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PA Inflation Down To 14.59% – Feb 5, 2011

Inflation seems to be coming under control, quite dramatically. The latest data  for Feb 5, 2011 shows a 14.59% headline number. It will no doubt be revised to 16% or more later, when no one remembers.

India WPI

What currently people don’t remember, and was in the data today:

Headline data for 11 Dec, 2010: 15.35%
Revised data for 11 Dec, 2010: 16.94%

These are huge revisions, which means even the "benign" December monthly number of 8.43% will go up in the past-data revision that will happen in March.

However, that inflation is coming down is a good trend. Let’s see if it lasts.

  • Anonymous says:

    >From your yahoo post:

    "But an interesting play for options traders will be to take on a straddle or strangle (buying both put and call options). But you will note that these options get really expensive near the budget, because people like me have done the analysis of the past and pushed up options prices through buying; at some point, the odds go against you."

    So, you should take advantage of the bidding up. In other words:

    The ideal way to play this is to enter into a straddle/strangle 5-10 days prior to the event. The options will get bid up or in other words you will get the benefit of vega (while losing on theta). Then, one day before (or prior to announcement on the same day) the event you can sell some fraction of your straddle (to lock in the vega gains) or tweak your strategy further (sell off one side, etc). The remaining position would be the play on gamma (large move either direction).

    The vega gains in the week prior to the event is usually quite substantial and worth playing for and which in turn can fund your directional play for the move after the event.

    This strategy can apply to any event, company earnings etc. The only requisite is that people bid up the options substantially all through the week prior to the event.

  • Deepak Shenoy says:

    >Yes, I agree – there is some opportunity out there now to get in, at a strangle on the Nifty. Could even do a condor.