No 30% return on total 50L. 45L of SGB will generate 2.5% + some additional % as SGB are traded at discount. Remaining 5L will generate 30% with assumption of 125+ points of credit every month. Overall return is around 6-7% on 50L which is same as debt fund return.
sgbs are at discount while buying but they may be also at discount from cash market rate at the time of maturity,, then this benefit would not be possible..
@@ajaydesai4544 usually No, it would almost market price of the Gold, you can check any sgb which is near to expiry n compare with market price of gold
Sir you forgot to count every month roll over cost which include brokerage and mcx trasaction charges Secondly if gold price increases 15 to 20 pct or even more over the period of time then our short gold position will show loss of 10 lakh or more for which exchange will demand more money in order to maintain the position.
Thanks first my guruji you are great You opened a way to think deeply . When we calculate the total ROCE, of 50L it gives only 3 percentage from the mcx trade and 2.5+1.5 percentage form the sgb benefits ( total 7 percent annual) the person is able to generate additional fd returns through risk free etf and liquidbees or trading income From the remaining 40L pledged margin thus msay work thanks genius
Sometimes futures mightbe at discount and at premium. As a Math teacher I think you are very good at calculating these complex things but for a layman its difficult to do this.
In that case you can avoid Future Short instead you go for Put Buying to secure ur Base Trade. And If you think the Discounting is intermediate go for selling OTM Call option. Doing all this you need to have Edge.
1) Shorting the Future is fine; but if gold price increase....I need to pay for the loss immediately. isnt it? how is it a no risk? we are holding gold for long term isnt? 2) Can this be replicated for index funds? purchase index funds and sell call options
Gold component 50 L*(2.5+1.5)% = 2 L Future shorting = 1.56 L 3.56 L on 50 L 7.12 % return SGB or bharat bond can easily give such returns so what is the logic to do all this Also no Gold returns as in future we get loss
important thing is missed SGB matures only by sept 29, what if market goes up shorted future will be in loss so while settling and roling over you need to incur loss and open new position how can we address this
Sir, the profit is 156000 for 5 lakhs, you are showing this as 31%. But I have invest 50lakhs. For 50 lakhs if its 156000 ?? Its 3%. Am I missing something?
A covered call strategy explained in a complex way by Mr. Sundar. His intentions may be good but there is nothing new in this strategy. What will happen if the gold futures increase one month and drop the next month. Do we have to cover the loss either by cash or by liquidating the gold bonds and wait for a fall again?? If so, what is new in this strategy?
The technique is nice sir, but what am concerned about is rolling the futures position quarter on quarter let’s say with loss if gold price constantly increases, I’ll have to finance the losses of futures in cash as the 2029 contract of SGB would not be liquid and will not catch up the actual gold price as well.
To add to your point, if you carry the loss for next 8 year it will nullify most or all of the gold appreciation gain. This is equal to buying SB today at the price of gold after 8 years.
@@rajatmin Sorry for late reply, we are indeed buying 2029 SGB and shorting Gold commodity which is 2 months ahead of us. Yes there is no free lunch I agree, the SGB keeps gaining no doubt but financing the losses time and over again is a difficulty. Moreover, shorting commodity at a premium is not a possibility always. Sometimes futures may trade at a discount too, it all depends on speculation. Anyways, let's wait to hear from sir, he usually replies but this might have not got his attention.
@@harsh-bm4wx Actual gold price will not reflect in SGB's always , only New/Expiry SGB only tied to real gold price, remaining other SGB's will be listed on discount / premium. It depends. I have 8 series of gold SGB's. trading volume also very less. It's not possible to buy same price in SGB like stocks in bulk, huge difference will be there if you see the depth. Theoretically you will find arbitrage but practically bit difficult.
Hi sir calculation is absolutely wrong. We can get only 6 to 7% return on 50 lacs, which is almost similar to FD where there is no knowledge is required, but here we need to take so many steps and knowledge. Anyhow thanks for giving this kind of knowledge at least, where nobody is sharing this kind of information also..
My investment is 50 lac, 2.5 % interest from GOI, 1.5 % discount difference, and 150000 income from mcx , which is not 31% but only 3%, you are calculating on 5 lakh margin, whereas i am giving entire 50 lakh worth gold as margin, sir please re calculate
Thanks Sundarji. Fantastic. Your exploration of risk free high ROIs are mind boggling. One need to learn the attitude from the successful people before learning the methods. I’m fan of that in you.
If gold price increases, your shorted position will make a loss. You cannot say you have bought SGB the price of that also increased, because it is pledged and you cannot sell it immediately and plan to make profit from it. With lock in period of 8 years, many such scenarios the outcome (ROI) would be pretty poor I guess. I am right?!
Totally agree, there's a loop hole in the strategy which didn't consider scenarios of gold price increases for which short loss needs to be covered in mcx. SGB won't help here to cover up.
@@venki493 and by doing this you lost gold returns also which will be more than 1.5 L 1.5 L on 50 L is 3 percent Gold cagr is 8 perfect So it is a sure shot nonsense strategy
Sir, If you short gold 1kg, you need to pay to Broker if market shoots up, then we can't sell gold bonds to cover the losses right. You will be go on paying losses if market/gold price drastically goesup, please clarify
Sir , Follow you and consider the best in options trading Sir how about not shorting future and just shorting 2000 Far OTM calls on MCX ( 1 KG) ? Assuming that I am not worried about SGB going down in long term , is not this more correct approach.? That would Yield 4 80 K approx per month ( considering 77000 call Nov , 2024)
I have been trading in SGB for past 1 year after your video the volume is increased by 10 folds Really you opened eyes of many Now it is trading near to market price Great awareness to general public 👏 👍
On 50 Lac capital total annual return would be 6-7 percent only . What he is telling 24 percent that is only on 5 Lac rupees . But since your 50 Lac capital is blocked , you have to calculate return on 50 L capital only. Do not get fooled . Better go for Mutual funds , that will will give u more than 12 percent return on your total capital invested .
You opened a way to think differently. Thank you for that. When we calculate the total ROCE, of 5000k it gives only 3 percentage from the mcx trade and 4 percentage form the sgb benefits ( total 7 percent annual). If the person is able to generate other trading income from the remaining 4000k pledged margin it will work well. But it will be under risk. Am I right?
No risk as SB is considered as cash equivalent...so even if gold future shoots....Value of SB will also shoot which is equal to cash only so no need to pay extra margin
@@Ashish-vd1ev as gold prices increase, sgb price won't rise instantaneously. SGB price matches gold market price only when bond matures after 8 years. If gold prices rise, future sell position will give immediate losses, while there won't be instant proportionate rise in the bond price. This might only work if one is committed to hold the bonds and then trade with margin money for 8 years at the least is what i believe. Open to comments. Thanks !
As we know that gold has a power of appreciation in long term. Why should short futures. I agree its margin fund can be utilised to buy gold fut and short covered call per month. Passive income could generate easily 15-20%.
Instead of selling futures, one can sell only call option making it a covered call. Returns would be minimal compared to futures but there are many advantages. If gold appreciates gradually (sell far OTM call option only) one can get good profit from bond.
For arguments sake, lets say if all covered calls end up in losses? Will we keep booking losses and only at the end of the SGB tenure we will realize the profits? (covered calls expire in 2 / 3 months, so the P/L will be realized in 2/3months) whereas SGB will expire in 6-8 years so the P/L will be notional until we book it?
@@benm3926 Yes. Notional loss has to be booked. Same with the case of Future. But here every month you will get an opportunity to slightly increase your strike price. In 5 years time you can increase your strike from say 5000 to 6000. Then 20% profit or 4% extra return you may get. In case of Future you locked your price on that day.
@@sivasankara1174 That is true, to add to your point, if you carry the loss for next 8 year it will nullify most or all of the gold appreciation gain. This is equal to buying SB today at the price of gold after 8 years.
What happens if future price goes up, possibility to lose in future trade??? Do you mean we give delivery of bonds to brocker at higer price to compensate the future loss??
you buy 5lakh rs sgb you pledge with broker you will get 4.5 lakhs now you short otm gold option ce you will get premium now also buy goldbees equivalent to delta of option if market falls delta will fall reduce goldbees according if market rise buy more goldbees as per increase in delta keep delta neutral
I have one question if anybody could help me out it would really be helpful. Once you buy the bond and short future, both are in different markets right. The arbitrage works only if you can square up one using another but that is not the case. The shorted future should also be squared up in the futures market and the SGB should also be sold on expiry. So where exactly is the arbitrage taking place.
Yes, i have the same query here. But if we keep continue in selling futures we may end up with profit though less than 30 perc. But I dont think its great trade , putting heavy value in gold and getting jus 1.5 lacs for that 50 lacs investment ( otherwise you use other margin left out used in other trades !! )
@@vallabhv6725 well it's not possible to happen in one month as many economies depend upon gold. so, every month you would be able to reset the cycle. even if the price increases by 10-20% you decrease the amount of gold from 1kg to 0.9-0.8kg and you are okay to go with your 50L capital for new month. I hope it helps.
@@vallabhv6725 You would receive 45 Lakhs after pledging 1kg Gold bond, 5 lakhs used for margin and remaining for offsetting the losses or trading different instruments.
At maturity sgb adjusted with future price. For example if you are making a loss of 10k pm on consistent basis because of increase in gold price, the loss will be compensated by sgb at maturity.
@@vijayakumarkotikalapudi7876 For example Few months before nifty @18000+ Went to 15200and again Now back to high. So flat return in these months if not relized in between How does reccuring period loss compenseted by long term meturity bond
I don’t know about indian market profits with all the tax, but dubai and all they do it profitably, going long on sovereign gold and short on gold bees type
Sir, can you please make a separate video on pledging of any of the security. As in stocks we get collateral margin which we can use only 50% in margin of F&O. But if we pledge SGB or Liquid Mutual Fund then will we get 100 % cash equivalents margin? My actual question is, suppose I pledge worth Rs 1 lakh liquid mutual fund or SGB. Now I want to Sale an option of nifty and the total margin required is Rs 80k. Then this pledged liquid fund is enough or again we have to pay 40k additional cash margin?
I appreciate your efforts! 🙏 Just a small off-topic question: 😅 I only have these words 🤔. (behave today finger ski upon boy assault summer exhaust beauty stereo over). What is this? 🤔
Instead simply buy oct month future and sell dec month future..but you can never be risk free as the future price may go below the underlying asset's price!
Thank you Sunder Sir... After a very long time I have liked your video as a new learning video on strategic trading has come from you. I have been seeing your videos since 2020 and have learnt many new things from your videos, but these days I am not tempted to like your videos. Thank you Sir once again. I have seen the video once, but I will surely want to learn more on the strategy you have discussed and so will see the video again. 1 question, instead of shorting futures will it not be better to short synthetic futures to save on the charges...will the Rs.130 advantage still be there then??
@@CuriousKnight-Wrestlecurious Yes, the daily Futures MTM will go away and the charges will be reduced, but since synthetic futures exactly match futures pay-off (otherwise there will be an arbitrage opportunity there as well) I think the 130 bucks PRS Sir is talking about will stay.... and yes 1 more thing, option sell positions can always be adjusted using the additional free marging available...
On expiry if the future position is in loss, then this ROI would be low. But if we keep continue in selling futures we may end up with profit though less than 30 perc. But I dont think its great trade , putting heavy value in gold and getting jus 1.5 lacs for that 50 lacs investment ( unless otherwise you use other margin left out used in other trades !! ) Gold may not give more than 6% p.a in longer term, as per history
@P R Sundar Sir, I have one doubt. Lets assume all the futures we short keeps giving us losses (that is gold futures keep increasing). So will we keep booking losses and only at the end of the SGB tenure we can book profits? I understand we can sell SGB in the secondary market before the tenure but that is taxable, whereas selling at end of tenure is not taxable. Please clarify
Remaing money received could be used for offsetting the losses. You would receive 45 Lakhs after pledging 1kg Gold bond, 5 lakhs used for margin and remaining for offsetting the losses or trading different instruments.
The risk is, if the good future price goes up few months up and few months down, then that is the risk. Because we book loss in future when gold future goes up and the actual gold price is nutral after few months or years
But for future we need to pay extra cash every month and our sgb money is only a virtual increase in money. So if gold keeps rising I need to have the mtm money also.
If gold prices rises your margin money will also increase. Many brokers offer a 8% haircut. So dontworry. You will get 92% of gold value as margin. You dont need extra money anytime
Horrible horrible strategy. Firstly, if gold price increases significantly in a particular month, then you have to liquidate SGB to offset losses in futures price. In that case, you lose 2.5% interest as you are selling SGBs in secondary markets. So essentially you can't count 2.5% interest from govt. as it is only applicable if held in primary market, until maturity Secondly, 2.5% interest from govt. is taxable. There is no LTCG tax on SGBs, but tax is applicable on 2.5% interest
1) with 5 lakhs captial, it is very unlikely to get 25 percentage return. Let's consider Zerodha broker, They charge 18% interest on collateral bonds/ shares. Let's say I bought 100 Gm worth bonds, I gave it to Broker as collateral , he will charge 18% capital. I am going to use. As per Zerodha they won't charge any interest if your user uses less than 50% of collateral .So in this case I have to use 250000 without any interest. Let's say we need an additional 2.5 lakhs to escape from interest. Total 7.5 lakhs minimum amount required. While providing information please provide complete details.
Our inflation is 8% but u have given a plan of 2.5+1.5 and 30% on 10% capital which is 5 lakh..... total 4%+3%=7% only. What will be the other side if the trades gone wrong.
You should see the price of 22 carat gold which is pure gold (you can't prepare the ornaments) Whereas the 24 carat is made my adding 2 parts of copper to gold (can be used to make ornaments) So, you just bought the 22 carat gold not the 24 carat gold.. Once cross check
While calculating he multiplied 130X12X100=156000. This is wrong. Considering 45 lac margin one can trade only 9 lots so earning will be 15600. Moreover, if you are in sort for 9 lot then you are sort for 9kg gold but long for one kg gold, which is dangerous. plus he has not considered expenses involved in future sales and buy-in every month.
Excellent. Awesome. Explained Very nicely, how to use Financial IQ to make Risk Free Money without breaking any rules. Keep up the Good Work. - Rao, Bangalore.
I invest and track SGBs closely. There is a lot of difference between price of SGB and street price of gold. You will never be able to buy physical gold at the price declared by IBJA (SGB follow IBJA rate at maturity). Also, you get cash, not physicall gold on maturity. Wherease in mcx you have to give delivery of physical gold. So it is not like a covered call.
@@sunilmakhija5819 You will. but what is the definition of market price? For SGB it is the price declared by IBJA on that day. IBJA prices are usually lower than what you have to pay jweller to buy gold.
Hi Mr Sundar, Very nice information. However please also explain the impact of various taxes, Brokerage, transactions costs also. After providing for such costs, what is the possible actual return. Incase you can do this, that would add tremendous value!
What is he talking here. the next series Rs.150 profit depends on the market situation. A lot of time it will be a loss. Today it is trading 150 lower. But when you actually switch before expiry it could be completely different. Can he show historical data to prove it. Being a such a big F&O trader he should be completely aware of this.
If price goes up future short must be realised Lose but SGB is unrealised Profit. So you have to be shot every 2 month in to be in break even. However charges are loss only .
You're right. I also checked. In fact we need to pay full pledged margin of 50 lakh for 1 Kg. And the return is much lesser comparing with Nifty or BNF option selling. Also with gold the risk is high if the gold price shoot up we need to sell and buy new SGB.
what happens if gold increases by 10 per-cent, then your principal amount will not give anything, I want to know that bond also increases 10 percent likewise shorting the future..
To all friends. He is right and wrong. He has not done this himself. Go watch LTCM and MG failures. Rolling contract has cashflow risk. His original long 2029 position is surely hedged but the intermediate rolling futures short will ask for liquid margin. His other option selling ( PUT) is a dangerous proposition. It’s practically naked… as the short future hedges the cash long the short put will bleed him and ask for more margin. This position altogether may not earn even 3%
I try shorting GOLD OCT future in zerodha, it say required margin to be around 22.66 lakh, where PR sundar only 5lack. can anybody help me if I am doing anything wrong here.
ROI calculation is wrong. There are also rollover risks. 1.5% discount also notional. Please amend and reload your video. Video can mislead many people.
by calculation , people can be fooled...so he did so..one is investing 50 L in gold bond plus 5 L in gold futures as margin money....earning 4 % on gold bond ie. 2 L in this case 1.5 L in futures so total becomes 3.5 on investment of 55L .....so calculate annual returns...
C’mon if this was the case there are plenty of traders in the market, they would’ve simply made easy money with this. Plus, also note down there is a premium decay while you’re nearing expiry. Hence, the premium is not fixed sometimes you gain higher premium and sometimes you might also lose in premium it depends on market volatility. I pretty sure you may not end up making more than 12 - 15% In the end the calculation is 136 x 100 Because the 136 premium is for 10 gms price and one Gold contract consist of 100 units 10gms x 100 = 1000gms So you would end up only making 13600 Rs in premium money every month, in Mr. PR Sundar’s fixed premium world Not a troll, only giving the right information.
Btw 2 of my trading platform (full time broker & Discounted broker ) doesn’t and will not allow pledge margin trade in commodity market Please let us know which broker can give pledge margin for commodity
Sir, you didn't explain the other side of the story, if Gold price increases continuously you will miss the incremental profit on your investment..as you are booking loss in Gold future...
But sir, you r showing two future contract primium difference at now while on expiring of Oct series (when will I shift my hedging in next month i e. Dec series) the price of dec series contract would having different price due to time decay, may be same, may be low... Please 🙏 clarify
Dear Sir, In Zerodha u cannot trade in MCX F&O with collateral... It is limited to equity and currency... It is written on there website... Thankyou Yours sincere follower
Mr.Sundar, It is a very risky strategy for example if the price of gold per gram rises by 2000 when SGB gold expiry, then we have to load margin for the future market, again and again, sometimes this strategy will easily ditch us because the future is involved in this😂.....புலிவால புடிச்ச கதை strategy🤣😂
Actual return on 50 lacs works out to be 7.12% which is fair enough for an options trader getting extra return but then there is hassle in this 1. Liquidity risk: if gold price shoots then there will be loss in futures and to cover that loss you have to pump in additional cash co futures are always marked to market. 2. Slippages while rolling over the futures which will eat away atleast .5% of return. 3. Its a very long term thing since sgb will expire after many years and even if once a person forgets to rollover the position by even 1 day, the loss may be huge due to slippage. Better to stay invested in liquidbees giving hassle free 4-5% return?
PR should replace the whole technical team. This video has echos. He should stop hiring his relatives but go for professionals after watching others good videos.
It's not right, I calculated as we we can get : 40 lac liquidity and 3.5 lac profit(~2.5 lac + 1lac) at end of the year... This we can achieve by pledging liquid fund that can also give 45 lac liquidity and 3 lac profit at end of every year , so why to spoil our Brain with this unnecessary numbers jumbling
obviously yes, that is called notional loss, In future you will be having notional loss and SGB you will be having notional profit so np, you should have extra fund to manage that
