Feedback Message Board

Since u bought in 5 accounts, u must not have taken hedging

No point of participating without hedging.
By considering very low ER & AR, i think ur net position will be in negative after buyback completion

I have purchased 5 lot more Now suggest what and how to do by hedging

Txs in afdvance

70*10 = 700 shares, assuming a 25% acceptance ratio, hence = 700*.75 = 525 shares remain left with you. You have two options for hedging:
1. Sell two lots of future (600 shares) for October month. Hence, you will get only 100 shares buyback benefit = Rs. 30,000 (Sure shot)
2. Buy two put options with a strike price of Rs.2700 @68 hence you get minimum profit = 175 * 300 (buyback benefit) - 65*600 (protective put) = Rs. 13,500 (Sure shot). But here you will get more benefits if the price is anything above 2700 in multiples of 525 and if below 2700 in multiples of 600 in unlimited form. (I am hoping a minimum of 100 Rs. difference on either side will give an additional profit of +Rs.60,000 if 2600 closing and +Rs.52,500 if the closing is around 2800).

@Sheky
I still feel that all this hedging is unnecessary if ur AR is low....
Assuming AR is 20% , so on 700 shares, 140 will ve accepted...so profit generated is 140*300....42000
but amt invested is approx 19.lacs.
Assuming rates remain approx 2700 after buyback is over, then u only get 42k/19lac..2.2% roi...for approx 15/20 days of blockage (still brokerage not incl)..and considering 4% sb acc int rate, we lose 0.2% for 20 days.
So ultimately u get hardly 2% or less

This is all assuming that rate remains approx 2700...

buyback is only profitable if AR is high and that looks tough

Correct me if i am wrong

@Sheky.. you said that additional profit of Rs. 60000 and 52500 in case of share price would be 2600 and 2800 respectively. Therefore, if share price after buyback would be 2600 then total profit would be 73500 (13500+60000) and if price would be 2800 then total profit would be 66000 (13500+52500).
But in my opinion your calculation is incorrect, total profit would be as below

share price 2600 :- 13k around
share price 2700 :- 6k around only
share price 2800 :- 59k around

so there is no benefit of hedging with put option in case share price will fall further that too with a capital of Rs. 19 lakh.

Thanks dear . I hv kept open all application with a view that a reasonable profit will definitely awarded .

@aandy Now will sell entire if it crosses 2860. pl endorse the decision.
Thanks in advance

@PLAZA
hahah now is the tricky situation.
Currently u r on approx 6000/acc profit so total 30k profit .....so u r right tht if it touches 2850, u can sell entire lot.
Plus der r Aramco news....so if in case it crosses 2900, retail investors may not apply for buyback.

but looking at buyback history of many shares....it may dip by 1/2% on ex buyback date.

So let me tell you what i would do.
as ur cp is approx 2700.....i wld sell entire lot 1 day after ex buyback date, if its anything above 2700....this way u will be eligible for entire lot.
Later on considering on v v difficult side AR to be 20/30% , buy only 30% of shares after buyback date and tender all....i hope u got my point

Txs for reply .
Your point is that once the eligibility shares finalized then if one participated for respective eligible shares then his full shares will be accepted or % of that tendered shares ...
Pl clear the position

@Plaza

forget everything, ur tgt almost rchd

Hedging strategy proposed succeeds only if share prices fall on ex-date as with many other shares. What happens if this share moves to 3000 or more? Premium bought on puts become worthless. One can straight book profit on purchased shares without submitting for buy back escaping AR cuts.

@aandy just want to know the mechanism of buyback for future . If u hv some input pl shate

Hv sold today 4 shares in each account