Yesterday was a prime example of the uncertain ways the market moves.
No one had an inkling of the happenings of the day. We had wished for some gains for us based solely on the trend in RELCAPITAL. That stock continued its down trend which we could not cash fully due to the reasons discussed earlier namely — F&O Ban and the brokers insistence upon margins.
What was not expected was this:
With a 158 point decline ( the biggest one day fall in the year 2019) NIFTY once again is below 11600.
NIFTY was at same level on April 11. On that day sentiment was happy that the market is close to the all time high and may be getting there soon.
At same NIFTY level, the mood is despondent that the market may go down from here.
This is market. It can cause problems even by not moving anywhere.
I really do not know what is the way forward for the market or is it the way backwards. We have to see our trades and stay focused. Cut out the noise.
We got out of RELCAPITAL PUT 170 at Rs. 29.00. As mentioned earlier, this exit was caused by factors beyond our control. The PUT went on to Rs. 39.00 at one stage. For all we know, the decline in the stock may continue but for us, the trade is over. This single trade has made our position comfortable. No profit yet but a reduction in loss is a big achievement. Remember that just 3 trading sessions earlier we were looking at a loss of Rs. 42000.
Before we start feeling jubilant, we should note the fact that the trades may still go wrong. Except RELCAPITAL trade nothing is closed yet.
EICHERMOT PUT 20500 could be bought for Rs. 110 and is doing well. We look for another 3-4% decline in the stock price. We have seen from the past moves that it is a possible move. To add caution, an equal move against us also is possible. We have seen that too in the past. Our loss is capped at Rs. 2750.
BHARATFORG moved down to Rs. 480. Too late. This should have happened on the day we bought PUT 470. Unfortunately, the stock went up 4% on that day and is back to the negative zone only now when time is gone. But a move similar to yesterday can make this option better. Let us watch carefully.
BIOCON is also in a similar situation.
New Trade for the Day :
Now that we are out of RELCAPITAL, some of the capital risked in the trades is back with us.
It is time to take advantage/disadvantage of the near expiry moves.
With oil prices shooting up, OMCs and Airlines stocks should be moving down. BPCL already went down 6% yesterday.
We look for the following trades:
INDIGO PUT 1440 @ Rs. 6.60 – 7.00.
Lot Size 600 Max Risk Rs. 4200
INDIGO does not meet the 30 day weakness criteria but is weak over 7 days period. The trade is based on oil price hike and not exactly as per our method for selecting trades.
But I will still go for this trade.
BPCL PUT 320 @ Rs. 1.40-1.60
For all we know the stock may rebound from the yesterday fall. With only 3 trading days to go for expiry we would like to keep our risk low while expecting some gains.
Lot size 1800 Maximum Risk Rs. 1980.
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.