I had blogged on Educomp a few days ago and now twice today.
What is Brewing ! ? Obviously something we don’t know but the worrying and critical and significant difference between the Lower Futures and the Higher Spot flags up
On the NSE the Feb 26,2009 Futures with the Market Lot Size of 75 shares closed at Rs 1416 with a volume of 17411 contracts traded and the March 26,2009 Futures with the new Market Lot Size of 150 Shares,closed at Rs 1332 with a Volume of 172 contracts traded.The underlying is Rs 1657…That’s a clear 20% or Rs 325 differential on the March Contract
Those who hold the Stock,should clearly not sit tight…They can pick from two options
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If truly worried,with this Significant Differential between Lower Futures and Higher Spot,they should exit from this Stock.Protected Put Option at a Strike of Rs 1710 has a high Premium of over Rs 300 and moreover is not a very liquid counter…so it is not possible to adopt this alternative.Also a Covered Call Strategy may involve getting the premium by selling a Call Option at an ‘At the Money’ Strike Price near underlying Value and thus immediately reducing the holding cost …but the premium does not cover the full differential betwenn underlying and Futures
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If they yet hold the conviction,like a lot of FIIs do ,in this Company,they should take this opportunity to reduce their holding cost by this Differential by selling in Spot and covering immediately in Futures
Something is clearly Brewing…Something not so Good