The last 4 days of trades in this series. The month has been volatile to the extreme and so far we have been able to stay above water because of the resolute faith in our method. Market has rewarded our faith.
Running away or salvaging some value from the losing trades is something which most of the option buyers do. Most of the time it hurts them but they do not know it.
We have the example of BIOCON PUT 230 this month. It was down to Rs. 0.05 on Friday in the early trades. During the day, the stock tanked 8% and the PUT was traded at Rs. 4.80 making it a profitable trade.
The position on Friday:
Out of the above trades , ZEEL, YESBANK, HINDPETRO, TATASTEEL and BIOCON will have to be exited today due to the stupidly implemented policy of physical settlement of F&O Contracts.
What can not be cured must be endured.
We do what is required to be done. Most of the brokers will square off the trades if we do not do it ourselves. It is preferable that we do it.
MARUTI PUT 6300 is deep in the money now and volumes are becoming low. We exit this trade and move to PUT 5800.
HEROMOTOCO PUT 2500 can be exited after seeing the initial trend for a while and PUT 2350 can be bought to stay in the trade.
Similarly for GAIL. We exit PUT 142.5 and move to PUT 137.5.
New Trade :
As we shall be exiting many physical settlement trades today, we can take at least one new trade today.
ITC is now trading very close to its 52 week low of Rs. 263.65. We can take a chance about the stock going below this level over next 4 days.
Implied Volatility of ITC options is very low so let us not expect some big move in our direction but we have seen strange things happen in this month as well as in the past. We are ignoring low volatility while considering this trade.
ITC PUT 267.5 @ Rs. 1.35-1.50 can turn out to be a good trade if the stock goes below the 52 week low. The move is just about 2% from the current price.
Lot Size 2400, Maximum Risk Rs. 3600.
Today is going to be an active day. Stay alert and watchful.
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.