We have now completed 14 months journey of option buying on this blog.
We have seen both success and failure and have learnt some lessons from the experiences and are learning more all the time as this fascinating journey continues.
The focus has always been on cashing out the good trades to the maximum extent possible. We strive for this goal even though falling short many times. The results could not have been positive for this period unless some big profits were booked.
Let s review how the good trades delivered.
We had a total of 194 contracts bought in these 14 months.
Many of them ended worthless or resulted in a loss. Number of such trades is 124.
70 right trades combined to deliver a gross profit of Rs. 708937.
How much of it came from the big profit trades?
What is a big profit trade?
Any trade in which the bought option was sold for a price of 5 times or higher is considered as a big profit. In absolute terms, the amounts may vary significantly but the factor of 5 is common.
Stock | Option | Lot Size | Buy Price | Sell Price | Profit | |
HINDUNILVR | Call 1520 | 600 | 17.00 | 90.00 | 43800 | |
TATAMOTORS | Put 320 | 1500 | 4.50 | 37.50 | 49500 | |
RELCAPITAL | Put 400 | 750 | 1.20 | 11.30 | 7575 | |
BHEL | Put 75 | 7500 | 0.75 | 3.75 | 33750 | |
UPL | PUT 600 | 1200 | 8.00 | 42.00 | 40800 | |
TATAMOTORS | PUT 250 | 1500 | 4.00 | 24.75 | 31125 | |
IBULHSGFIN | PUT 1160 | 500 | 13.50 | 230 | 108250 | |
L&TFH | PUT 150 | 4500 | 1.40 | 28.00 | 119700 | |
RELCAPITAL | PUT 390 | 1500 | 5.05 | 53.00 | 71925 | |
RELCAPITAL | PUT 310 | 1500 | 3.00 | 17.00 | 21000 | |
PNB | PUT 75 | 5500 | 0.50 | 12.50 | 66000 | |
HINDPETRO | PUT 240 | 1575 | 6.75 | 76.00 | 109069 | |
YESBANK | PUT 175 | 1750 | 3.00 | 22.00 | 33250 | |
SUNPHARMA | PUT 450 | 1100 | 8.00 | 45.00 | 40700 | |
HEROMOTOCO | PUT 2800 | 200 | 28.00 | 150.00 | 24400 | |
ZEEL | PUT 480 | 1300 | 5.00 | 70.00 | 84500 | |
RELCAPITAL | PUT 170 | 1500 | 4.80 | 29.00 | 36300 | |
TECHM | PUT 700 | 1200 | 1.50 | 8.00 | 7800 | |
GLENMARK | PUT 500 | 1000 | 1.60 | 35.00 | 33400 | |
Out of 70 trades which gave positive result, 19 trades gave a multiple of 5 or more.
These results could have been better but we have to go by the actual numbers.
Let us see the contribution of these trades towards the realized profit.
These 19 trades resulted in a profit of Rs. 962594.
This amount is much higher than our total profit of Rs. 708937.
What does it tell us? :
Option Buying can not be profitable if we book small profits.
Without these 19 big profits, we would be nowhere.
Those who tell you that it is an impossible game to make money through option buying are right in saying so as they know that most of the traders would not be waiting for and cashing the big opportunities.
A combination of method, skill , patience and luck will deliver these kind of results. Luck is one thing which we can not plan for but the first three are our jobs.
Let us keep doing our part and leave the rest to the market.
If we are sincere in our efforts, market will not fail us.
Big profits are the only way to profit.
Wait for such trades. Such opportunities will keep coming if we keep the faith and patience.
Enjoy the Sunday.
Back tomorrow with normal trading.
Comments
Vishal Agarwal June 30, 2019 at 3:16 pm
Sir I believe you have taught us 2 primary edge in trading
1. making money out of weak stocks, which are very predictable- likes of relinfra, idea etc. while the Nifty movement is mostly not predictable.
2. cashing out big profits in winning trades that more than take care of wrong trades.
Saying “thank you” is not enough for such enlightenment. Still, thank you so much Sir. I feel blessed to have you as mentor.
ReplyDhananjay June 30, 2019 at 5:37 pm
Nicely explained sir… Really patience and faith is all we need…
ReplySunny Mittal August 5, 2019 at 12:40 am
Hi Sir,
Just to reinforce what you are saying more from a mathematical point also, since I always like to find mathematical models for anything I want to do if possible. Here Normal distribution applies(since we always assume market is random) which in our case would mean
68% moves within 1 SD (loss or small profit)
22% moves from 1SD – 2 SD (moderate profit)
10% moves greater than 2 SD (Big profit)
(SD — Standard Deviation, stock volatility in our case)
We also got exactly 19/194 big profit.
Rest 90% either loss or taking care of losses of other trades.
So mathematically also it is very important that one does not small profits and make sure they make big profits.
Also your saying of not to get disheartened by underperformance of any month is also quite valid as trading is more statistics play which works only on somewhat larger time scale.
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