term trade idea

Scrip Name: BankIndia CMP :145.25	Comment
Trade Check List
PRICE/BOOK & PE value	0.36 & 3.07
Bollinger Band Level	Trading near bottom
5 & 14 day RSI Value	62, 72
Money Flow Index	47
Support Level	140.60, 142.85
Resistance Level	149.5, 153.9
Action	Long

Reasons to buy Bank of India, 

• Low P/B ratio @0.36 and Low PE value @ 3.07.
• RSI value Indicates over-sold condition.
• MoneyFlow Index indicates steady rise in trend  as seen in the chart below.
• Increase in Volume.

News favoring trade,

1. RBI to infuse Rs: 14,000 crores in PSU bank in fy'14.
2. Central bank announced to conduct an open market operation (OMO) to purchase (not sell) government bonds of Rs 8,000 crore from the market on August 23, 2013.
3. RBI allowed banks to hold Statutory Liquidity Ratio (SLR) bonds in Held to Maturity (HTM) category at 24.5 percent of their respective total deposits or net demand and time liabilities (NDTL). 

News Against trade,

1. Fear of downgrading Indian economy.
2. Ever-ending depreciation of rupee value. 

PFB the technical chart for Bank of India,

My views on Indian market now !

Reasons to Avoid Indian Market Now,

India’s equity market was sold off heavily in last few days. Many investors attribute this to fed tapering. In my view, the tapering is only the catalyst for this decline.

The root causes of this sell off are:

• Widening current account deficit.
• Increase in foreign debt.
• Increase in oil price.
• Depreciation of rupee value. 

We’re unlikely to see the decline in CAD and rupee appreciation in coming days which has reached historical heights , as export continue to decline with increase in commodity prices. 

There is an adage for this situation " If you can't stand the heat, it's advisable to leave the kitchen"

The other-way, a good investor or trader "will leave a thermometer before leaving the kitchen, so that he can re-enter once the temperature cools down and favorable to him"

Bottom Fishing: The method is just an bargain shop, during crisis many stocks will gradually and sometimes sharply loses it's substantial value.in the market. Generally this is due to the behavioral reflection of our national economy, markets like India will always bounce back. As a Investors we need to do little research to identify which stock is fundamentally strong, watching them drop and then buying them to wait to rise back again.

My advice is that, please don't try to act as an hero in this situation to save the market from falling and burn your ass, it is advisable to wait and buy stock once it is completely bottomed out and If you see some value buying in action.

Happy Investing !.

Intraday trades executed 21/8/13

Trading in the volatile market like today where Index heavy weights oscillated + (or) -  7% was an real test for intraday trader like me. How ever I've managed to book some profit from my trades, PFB table for the trades I've executed.

	Trade Capital	70000
	Net Return(%)	7.24%
	Scrip Name	Entry Price	Exit Pice	Position	P/L
	LT	731	753.55	Long	8456
	WIPRO	452.85	450.1	Short	1375
	YESBANK	284.85	282.4	Short	1225
	WIPRO	452.95	450.7	Short	1125
	UNIONBANK	119.08	114.6	Long	-8960
	HEROMOTO	1889	1871.25	Short	2218
	LT	710.25	706.35	Long	-1535
	RELIANCE	781	785.65	Long	1162
				NET	5066

PFB the trade journal for the same, 

Intraday trades executed 20/8/13

I've executed below trades in equity future instruments which is traded in lots.

Trades Executed:  

	Trade Capital	70000
	Net Return(%)	14.75%
	Scrip Name	Entry Price	Exit Pice	Position	P/L
	SBIN	1511	1516	Short	-625
	WIPRO	460.25	457.15	Short	1550
	WIPRO	459.25	454.05	Short	2600
	WIPRO	450.95	453.55	Long	1600
	BANKBARODA	450	452.4	Long	1200
	TATAMOTORS	290.35	291.9	Long	1550
	ITC	320.55	319.8	Short	750
	HCL	899.15	900.35	Long	600
	WIPRO	446.65	447.1	Long	250
	ITC	320.95	319.65	Short	1300
	ITC	321.15	321.05	Short	100
	TATAMOTORS	291.05	290.6	Long	-550
				NET	10325

PFB the screen for the same,