RIL & RNRL Strangle

[prasham]

Buzz is saying that due to some reasons the judgement of court case between RIL & RNRL shall be made by mid May. Hence isn't it the right time to enter Strangle of RIL & RNRL as large movements can be expected in both the counters, especially RNRL.

Experts please advice.

 

[scplindia]

Very tough question, because we donot know the outcome of the court case. RNRL won the high court case, now the same is under appeal at SC. If the case is in favour of RNRL, which the market is anticipating, then go long on RNRL, Short on RIL.

If the case is in favour of RIL, then take contra position.

or if you cannot make a guess as to the outcome of the case, then, before the judgement day, take put & Call on both RIL & RNRL, and exit immediately on news of the loosing leg, this way you can gain from the winning leg, as and when you feel happy with the profit, exit the winning leg.

 

[AW10]

I would stay away from it.. cause RIL options are fairly liquid.. but RNRL options are illiquid. So chances are high that you will get these options on wrong price (i.e. mostly higher price).
If this rumor/news is already public then option sellers are not fool to sell options at low price. This news is going to trigger trend, or atleast volatiilty so option already get costly. And Long Strangle is loosing strategy on most of the time.. due to double effect of timedecay on both legs.

Hope this gives u some points to think about.
Happy Trading

 

[scplindia]

If RNRL is illquid then avoid that, and just buy the put&call of RIL, and only profit from the movement of RIL. But buy only the day before the judgement day, not much in advance as you will loose from time decay. The movement is expected to be quite large, so you can go for cheap OTM options, instead of costly ITM options.

 

[scplindia]

Other strategy is to wait for the news & then buy or sell at market price the Fut of RIL & RNRL and sail in the direction of the winning leg. This will not be easy as you have to be very quick, because brokers, FIIs, DIIs, will get the info even before the press / TV releases it.

 

[scplindia]

The strategy for now, until the day of the news is:
Market is expecting RNRL to win and buying in large scale has already started on RNRL, and the stock has started to move up, target can be 100+ so buy on dips now and exit before the news. You can even consider shorting RIL, I would not recommend this, as somebody is buying into RIL and not letting the stock fall below 1020. at the same time it may not go above 1035/1045, which are the two major resistences.

Well these are all my opinion, use your own judgement to trade.

I have put forward my views, hope seniors can advise & recommend other strategies.

 

[prasham]

1) If the judgement is out before 15th of this month. I think I have about 9-10 working days left before expiry so Time decay shouldn't hurt much IMO. Or should I go for next month options.

2) There is a huge built up of OI in RNRL Call Options. Currently its trading around 65 while its 95 may call has OI of more than 3L. Hence I think Liquidity is fair enough.

3) IMO above call built up isn't a hedging technique as OI in RNRL Futures has also increased about 6% or so.

Things seem to be going in favor of RNRL. What should I do? Should I buy a simple OTM Call of next series?