Volatility is a double edged sword.
It can kill the enemy and can inflict serious wounds to the holder of the sword.
We know this fact. But knowing the fact and being on the receiving end of it are two different things. Yesterday, our trades went from bad to worse throughout the day and we were left wondering as to what hit us.
Only three days ago on Monday, we took all the possible benefit of a 250 point fall in NIFTY. Giving back 84 points out of that cost us almost 70% of our notional profits.
ZEEL and HEROMOTOCO were the big gainers of the day causing big dents in our account.
All other trades too lost big or small amounts and at close of day we were looking at these numbers.
We had planned some exits from the profitable trades but our anticipated prices never came about. The same thing had happened last month too when we looked for exits in SUNPHARMA and BIOCON trades which could not be taken.
Probably we just have to take the exit without worrying about a likely price.
But were we right in waiting so long?
Hindsight is always 20:20. Decisions made in real time can not be judged after the outcome. Mostly these results end up evens if the sample size is big enough over a period of time.
Let us learn a lesson from the past:
In September 2018, I had sold IBULHSGFIN PUT 1160 for Rs. 230 after having bought it for Rs. 13.50 few days earlier.
But was it a smooth ride. Not at all.
After buying the PUT for Rs. 13.50 on Sep 06, I saw it move up to Rs. 54.15 on Sep 12.
Great. Similar to some of our trades this month.
Next day it went down to Rs. 9.30.
From a 4x trade to a loser next day.
Again, similar to some of our trades this month.
On September 21, it opened at Rs. 6.05 and made a high of Rs. 353. I put in a SELL order at Rs. 400 which was not executed ans saw it end up at Rs. 102 for the day.
Sold for Rs. 230.00 on Sep 25.
Market can punish us or reward us any time.
For today :
Do not lament the trades which go wrong. Focus on the right things. Tough to follow when looking at the profits slipping away, but there is no other way.
Yesterday’s rally was not led by the heavy weights of Index. It may fizzle out in a day or two and these stocks may resume their earlier trend.
Somethings are really funny about the market.
RELINFRA gained 10.75% for the day. At one point, it was up more than 15%. Why?
Because the lenders have agreed to wait for loan repayments till September. Does this time window change the fortunes of the company? Does it become profitable in these two months? And what happens if they do not have money after two months?
But then nobody told us that markets were rational.
We have to take such stupidities into our stride and suffer for it at times.
New Trades :
Let us not take any new trades today. It will be prudent to stay with the current set.
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.