After the announcement, ONGC, Gail and IOC firmed up because the impact was less severe than the market feared. These stocks could go either way in the next few sessions. There might be a sell off or a firming up on short-covering and further re-rating; the prices may move away from the current spot in any event.
| Stocks with highest changes in options OI | ||
| Cos | % change | PCR |
| Escorts | 926.02 | 0.10 |
| VSNL | 567.69 | 0.28 |
| Titan Industries | 354.78 | 0.67 |
| Neyveli Lignite | 248.07 | 0.06 |
| Infosys | 240.08 | 0.33 |
| MphasiS BFL | 145.64 | 0.01 |
| Bank of India | 135.49 | 0.16 |
| Karnataka Bank | 135.26 | 0.13 |
| CESC | 124.07 | 0.02 |
| SRF | 111.41 | 0.25 |
My advice in BPCL, HPCL, IOC, Gail and ONGC would be to try and create two-way positions. This can be done through options with straddles or strangles or through a combination of long calls and short futures and this seems the most cost-effective route.
The margining would be similar for either long or short futures and the calls are comparatively cheaper than the puts at this moment. Hence the third possibility of long futures and long puts is less attractive.
Non-PSU energy stocks such as RIL and Essar Oil received a shot in the arm when it became known that they would not have to share the subsidy burden. Long futures in RIL and Essar look fair possibilities. The Essar spot is 44 and a long 45c (2.4) versus short 50c (0.7) costs 1.7 and pays a maximum of 3.3.
Among other stocks, Escorts, IPCL and NTPC seem bullish. Long positions in any of these could offer a fair payoff. There are plenty of speculative long positions in MphasiS BFL because of rumours of a Barings sell off at 315, some 35 above current spot.
In MphasiS, with spot at 280, a long 280c (11) versus short 300c (3) costs 8 and it could pay a maximum of 12. In Escorts, with spot at 109, a long 110c (7.15) versus short 115c (5.1) costs about 2 and could pay a maximum of 3. In NTPC, with spot at 92, a long 95c (1.15) seems cheap but it cannot be laid off since there are no quotes available higher in the option chain.