nifty future trading at huge discount

andy · #1 30th May 2005, 10:45 AM

Why the huge discount on the June Nifty Futures. Is it because of dividend payout by some stocks on the Nifty?

ivanboesky · #2 30th May 2005, 10:49 AM

Yes, partly coz of that and partly hedging/ speculation by the big boys in the market. The gap reduced from 40 points to 30 points on Friday anyway.

Mohan · #3 30th May 2005, 10:50 AM

Quote:

Originally Posted by andy

Why the huge discount on the June Nifty Futures. Is it because of dividend payout by some stocks on the Nifty?

The steep 30-point discount on June Nifty Futures has been brought about by a large number of index stocks going ex-dividend in June.

According to reports as many as 15 stocks in the Nifty 50 will go ex-dividend in June.

#4 31st May 2005, 11:15 PM

Hi To All members,

nifty future trading at huge discount(Jun,July,Aug).Yet nifty is rising .

Traderji and senior members ,please throw some light on such phenomenon.

Traderji · #5 1st June 2005, 10:25 AM

Quote:

Originally Posted by vini

hi

Does it mean any short positions in nifty positions are building?

Since futures trading is a zero sum game and for every buyer there is a seller I fail to understand how anybody can say if there are more short or long position building up in the market?

If there are more short position there will be more long position as a short position cannot be made without a simultaneous long position.

I would suggest all novices you to quit watching the analysts on TV and do some serious reading.

ivanboesky · #6 1st June 2005, 10:59 AM

Traderji,
I agree with you... Most people blindly follow the analysts without understanding the basics of the market. For every buyer there is a seller and the total number of outstanding positions is reflected in the Open Interest. I sometimes have people asking me how much is the long OI and short OI!!
Anyway, it is possible to know if the buyers or sellers are more aggressive with their position taking by looking at the cost of carry. Higher CoC would imply aggressive buyers, while lower CoC would mean that the sellers are more aggressive.

gvnarendra · #7 1st June 2005, 07:50 PM

Quote:

Originally Posted by ivanboesky

Traderji,
I agree with you... Most people blindly follow the analysts without understanding the basics of the market. For every buyer there is a seller and the total number of outstanding positions is reflected in the Open Interest. I sometimes have people asking me how much is the long OI and short OI!!
Anyway, it is possible to know if the buyers or sellers are more aggressive with their position taking by looking at the cost of carry. Higher CoC would imply aggressive buyers, while lower CoC would mean that the sellers are more aggressive.

Hi Ivanboesky,
Do we have to calculate the cost of carry? or can we get the figure in any site. Please let me know the normal range of coc for Nifty future so that I can decide it is in the higher or lower side.
gvnarendra

ivanboesky · #8 1st June 2005, 08:01 PM

Dont know if you can get the cost of carry at some particular site... Guess you will, but dont know where. Its pretty simple to calculate anyway using the futures pricing method... As for a range, after accounting for any dividend payments, a decent CoC would be between 5-10%. Anything lower would mean portfolio insurance/ shorting, and a substantially higher figure could indicate a buying frenzy in futures without adequate buying in the cash market. With many mutual funds coming into the arbitrage arena, the instances of high cost of carry could disappear... depending of course on the corpus of thee fund.
Its always better to look at the cost of carry in a historical perspective to decide whether the CoC is too high or too low.

Traderji · #9 1st June 2005, 08:44 PM

The NSE website gives the cost of carry every day. for example you can view it for the Nifty Futures at http://www.nseindia.com/marketinfo/fo/foquote.jsp?key=FUTIDXNIFTY30JUN2005--01JUN2005&symbol=NIFTY&flag=1

You canmaintain your own database and work out a trading strategy based on the ost of carry.

gvnarendra · #10 2nd June 2005, 09:56 PM

Thank you ivanoboesky on enlightening me about the cost of carry and Thank you Traderji for the link of the nse where we can get the coc details.
gvnarendra

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