Costly Love & Killer Affection

I love risk proposition; interested to enter risk based instruments and commit money on such contract, I like speculating the things for which decision is expected. Recent such commitment was for the TRAI (Telecom Regulatory Authority of India) decision pertaining to the Number portability. Though the implementation has to be made before 31st Oct, but I’m sure that it will not go as planned. The reason for my belief is that there have been at least three occasions when the deadlines were extended and this time also it will be extended by few more months. My commitment to this contract is beyond 31st Dec-2010.

But this sort of contract, occur as a result of off the line discussion and are not sufficient for my risk appetite. In my constant hunt for the risk based instrument, I ventured into a new of kind of stock market instrument i.e. “Writing option”.

I have tried buying call and put option many a times but never tasted success, though the indices were more or less towards my opted call/put price but not enough steam left in the market to cross those strike prices with heavy margins. My diagnosis was right but the prescription went wrong. As a result of which the current prices of my call and put were trading at a lower prices as compared to purchase prices. Contract reaching the expiry added more to the losses as premium for call and put options started eroding with each passing day.

But this time I wanted to take the premium of such contracted and decided to write a call. There were some clues that market has some steam to touch new high but will end up correcting heavily. But since my purchase, a correction seems to be ruled out and premium for my call has doubled amounting to huge losses.

Call options are more In-The-Money if the stock price goes higher, and if one sell a Call option and the underlying stock price goes down below the option's strike price (the option becomes Out-Of-The-Money), the option will expire worthless. And one can pocket the profit earned by selling the option. Which is exactly what I intended to do.

However, what happed was entirely reverse, these contract are infinite risk as the call price can rise to infinite. The real danger happens when the stock price keeps climbing and if it keeps going up, it will never become worthless, and near to expiration day someone is going to exercise the option and buy the stock from the seller who has earlier sold at a cheaper price as compared to today’s price. The seller is now in a heavy loss. Unfortunately the seller was me.

In a nutshell this article and experience is worth 4,000 bucks. Anyways I’m still interested to write the same call which has doubled by this time, at the same time I also admit that My love towards risky proposition is proving to be very costly and affection towards equity instrument to be Killer.

Let see if this works as per my expectation and will pray for a steep correction in the market.

Kismat Connection….

Till my initial college days I never believed in horoscope, planetary position, fortune, destiny etc as I was an avid follower of saying that “Hard work can change one’s destiny”. But during those days even after giving my 1000% percent efforts I was not able to score big in the exams and I merely use to get passing marks. That incident forced me to think that there are some factors which are beyond my control and even after putting my best in the right direction, right time and with right strategy things are falling in my accordance.

With lot of questions, ifs and buts, I visited an astrologer. He suggested me to wear a ring with certain specification and things started moved drastically after that and during the last stages of my academics I was able to score big numbers. Since then timely visit to an astrologer is a practice that I follow religiously, the way people have a practice to go for a body checkup after certain intervals.

From last few sessions I’m seeking an answer to a specific question which probably the astrologer is not able to understand. The question is that “How to establish a connection with the fortune i.e. Kismat connection?” I have realized and understood that most of the people are getting limited returns w.r.t. effort they invest in. Everyone is working hard, giving his best and striving for success but still the ROI is less for some and high for other. I felt that my ROI is less as compared to others and this proposition is not acceptable to me.

Based on some calculation of planetary position he feels that I’m happy (which actually I’m not and I don’t know what made him feel that ‘m happy ) but the fact is that I’m not happy from within looking at the ROI I’m getting, and I seriously feel that; it is very is less. My Investment is in terms of efforts; dedication, inclination, hard word and what not are much higher and outcome which I measure in terms of money is too low.

I’ve been a looser in all the risk based transactions made till date. I like to enter risk based agreement & transaction as in such transactions the rewards are on the higher side with obvious risk of loosing your investment. I invested in all the risk based instrument of equity, commodity, currency and capital market but as I said that the kismat connection is not happening and that’s the reason I emerged as a looser from those risky propositions.

Market reacted reverse to my calculation and as these type of trading are high risk prone and are calculated on mark to market basis I made huge losses. The losses are enough to pull me down crashing. But I’m not deter and neither my interest has died out as I’m sure that one day kismat connection will happen and cards will be in my favor. Because if I get afraid of the risks and refrain myself from entering such agreements then chances are there that it will become my practice to avoid risk and I will never agree to enter a risky agreement. And as rightly said “No risk no gain.” With this ideology my hunt for getting kismat connection is on.

Image source: wikipedia.org

Carbon price predictions

European Union carbon emissions futures rose on Monday, as a cold weather snap across Europe continued, if the cold weather lasts into next week and energy demand remains high, prices could break a key resistance level of 13.55 euros.

Market analyst, Point Carbon has published a report predicting that Europe’s Emissions Trading Scheme (EU ETS) is likely to raise the price of carbon in the EU from around €15 per tonne today to €30 in 2013 and €40 by 2016. If we go with the predictions and wish they come true, will bring a pressure globally to reduce the carbon emission and will create awareness among the people and manufacturers as to what products and services use more carbon and what are the substitutes available. High carbon price will give more incentive to the inventors and innovators to develop and introduce low carbon products.

What is carbon credit: Carbon credits create a market for reducing greenhouse emissions by giving a monetary value to the cost of polluting the air. Emissions become an internal cost of doing business and are visible on the balance sheet alongside raw materials and other liabilities or assets. Carbon credits are a key component of national and international attempts to mitigate the growth in concentrations of greenhouse gases with One Carbon Credit is equal to one ton of Carbon Dioxide or in some markets Carbon Dioxide equivalent gases.

There are also many companies that sell carbon credits to commercial and individual customers who are interested in lowering their carbon footprint on a voluntary basis. There are two distinct types of Carbon Credits: Carbon Offset Credits (COC's) and Carbon Reduction Credits (CRC's). Carbon Offset Credits consist of clean forms of energy production, wind, solar, hydro and biofuels. Carbon Reduction Credits consists of the collection and storage of Carbon from our atmosphere through biosequestration (reforestation, forestation), ocean and soil collection and storage efforts. Both approaches are recognized as effective ways to reduce the Global Carbon Emissions.

Information Sources: reuters.com
Knowledge Source: Wikipedia.org

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Future in futures ….

Firstly when I came across the concept of futures I was very much thrilled and excited and I was on top of world, as to purchase anything in equity or commodity I have to shell out only 6-10% margin money. I thought I can play long and short in all the futures and make quick bucks. Though my expectations from the future market were not very high (in terms of profits) and the profit margin I was targeting was hardly .15 %, the moment I had that much margin I wanted to exit my position.

Till this time it was fine and sounded interesting, but

Suddenly I have lost my hope; my faith has also been shattered.

This has happened surprisingly, for what I was never feared.

I’m left with nothing at all, my happy time ended so small.

As I did transaction based on some assumption that how the market will react, but as you know the assumptions are not always true. The same thing happened to me in all my future transactions, market reacted reverse to my assumption and as these type of trading are high risk prone and are calculated on mark to market basis I made huge losses. The losses are enough to eat up all my profits earned till day in the equity market, but this losses gave me a lesson that the future market is when you have surety of the market movement and you should have deep pockets to enter in the future market.

How short is short

The second thing that proved deadly to me is taking a short position in the market. When you take a short position you assume that the market will fall and you will purchase at lower level, but the things turned to be reversed, Instrument appreciated and I was forced to purchase them at a higher level. I was forced because the transaction has to be squared off within the same day. (Where as if you buy something and it depreciates you have an option to hold it for a long). After making some wrong transactions I learned the lesson that you should hold the instrument to play short in the market so that in case if it appreciates then you have the instrument to settle the trade.

Image source: online-stock-trading-guide.com