May 2019— Options Once Again — Day 12

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I had written yesterday — One day makes a lot of difference in options trading.

On Monday, the difference made was in our favour. Market decided to make a difference again on Tuesday; this time we were on the receiving end.

NIFTY ended the day about 73 points higher.

A touch of green was seen after continuous decline over previous 9 trading days.

But the high of the day was not sustained. NIFTY was up by 148 points at one stage and then came down to the level when the gain was just 33 points. Another up move and NIFTY was up more than 90 points again. The weighted average close was 73.85 points gain.

All the big moves happened in the last hours of trading and most importantly in the last 30 minutes.

Again, market may move whichever way it wants but the volatility is here to stay.

Option Buying is the safest way to trade in such type of volatile environment. Otherwise we shall be seeing our stop losses get hit every day.

Our trades did not do well yesterday. With the kind of positive trend yesterday, that was to be expected.

CADILAHC made yet another 52 week low. SUNPHARMA ended up more than 5% higher. We can worry all we want but the fact is that PUT 430 is still priced higher than what it was two days ago.

We should learn the habit of looking at a glass of water as half full and not as half empty.

There was no cause for jubilation on Monday and there is no cause of distress by the results of Tuesday. Market gives and the market takes away. Let us live with this fact.

This was the position at close yesterday:

We have given away significantly yesterday. Let us take consolation from the fact that we are in better position than we were in just two days ago.

New trades for the day:

Among IT stocks, HCLTECH is showing pronounced weakness.

It is weak over 30 days as well as 7 days. Implied Volatility of options is in the range of 32-33 which is fine with us.

Current price is Rs. 1067. If we go for a strike about 5% away, we get PUT 1020.

Number of contracts traded for this strike was only 62 yesterday. But 1040 and 1000 PUTS had decent volumes.

We shall make an exception this time with respect to minimum volume and go for PUT 1020.

HCLTECH PUT 1020 @ Rs. 10-11 can be a good trade if the weakness in the sector and the stock continues for a little while more.

Lot Size 700 Maximum Risk — Rs. 7700.

In CADILAHC PUT 280 trade we shall move out of this strike for about Rs. 25-26 and enter PUT 250 at around Rs. 9.00. If the downtrend continues, we make some profit in this trade too. Some profit booking is called for at this stage. The type of reversal seen yesterday can hurt the current trade.

Stay calm. Volatility is a good friend too when it works for us.

Trade cautiously, trade profitably.

Disclaimer: This post and examples are for teaching purpose only and are not meant as advice/suggestion to trade in these stocks. Trading in Futures and Options can lead to big losses and should be done with appropriate knowledge and advice only. Mentioning the stocks here does not imply that I have a trading position or likely to take a trade in these stocks.

 

6 Comments

  • Tharik

    My mind came to a point where notional profits doesn’t matter and losing some notional profits doesn’t matter either. Holding on to all of my trades

  • Praveen

    SBIN 290PE@5.6 LTP@4.9 Profit/Loss: -2100. Open

    ZEEL 390PE@13.05 SellPrice@60 Profit/Loss: 61035. Closed
    HINDPETRO 260PE@4.4 SellPrice@5 Profit/Loss: 1260. Closed
    Maruti 6800CE@191 SellPrice@184 Profit/Loss: -525 Closed
    IOC 150PE@3 SellPrice@7 Profit/Loss: 14000 Closed
    YESBANK 160PE@9 SellPrice@14 Profit/Loss: 8750 Closed
    INFY 720PE@12.05 SellPrice@25 Profit/Loss: 15540 Closed

    Totla Deployed Capital 16,800
    P/L : 97,960

    SBI Put Again came in buy range today, expected to see profits in coming days

    No new Trades

    • Praveen

      Hi
      I pick stocks on bounce back. Trending stocks which bounce back and follow the trend again.

      But don’t get carried by the profits shown during this downtrend. Any one who picked couple of puts this month would have been in the profits. One needs to have a method consistent like the one sir teach here.

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