The board of HDFC Ltd. and HDFC Bank on Friday, June 30, 2023, approved the merger of HDFC Ltd. into HDFC Bank. The record date has been set as Thursday – July 13, 2023, to make the database of the shareholders of HDFC Ltd. to whom shares or HDFC Bank will be allotted.

Therefore, from Thursday – Jul 13, 2023, no one will not be able to trade HDFC Ltd shares even if they own them. In fact, HDFC Ltd shares will NOT show in anyone’s Demat account on and from Thursday, Jul 13, 2023.

Even though the details are now clear by the time I am writing this post there are a few points that may help you if you read this article. If you are reading it post the merger, this post will still help you in future if the same situation happens. So do read.

If you have not read the declaration by HDFC Limited you can read it here:

https://archives.nseindia.com/corporate/HDFC_03072023123649_SE_Intimation_Effective_RecordDate_30062023.pdf

Here are a few things that you can do if you own HDFC Ltd shares:

The most basic point is this:

Shareholders of HDFC Ltd. will receive 42 shares of HDFC Bank for every 25 shares held of HDFC Ltd. But it will take more than a month for the credit of shares to take place.

So my opinion is simple. Why get into an unnecessary hassle of waiting? Just sell HDFC Ltd Shares before Thursday, Jul 13, 2023, and book the profits – if you are in profit. Or if not, just sell and buy HDFC Bank shares when all the amount is credited to your Demat account in T+1 day.

In the 1 interim day HDFC Bank shares may fall or may rise – does it matter? It will be max 2-3% here or there, that’s it. So instead of the market makers doing the job of giving you the shares, you do it on your own and escape the hassle.

What if you hold HDFC Ltd. F&O contracts?

The existing F&O contracts of expiry months July 2023, August 2023, and September 2023 will expire on Wednesday, July 12, 2023, and shall be physically settled.

Again my advice is the same. Before the expiry date of Wednesday, July 12, 2023 – just close the F&O contract. Do not look at profits or losses. Read the above sentence again – if not closed and if not expired worthless – they will be physically settled.

Not sure if you have gone through the pain of physical settlements of shares, but just to give you an example here it is:

The lot size of HDFC Ltd is 300. The closing price of HDFC Ltd is 2,769.45 (NSE 07-Jul-23).

Now if physically settled you have to keep this amount ready (either to buy its shares or go for a penalty of not being able to deliver the shares. Please note that not being able to deliver the shares is even more painful as you will have to buy from the auction market which is at least 10% above the closing prices):

2,769.45 * 300 = 8,30,835.00 (Eight Lakhs 30 Thousand and 835).

So closing the options or futures trades of HDFC Ltd before Wednesday, July 12, 2023, is more important than selling the shares and buying HDFC Bank shares.

I pray to the almighty that no one gets into a physical settlement of shares. All I can do is teach people via my website – TheOptionCourse.com or via my emails. It is up to you to listen or not.

My financial management advice is simple – KISS – Keep It Simple Stupid.

In fact whoever made this proverb or whatever it is called. Kodos to him/her.

Keep It Simple Stupid (KISS) works not just in financial markets but in life as well. Just live below your means. Keep things simple not flashy and wear simple clothes – not branded extravagance ones, and you will save more than 10% of your salary compared to what you are saving now every month.

I hope you read this post till here and will implement what you learned, to improve your financials and life.

Update on 10-Jul-23:

Someone said in the comments section – “I also read somewhere that if you own less than 25 shares of HDFC, then you won’t get HDFC Bank shares in proportion, so I sold my HDFC shares.”

So I am writing some more updates on this topic.

What will be the average price for allotted shares of HDFC Bank?

The average price of allotted HDFC Bank shares will be calculated as follows: Invested value in HDFC Ltd. / The number of HDFC Bank shares received including fractional shares.

For example, if you had invested in 25 shares of HDFC Ltd. at Rs. 2500, the invested value will be Rs. 62,500.

If you receive 42 shares of HDFC Bank, the average price will be Rs. 1488.09 (62,500 / 42).

The fractional shares are cash settled, and the amount for these will be directly credited to your primary bank account as and when the trustee appointed by the company sells the shares.

When will I receive the amount for fractional entitlement?

If there is any fractional entitlement, the equivalent amount will be directly credited to your primary bank account after the trustee appointed by the company sells the shares. I think this will take 30 days approx.

What if I hold less than 25 shares of HDFC Ltd.?

Even if you hold less than 25 shares of HDFC Ltd., you will receive an allotment of HDFC Bank shares. For example, if you hold 10 shares of HDFC Ltd., your allotment comes to 16.8 shares (42 / 25 = 1.68 x 10 = 16.8). 16 shares will be credited to your demat account. 0.8 will be fractional and the amount for this will be credited to your primary bank account.

Update on 11-Jul-23:

By selling HDFC Ltd. shares and buying HDFC Bank Ltd. shares you will not lose anything. Here is the calculation:

If you have any more questions please ask in the comments section.

Some ideas to write this post are taken from tradingqna of ZERODHA.

Update on 13-Jul-23:

About The Company – PKH Ventures Limited:

It’s a real estate builders & construction company in Mumbai, Maharashtra.

Address: 201, A Wing, Fortune 2000, C-3 Block, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra 400051

Website: PHKVentures.com

PKH Ventures Limited is a construction company mainly engaged in construction and development, hospitality and management services business. The company completed construction of the Delhi Police Headquarters on April 21, including the construction of the 17-storey twin towers. Garuda Construction Co., Ltd., a subsidiary of Garuda Construction, is responsible for the civil engineering business. The Company has several in-house development projects underway including a property development in Amritsar, Punjab. Food park in Jalore, Rajasthan. Cold Storage/Facility in Indore, Madhya Pradesh. Chiplung, Maharashtra has wellness centres and resorts. In addition, the Company has received two Government Project Contracts relating to Hydropower Project and Nagpur Project, which are being implemented through its subsidiary/SPV. The company plans an IPO consisting of approximately 7.4 million OFS shares and 18.3 million new shares, for a total value of Rs 3.79 billion. Leveraging strong hospitality sector expertise

Founded in 2000, the company managed and operated restaurants, lounges, retail stores, concessions, bars, canteens and catering at various airports around the country. The company currently offers a range of mechanical, electrical and plumbing (MEP) services, including annual project maintenance and certain third-party O&M contracts. The Company has owned, manages and managed hotels in Mumbai since 2015, developing its two hotels in Mumbai, Golden Chariot Hotel & Spa, Vasai and Golden Chariot (Mumbai Hotel), a boutique hotel near Mumbai International Airport. We operate. With the knowledge and experience gained during the development of the hotel, the proponent entered the civil engineering business through Garuda Construction, which provides integrated construction services for residential and commercial buildings.

Asset-light and Diversified Business Models:

The company adopts an asset-light model in its civil engineering business, relying primarily on third-party suppliers for equipment and labour. Additionally, these companies generate income from a variety of completely independent activities. For example, a retired subsidiary, Eternal Building Assets, has already received a three-year pension, partly in cash, and will receive an annuity of Rs.780 crore per annum until FY2033. We not only grow our backlog but also undertake high-quality projects with the potential for higher profit margins, as well as well-known projects that lead to increased reputation, market penetration and visibility. Focusing. The Company is currently engaged in the construction of six residential projects for MMR’s third-party developer and promoter groups.

Overview of Financial Data:

FY0-22 Revenue/EBITDA/Adjusted PAT grew at a CAGR of 10%/127%/70%. FY2022 revenue was Rs 1,994 million and EBITDA was Rs 530 million. The EBITDA margin increased significantly from 6.2% in FY2020 to 26.6% in FY22. adjective The PAT was Rs.141 million, Rs.360 crore and Rs.450 crore for FY2020, FY21 and FY22 respectively. Profit margins are healthy with an average RoE/RoCE of 8.5%/4.6% for fiscal 2020/22. The average book value turnover was 1.7x for fiscal 2020/22.

Price Band of the Stock:

It has fixed a price band of Rs 140-148 a share for its initial share sale, which will open for public subscription on June 30. The initial public offering (IPO) will conclude on July 4 2023. The public issue comprises a fresh issue of 1.82 crore equity shares and an Offer for Sale (OFS) of 73.73 lakh shares by its promoter Pravin Kumar Agarwal.

The company through its IPO will fetch Rs 358.85 crore and Rs 379.35 crore at the lower and the upper ends of the price band, respectively. Proceeds from the fresh issue to the tune of up to Rs 124.12 crore will be used for investment in its subsidiary, Halaipani Hydro Project, for the development of a hydropower project. In addition, Rs 80 crore will be utilised for investment in the subsidiary, Garuda Construction, for funding long-term working capital requirements, and Rs 40 crore for pursuing inorganic growth and other strategic initiatives and general corporate purposes

Final View:

Financial figures for fiscal 2022 indicate that the IPO’s PER is 30 times, EV/EBITDA is 24.5 times, and EV/sales is 6.5 times, which is at the upper end of the price range. The company expects to grow in the coming years with several projects underway. The Company has received orders for three government-owned hotel development projects, and its subsidiary, Garuda Construction, is currently constructing six housing projects. PKH is also running several development projects in the future. Given the strong business outlook, strong financial position, hospitality expertise, synergies from the Amar Remedies acquisition and experienced management team.

Disclaimer: This is an educational post. Please do thorough research before investing in this IPO.

Click Here to Open a STOCK BUY AND SELL FREE Demat account to Subscribe to PKH Ventures – IPO.

Since I started the Conservative Options Course in 2015, I have talked with many traders who either lost too much money trading options and wanted to recover their money or made some money now and then but not consistently.

It’s a privilege to be able to talk directly with so many traders all over India. So I know what they want, why they trade and why they lose.

Most traders want consistent income trading options. It is good that most of them knew that it is not possible to double the money in 2-3 months trading options but almost everyone said they heard that someone out there is making 100% or more in every trade.

But when I asked them to name that person, they replied that they have just heard not seen.

The fact is they will never see that person because no one makes a 100% return in every trade. If this is not possible then what is? Generating small but regular income is a possible trading option. Options trading is NOT a get-rich-quick scheme that most of the newcomers to the trading world think.

In this article, I will explain some option income trading strategies. These types of strategies try to generate income regardless of the market condition.

When I was new to the options trading field I thought the best possible way to generate easy money was to buy a call and a put at the same time – one of them will make money. This is simply not true. Though it may work 1 out of 10 times, you do not know which is that time and hold, so you may end up taking a loss even though this was the best time to hold.

If you want to make consistent income trading options you have to practise trading them initially on paper and then in the real market.

Options Income Trading are strategies aimed at generating profits or income over the long term while minimizing price and volatility risk. Unlike directional trading, income options trading does not rely on price fluctuations of the underlying asset to generate returns.

Income strategies are designed to perform best when the price of the underlying asset is flat. Due to the lack of direction, the yield strategy can be profitable in both bear and bull markets.

Some of them are iron butterflies, straddles, strangles, condors etc. They are freely available on Youtube and many websites online. Yet 99% of traders lose money according to a SEBI report.

My paid course, therefore, has all non-directional option income strategies. The difference between my course and freely available strategies is that you cannot contact anyone for help to understand the strategies. But in my course, you get help for one year. Without a mentor, any freely available strategy is not worth trying as anyone – even your neighbour can upload a strategy on YouTube. This is counterproductive and dangerous for their followers. You cannot blame the Youtube video makers for your losses. It was freely available and no one forced you to follow. So you can only blame yourself for the losses.

To be honest, unless a trader is good at discerning price movements and market direction, it is difficult to accurately determine the direction of an underlying asset’s price movements. Even technical analysis cannot predict the market direction 100% of the time. They are correct 50% of the time. This is because the short-term movements of stocks are very random. So discipline is more important that the direction you are taking as per your technical analysis.

Therefore it is advisable to trade direction independent strategies also known as option income strategies. One of the advantages of option income trading strategies is that you don’t have to choose the right direction.

For this reason, option income strategies are also called non-directional or delta-neutral strategies.

Trading for income doesn’t give you much profit, but it often doesn’t give you much loss either. The reason is all the strategies are non-directional and are properly hedged. The hedge ensures that you rarely lose money and even if you do you its not huge as the hedge will make some money while the original trade loses.

The naked traders lose everything however the option income traders only lose a part as some of the losses are offset by the hedge trade.

It’s unfortunate that most of the traders who know that a hedge will save them from huge losses still chose to trade naked in the hope that they will make a lot of money. In reality, vice versa happens. Then they go for revenge trading. Instead, one should keep patience and try to bounce back from bad trading.

The bank nifty lot size will change to 15 from 25 and even the expiry day is changing. Read the details below.

BANKNIFTY Futures and Options expiry day is changing from THURSDAY to FRIDAY.

NSE (National Stock Exchange) has not given any reason for this but I feel they want to finish the weekly FnO contracts on the last working day of the week.

Please note that even though they are known as weekly contracts they start trading much before the start of the week. This means that technically an option expiring next week should start trading from the expiry day of the previous week, but they start trading before that.

So what will happen to the current contracts that are set to expire on Thursday?

Nothing to panic about – they will expire on Thursdays only until Thursday, 6th of July 2023. This will be the LAST Thursday expiry of Banknifty Futures and Options contracts. From next week the Banknifty options and future contracts will expire on Fridays.

The first FRIDAY expiry will be on FRIDAY 14th of July, 2023.

After the market closes on Thursday, 6th of July 2023, all contracts will show the expiry date as Friday of that week not Thursday. This means on Friday, 7th of July 2023, when you log in to your trading account you will see all bank nifty futures and option contacts showing the expiry date as Friday, not Thursday.
There is no other change. So there is nothing to panic.

Now coming to the banknifty lot size. Currently, it is 25, however, the lot size of banknifty futures and options is reducing to 15 from 25 now.

All contracts expiring after July 1, 2023, will have the lot size of 15.

Please note that when the lot size changes margin also changes as per the size of the lot.

See how with the change in the lot size, the margin of banknifty futures and option selling will reduce.

Here is the difference – margin calculation done in June 2023:

Current lot size 25 – Future / Option selling margin required: 1,47,032.00
All contracts expiring after July 1, 2023 – lot size 15 – Future / Option selling margin required: 88,668.00
Margin calculator used: ZERODHA

I think this is done mainly to increase the participation of derivatives traders of banknifty.

On one side the market makers try to reduce the retail traders from entering the derivatives markets, on the other side, NSE does tricks to get more retail traders to trade. Not sure what exactly they want.

Anyway, all I can do is remind you to is to trade safely and carefully. Learn to hedge and respect your stop losses.

What will happen when the Bank Nifty lot size will reduce from 25 to 15:

1. It will bring liquidity to the market.

2. The selling margin will reduce from Rs 1,40,000 to Rs 85,000. This is 40% less. So some of the experienced traders will become sellers, who were buyers till June 2023.

3. There are a lot of traders who still do not know that if you hedge then the margin gets reduced for selling options and trading futures plus it also reduces the losses. These sellers will increase the number of Nifty Bank lots sold, compared to what they were selling now when the lot size is 25.

4. Then you have some I-am-very-smart-trader thinking type of traders who know that hedging reduces the losses plus the margin required but still do not hedge because they think they can never go wrong. These people will sell more than they are selling now as they will have more cash in hand.

5. High liquidity brings down the volatility in the markets. This will decrease India VIX and bring down the option premiums of both Index – Nifty and Bank Nifty. This is good news for my course customers – the success rate of strategy 1 will increase from 70% to 80%.

6. Option buyers will lose less due to decreased lot size but their loss percentage will increase.

7. Risk management will become easier as traders with 3-4 lakh cash will have extra money now to mitigate risk. Though trying in vain to save loss in a losing position results in more losses.

8. I feel a reduction in lot size in Nifty will also follow suit.

If you are an option buyer I suggest keeping your stop loss and profit levels looking at the level of the stock or nifty / bank nifty – not the option value.

For example, if you bought a call option then wait for a 2% move either way for the stock/index to move.

Do not wait further. Either it’s a small profit or a small loss. But at least 2% moves come fast and there is not much theta loss. That way you can be in the game for a long time.

You can do my paid course and learn strategies that work in any market condition.

If you hold stocks that have fallen, be patient.

It usually happens that when the stock markets are low, few people buy stocks, and when they rise, everyone is on a buying spree. It should be the other way around.

If you have bought stocks recently (June 2023), they are likely near their all-time high, as Nifty 50 is also trading near an all-time high. From an all-time high, the stock usually falls. In that case, be patient. It will prove to be rewarding.

If you have invested too much in a single stock and if it has fallen more than 20%, then you can take a partial stop loss.

A partial stop loss is an exit from a few stocks you hold. It could be 25% of the stocks. You can hold the rest of them until they make a profit.

India VIX at the time of writing this email is 10.65. This is considered a normal market condition. Which means it will be tough to predict where the markets will go.

So what can you do?

1. Research
2. Plan a trade
3. Decide where you will take a stop loss (this depends on how much loss you are willing to take).
4. Decide where you will make a profit. Ideally, your profit should be double your stop loss.
5. Take the trade.
6. Once it’s confirmed set the GTT (Good Till Cancelled) in the system and forget.

GTT is a feature that allows a trader to set a stop loss and profit in the system. So suppose you bought an option at 100. You can set the stop loss at 95 and the profit at 110. The GTT system will automatically trigger your profit or stop loss whichever is hit earlier, and cancel the other GTT order. This is called OCO – One Cancels the Other.

GTT stays in the system for one year or till the order is hit or till the expiry of the options/futures or cancelled by the user – whichever comes earlier.

Suppose 110 is hit – the system will close the stop loss order of 95 GTT automatically. And if 95 is hit, then the system will close the profit target order of 110 GTT automatically.

This broker gives GTT features free of cost. Plus it does not even charge on stock buying and selling.

More articles on India VIX:

Nifty And India VIX Are Inversely Proportional

How India VIX Is Calculated and What to Expect After Seeing High or Low India VIX

Low India VIX Indicates Not Much Move in the Stock Market

India VIX over 17 What It Means

In this article, you will learn the strategies you can apply after looking at India VIX.

Today I got an interesting India VIX query via email from one of my clients. So I thought let me post it in the blog to help people.

The question is here:

Dear Dilip,

Good morning.

Just trying to know a concept for Option Selling or Hedging strategy.

Here are some range bands of India VIX:

10-15
15-20
20-25

Generally, for the above figure which range-band is best for options selling strategy like straddle, strangle, covered put, covered call, iron butterfly and iron condor?

Which India VIX range is generally considered for buying or selling Nifty Futures and BankNifty Futures.

Can you give some ideas or write an article.

Thanks for your cooperation.

Regards,
Rabindra

My reply:

First, you can see live India VIX here:

https://www.moneycontrol.com/indian-indices/india-vix-36.html

India VIX can only indicate future volatility – and this is just an indication, not a guarantee. But yes it does help to decide what kind of strategy to deploy on a particular day.

So if you see India VIX at the 10-15 range, it is advisable to trade conservative strategies as they are unlikely to hit the stop loss. Though the profit may be small, you will end up making some money which is better than losing money. It is better to make a small profit than to make a small loss.

In this range, it’s better to trade option selling strategies like straddles, strangles, covered put, covered call, iron butterfly, iron condor etc.

If you see India VIX in the 15-20 range, you can do a combination of trades. This means trading with some money the conservative strategies like the iron condor or ratio spreads (as described in my paid course) and trading some aggressive strategies like future hedged with options which are also there in my paid course.

If you see India VIX in the 20-25 range, it is advisable to try debit spreads or aggressive strategies like future hedged with options aggressively. India’s VIX in the 20-25 range is very dangerous for the markets. Here the intraday swing can be up to 3% up or down, and the gap up or down openings will also be very wide.

In this range, you can also do long calls or put straddles or strangles. However, do not go overboard and trade with multiple lots. Even if you are HNI you have to trade with max 5 lots.

I hope this helps.