At Wimbledon Tennis tournament, the second Monday is known as Manic Monday as all the 16 matches ( 8 for Men and 8 for Women ) of the last 16 are scheduled for the day. There is a big spectator turnout on this day. It is a great spectator experience and those who saw the matches yesterday saw Novak Djokovic, Rafael Nadal and Roger Federer winning their matches in their own trademark manner with consummate ease.
Unfortunately, the market participants did not have the same experience yesterday.
This Monday, after the budget presentation by the Finance Minister on Friday, turned out to be Maniacal Monday.
NIFTY gave up 252 points. ( 2.14% )
It was red all over.
Where does this stop?
We do not know.
Yes, the budget of the year 2018-19 presented on February 01, 2018 was equally bland and the culprit was LTCG ( Long Term Capital Gains ) tax.
The journey from the budget day to the expiry day in February 2018 was like this:
NIFTY had given up 684 points from budget to expiry.
Are we in for something similar? I am not sure, but there is no harm in being prepared. The first reaction is almost same. Final outcome is something which can not be predicted but can be expected. What do we lose by being wrong? Option Premium and little peace of mind. As long as we can handle that, it can be beneficial to stay with the trend.
Our Trades :
Our trades were not doing badly when the market was inching up. We had a faithful weak stock in YESBANK to keep us afloat. When the market has gone down for 2 days, other stocks have become active and the position suddenly looks good.
MARUTI and HEROMOTOCO made fresh 52 week lows today.
It was good that we could identify the weakness early and get into the trade at a good price.
YESBANK was the top gainer today. There was lot of discussion on Friday about exit from PUT 100. On that day, the exit did not look good. Today it proved right. We never know what a stock will do, technical analysis notwithstanding. No one expected the bounce in the stock today and when it goes down again, it will be against expectations.
GAIL promised much in the early trades but delivered little. The stock fell to Rs. 297.40 and our strike at Rs. 295 looked within reach. It reversed and closed the day at Rs. 302. PUT 295 showed a price of Rs. 7.10 but ended the day at Rs. 5.40. We live to fight another day.
SUNPHARMA too kept up with the market and moved lower. Our PUT 380 has now come to Rs. 18.40.
What now ? :
The traders biggest dilemma– what to do with a trade that is showing a good profit.
Anything we do can turn out to be wrong.
But this also is a fact that over a period of time trades even out if we trade with any method. Only we should deploy the method consistently. But we are humans and make mistakes. Let us ensure that we make less mistakes.
HEROMOTOCO PUT 2500 can be exited around the current price and we buy PUT 2300 at current price. These prices are around Rs. 156 and Rs. 42 respectively. This way part of the profit is booked and we are still in the trade if the stock is headed lower.
We wait a little more with MARUTI and SUNPHARMA.
But if by any sudden down move happens in these stocks today, we take an exit and move to PUT 6000 and PUT 350 respectively depending on the size of the move.
TATASTEEL PUT 460 was taken at Rs. 7.50 and it ended the day with a small profit.
New Trade :
BIOCON made the new 52 week low at Rs. 230 yesterday and then bounced back to Rs. 243.45 and closed at Rs. 240. We have seen such kind of moves earlier too. Our 30 day and 7 day criteria of stock weakness is satisfied. So is the IV and volume criteria.
So we go with a PUT trade in BIOCON.
BIOCON PUT 230 @ Rs. 3.50-3.80 can work out if the stock simply does what it did today.
Lot Size 1800 Maximum Risk Rs. 6840.
Be watchful with all the trades. Volatility is here to stay. We shall see quick profits coming on the screen and then vanishing equally swiftly. This should not make us nervous. This is how trading is done. Stay calm and peaceful.
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.