Satyam’s fall keeps traders busy churning strategies

Market just won't suffer nonsense. Mess with principles, you face brutal consequences. Satyam may have learnt it the hard way

SATYAM Computer was the centre of action on bourses on Wednesday, with traders churning out trading strategies to profit from the sharp dip in the stock. While many traders made money by simply creating short positions in Satyam futures, a handful of arbitrageurs managed to eke out profits from the price differential in spot and futures markets during the session.
    "Only astute traders, who managed to sell Satyam futures in the first few seconds after the market opening, have managed to get some good spreads," said Dharam Chand Sethia of Kredent Brokerage, a Kolkatabased proprietary firm.
    There was very little scope for option traders in Satyam in the absence of enough readily-available strikes. The exchange introduces limited fresh strikes in options contracts for the day's trading, based on the underlying's closing price in the previous session. Also, there is no facility to invoke fresh strikes during market hours. As the last strike available in Satyam options contract on Wednesday was Rs 205 and the stock was trading between Rs 160 and Rs 170 for most of the day, most traders were forced to stick to futures and shares. Satyam shares ended at Rs 157.10, down 30.6%, or Rs 69, from Tuesday.
    Around 11.5 crore Satyam shares were traded on both exchanges combined in the cash segment, while the total open interest in its futures contracts was over 1.7 crore. Brokers said the sharp fall in the stock triggered some margin calls — a demand from a broker to his client for margin deposit — in cases where investors had judged that the stock would not fall below the recent lows and had created long positions. They added, however, that the cascading impact of margin calls was limited as Satyam futures are not heavily traded on a regularly basis.
    Analysts said the sharp build-up of positions in Satyam in the past few sessions worth 60 lakh units in open interest till Tuesday, indicated that some informed investors had already received a whiff of the now-shelved Satyam-Maytas plan. Though Satyam's prospects on bourses may be subdued in the foreseeable future, analysts expect a rebound in the stock over the next couple of days, led by short-covering.
    nishanth.vasudevan@timesgroup.com