Discovery of America by Christopher Columbus was a great event.
Was it possible without the risks taken by the voyagers of that journey? Did they know that they will succeed?
Columbus did not do any back testing of 3 years results of previous voyages. He did not have data and weather information of the unknown waters of the oceans where he was headed. Some say that he was trying to discover India but landed in America. Still, a new place was discovered which is a mighty nation today.
When Wright Brothers invented the aircraft, it was a huge risk. Taking off was the first unknown. More dangerous was the second unknown — how to come down once you are flying. There was a risk of crashing down to death.
But the quest of something new kept them inspired and working on their dream and they succeeded. Was the venture without risks? Absolutely not.
The world is a better place today because some people took risks. They discovered new things, they made new inventions which we take for granted today. Those who attempted but failed in finding success also should be remembered with gratitude because without learning from those failures, success would not have been possible for those who succeeded.
Option Buying Method:
To make profit from option buying is a very insignificant and mundane activity compared to the examples mentioned above.
But this too is like a journey which has its risks of failure and financial loss. Those who are averse to the loss, should not sail the ship. While avoiding the loss, you certainly miss the profits too.
It is not that I have invented some great mathematical formula which can always make profit from option buying. I have simply applied some assumptions to the market behaviour and wait with patience while looking for profit. I found that it works.
Black and Scholes are the creators of the Option Pricing Formula which got them Nobel Prize for Economics. Applying that formula to your trades in real market conditions also does not give a profit regularly.
Do we give up?
Or tear down that formula?
Or we find a way to adapt it to the market conditions?
The first two options will not make me a better trader. Third option may do that.
Returns Comparison With Other Avenues :
The debate began with questions about the 2 year performance of trades on this blog.
A great profit on a starting capital of Rs. 2.00 lakhs.
The points made were that without the initial success this capital would have been wiped out.
I am posting what actually happened and not what could have happened. If the capital was wiped out, we would have tried again and maybe would have achieved the results with a capital of Rs. 5.00 lakhs. Even then this would be a good performance.
Now let us put things in perspective.
Where do we park most of our money for investments in the stock market?
In Mutual Funds.
Market was equally good or bad for me and the mutual funds.
They are managed by professionals who have all the data and analysis available to them. Supposedly they carry out research too on the companies when they buy a large stake. These professional get paid very well for managing your money and my money.
And we never question them on their decisions because they do things in the traditional risk averse methods.
Our money is safe in mutual funds and professionals are looking after the growth, we are supposed to believe that.
This is how most of the Equity Funds have performed over same 2 year period:
Last 1 year has been bad for the market but the previous year had all time highs on multiple occasions. Where are the profits in that year?
But these are the high and mighty. These are the stars of the market.
I am just an ordinary guy trying to tell my readers that they have a chance to survive and make money in this market where the highly touted ones are failing.
Most of the readers believe that. The results are real.
There are some who look at the few failures and announce that this method is a sure destroyer of your capital.
Well, different strokes for different folks.
My methods made money when all these experts whom we trusted ( my money is also there in mutual funds, unfortunately ) have been losing our investments even when the market was in an up move.
I rest my argument.
Readers comments are welcome.
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