We started the option buying series on this blog from May 2018 Series.
The journey has seen its ups and downs. We have seen few good profits and few bad losses. We had some conventional wisdom working against us and a method and some luck were essential to come out successful.
The points needed to be overcome were:
About 80% of the options expire worthless.
Option Buyers do not make money because time is always against them.
Indeed these are two strong factors which impact option buying and result in losses.
Let us review how did we perform over the 12 month period.
The review till January 2019 ( 9 month period) was already published here:
Let us look now at last three months which in fact did not go very well.
February 2019 :
The month started with the budget presentation and NIFTY went up initially to come down later. We had a good trade in M&M and HEROMOTOCO but other trades did not do well.
We had 3 trades giving profit and 9 of them went into loss, total loss for the month being Rs. 30371.
March 2019 :
We kept trading in the same manner. Again the market did not oblige much. We were into profit initially, went into a big loss and then recovered some part of it.
The result was again a loss which was lower than the previous month.
12 Trades, 3 Right 9 Wrong, Loss Rs. 25450.
The question many readers asked was whether we should not exit when we see some profit. My answer was that we have to wait for big profits. We have succeeded in the past because of bagging some big gains and that way only will work in this business of option buying. Sometime the small gains seen initially may be frittered away while waiting for a bigger profit. That can not be helped. We are not here for instant gratification. We are in here for a regular deal, month after month. We shall take our hits and misses equally well.
It was time to move on to April.
April 2019 :
Market made new all time highs. We had too many PUTS. It was natural that there will be losses. Five days before expiry we were looking at a loss of Rs. 43000.
In the last 4 days, situation changed in our favor just because of a single trade in RELCAPITAL. If the stock was not in the F&O ban we could have waited out and probably recovered the entire loss. But we had to book the profit early.
We had only 2 trades going right out of a total of 11 and the loss for the month was reduced to Rs. 16887.
This is the third continuous month of losses and it is time that we are back to winning ways.
If we look at the results we find that even though only 8 out of 34 trades have given some profit, the total loss in this 3 month period is Rs. 72510.
The combined loss for three months is significantly lower than the profit of a single month in January 2019 Expiry.
This is the beauty of option buying.
Losses are already known and can be controlled. Profits could be anything and should not be controlled. Most of the traders try to control the profits and end up getting less than what the market wanted to give.
Summary for 12 Months :
Number of Contracts Traded —- 156 ( 12 months )
Number of Wrong Trades ——– 99
Number of Right Trades ——— 57
Winning Months —————- 07
Losing Months ——————- 05
PROFIT for 12 month period —- Rs. 649323
The profit is derived from a risk capital of only Rs. 200000 out of which maximum Rs. 100000 was risked at any point of time.
The last three months have been losing months but still the profit is significant.
A profit of 320% in 12 months is wonderful in percentage terms as well as in absolute numbers.
We shall continue with the same method in the coming months too and see where it takes us in the second year of trading.
I know trading with a method is at times dull and boring. We are having only 156 trades in almost 240 days of trading in a year. But as long as its make money, I am happy with the dull and boring. We are in the market for making money and not for thrills and excitement.
I thank the readers who have stayed with me through this journey and hope that more readers shall join the journey for the second year.