NIFTY was down by 73 points yesterday. Should have been a good day for us. Ways of the market are not so straightforward.

Our loss went up as the stocks in which we are holding PUTS went up yesterday defying the general market direction.

There were big moves on both sides but ultimately the trades went wrong for us.

RELIANCE PUT 1180 made a high of Rs. 6.20. It ended the day at Rs. 1.00.

COALINDIA PUT 215 was at Rs. 2.65 during the day. At the end, we are looking at a price of Rs. 0.80.

Option trading can be cruel. From the high to the low does not take much time.

Our only protection is that the maximum loss is known right at the beginning. The same can not be said of option writers.

The status at close yesterday:

We accept whatever the market does.

COALINDIA still looks like that in can go below Rs. 215; it had touched Rs. 216 level yesterday.

TITAN and RELIANCE have shown volatile moves in both directions on Friday and Monday. Not a big chance but a slim chance can not be ruled out here.

If nothing happens, we lose Rs. 8650.

New Trade :

We do not know which way the market will go in the 3 days left to expiry. Banking sector was weak yesterday mainly because of the fall in HDFC BANK.

If the weakness spills over to others too it can give us some returns elsewhere too.

ICICIBANK PUT 405 @ Rs. 0.90-1.00 looks workable if the negative trend continues. The strike price is 2.5% away from the current price and the Implied Volatility of options suggests that such a move in either direction can happen.

Lot Size 1375 Maximum Risk Rs. 1375

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.