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.
Comments
Ravi Kumar July 22, 2019 at 9:22 am
Getting to face the Impact of Physical settlement first time today with Zerodha. What ever profits i got from Friday has now been locked as “Margin”. Even then the Margin is in Negative balance. I will have to pump in funds for new trades but the new funds will first go towards the Margin, which leaves me with no funds to take any new trades from today till expiry 🙁
ReplyDev July 23, 2019 at 9:00 am
I faced same last time.. It showed some 3-4lacs negative. So I decided to square off most till Friday.
ReplyM Kithan July 23, 2019 at 10:24 am
I have been following your trades for more than 6 months and I have not only made money from your suggested trades but have learned a lot from you especially in regards to having patience.
Thank you very much for that.
Regarding Physical settlement issue and the blocking of margin even for options buying, I would suggest that you go for Upstox (http://upstox.com/open-account/?f=bZeY)
They do not block any margin and you can hold the positions till one day before expiry. It will be automatically squared off on Wednesday at 2:30 pm if you do not close the positions yourself so that Physical delivery is avoided.
This is the best option available for now compared to ICICI Direct or Zerodha.
ReplyAjay July 23, 2019 at 1:34 pm
Sir.
ReplyWhat about ITC will it fall in next two days.
Pramod Kumar July 24, 2019 at 8:09 am
I wish I knew. It did not fall yesterday even when NIFTY was falling.
Cheers.
ReplyShahid Gauri July 23, 2019 at 11:43 pm
Hello sir,
ReplyFor the trades above you are telling that ZEEL, YESBANK, HINDPETRO, TATASTEEL and BIOCON need to be exited due to physical settlement. But in these only Yes Bank and TataSteel were in the money and ZEEL, HINDPETRO and BIOCON were not. Then why should they be exited ?
Moreover ZEEL, HINDPETRO and BIOCON are still not in the money.
Pramod Kumar July 24, 2019 at 8:01 am
It is not only In The Money Options which need margins as per the physical settlement mechanism.
3 Strikes up and 3 Strikes down are considered CTM ( Close to money ) and margin is required for such trades too. Yes ZEEL is far away even at this point but do we really expect something from this trade at this stage? Biocon was within 3 strikes. If we do not exit on our own broker will do it and that will not be at a price of our choice.
Cheers.
Reply