December 2018— Option Buying — Day 04

After 6 days of positive closing, NIFTY went down very mildly yesterday. It can be called a flat trading day again.

It is another matter that the decline did not help us much. SUNPHARMA continued its down move though not with the same speed as on Monday. The low point was almost same on both days. We need this stock to now go below the previous low of Rs. 435.

RELCAPITAL and TATAMOTORS closed higher in spite of the negative NIFTY trend. All we can do is to wait.

INFY went up very strongly. This trade was taken with the expectation that strength in INR will continue for few more days. That did not happen and INFY has gone into an up move of its own.

TITAN gave up all the gains of previous day and some more.

This is the status of the trades:

We stay in the positive zone thanks mainly to SUNPHARMA.

Likely Trend:

US Markets closed with big losses yesterday. DJIA and NASDAQ were both down by more than 3%,

Asia is trading negative but not like US. We are seeing some disconnect from the Global Markets in India for last few months. But such a big down move is likely to have some impact. At the time of writing SGX NIFTY is down 47 points. Let us see how the day unfolds.

New Trades:

For us it has become a cliche now— What an IDEA ?

Most of the time, buying a PUT in IDEA has worked. And we have a habit of being lazy and trying to make profit with minimum of effort.

IDEA fits the criteria of 30 day and 7 day weakness.

Problem arises in selecting a Strike Price. It is trading at near Rs. 35.00. There are Strikes available at 35, 34, 33, 32, 31 and 30. Out of these 35 and 30 Strike have the required volumes. Other strikes have small volumes.

For once we shall make a departure from our 100 contracts policy and go for PUT 32 at Rs. 0.80-0.90.

Maximum risk is Rs. 6300 as the lot size is 7000.

This would be our sixth trade in four days and I believe we should not be going any faster than this.

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

Badrinath December 5, 2018 at 9:08 am

Sir, is it mandatory that if US markets are down Indian markets should be also end in negative with same type of 3% down. Daily i watch Moneycontrol and investing.com to check their price, but Indian markets are acting reverse of them.
few months back when 1000 points down in US markets and same has happened for the Indian markets. After that i didnt see the differences. US and Indian markets are totally differing.

admin December 5, 2018 at 8:41 pm

I had stated that till few years back it was normal to expect a similar move to US markets. Not exactly but with reasonable similarity.Now that correlation is missing.
Cheers.
Reply

Narayanan December 5, 2018 at 10:05 am

Is it advisable to buy IDEA PUT 32 now quoting at Rs.1.20?

Avinash December 5, 2018 at 10:07 am

Sir,is it feasible to buy idea PE 32 at 1.20?

Tharik December 5, 2018 at 11:11 am

Dear Promod Sir,

Relinfra looks like a good candidate for PUT . What are your suggestions

Anand December 5, 2018 at 2:34 pm

Guys,

Any one planning to quit Sunpharma and move to next put @ 390?

Varun December 5, 2018 at 5:16 pm

I have moved to 420 puts. Will move to 390 puts only if it manages to break 390
Reply
- Anand December 5, 2018 at 9:02 pm
  
  Hey Varun,
  
  When we checked, 420 was at high premium. How much did you get it for?
  Reply
  - Varun December 5, 2018 at 9:18 pm
    
    Yeah I got it at high price Rs 30. I sold 440 puts at 40. I usually sell the puts once it becomes ITM. I do that to ensure profit protection, but it does come at a cost on the profit.
    Reply
    - admin December 5, 2018 at 9:34 pm
      
      Not clear how selling 440 put protects your profit.
      I agree it becomes a credit spread but the risk reward is not favorable.
    - Anand December 6, 2018 at 12:38 am
      
      No sir, he means he will exit from the trade once PUT comes into ITM and goes to next lower strike. But here spending 30 rs to protect 40 rs profit does not look correct

Satish Kumar December 5, 2018 at 5:50 pm

Sunpharma is just another magic. I quit at 30.55. It went peak at 50.5 and then back to 40. In same time, I took future and make couple bucks, which i missed in option. And took another 380 PE. Lets see if this much greed will work or not ? Thanks Sir for the wonderful month beginning.

vishal agarwal December 5, 2018 at 8:23 pm

Sir, for the benefit of all, could you please throw some light on timing of trade. We usually have a selection of stocks at the beginning of month. But how do you decide which ones to enter when. Like you mentioned in one of comments that you don’t want to suggest all trades on day 1. I was one of the unfortunates to miss sunpharma trade this month and ibulshgfin last month(in that could not enter since price moved swiftly and never got a chance later). The goal is not to just follow your suggestions but to learn to take decisions independently. Sunpharma was in my list too but since initially it was rising in price was planning to enter a bit later once the price rise stablize. Your guidance here will be very helpful.

Regards,
Vishal

admin December 5, 2018 at 8:38 pm

Dear Vishal,
The process is simple. Having decided on a likely trade one should not be hesitating. I am mostly suggesting the likely price based on previous day close and likely opening price of the stock. Sometime it is not possible to get that price like I did not get IDEA PUT 32 price today. No point in regretting it. Move on to other likely trades.
All this will come with practice and definitely there shall be some mistakes and some costly misses like SUNPHARMA this time. I was keeping an eye on SUNTV. Had suggested a PUT 560 trade last month which went worthless. Same PUT 560 trade if taken 2-3 days earlier would have given good profit by now. it looks bad to miss the opportunities but one has to live with it.
Cheers.
Reply

vishal agarwal December 5, 2018 at 8:54 pm

True Sir, we have to live with the misses. Anyways if I would have not seen the suggestions here before the price fall or you would have not suggested it, we would not be regretting as we don’t regret for n number of stocks that go up and down daily. Its just emotions that play with us. Again for my question on entering trades, say at the begining of month I have a list of 5-7 probable trades, should I just enter into them at once without trying to time it? What goes behind your process of suggesting trades. For ex we knew Idea was weak and that was most obvious trade to take on day 1. Infact we make good money in last month with Idea. Why did you waited to suggest that trade for 2-3 days? Was there any signal you were waiting for? Please clarify this sir, this point has become blocker for me after learning how to pick stock for trading.
Thanks a lot for all the guidance. You have changed my perspective towards trading.
Regards,
Vishal

admin December 5, 2018 at 9:04 pm

I am writing on a public platform. I have to be cautious and careful of the risk involved due to higher premiums. For this reason I stagger the trades. If I suggest 5-6 trades right in the beginning, it will be very good if they go right. In case of going wrong, we lose heavily. So we keep on moving slowly and surely. There are always new opportunities.
Cheers.
Reply
- vishal agarwal December 5, 2018 at 9:17 pm
  
  That is a genuine concern Sir that premiums are too high initially and one would like to carefully keep on adding the probable trades as the days progress. Even I entered 5-6 trades over 2-3 days keeping in mind not to overpay for the options. But may be its just matter of luck that sunpharma performed before my entering into it. I am just wondering how could I have done it better so that next time I dont miss such opportunities by not entering into the trades which were in my list of probable trades.
  Reply

Inzamammul Ahmed December 5, 2018 at 8:55 pm

Sir, do you think Sun TV is a missed opportunity or it can move further down as it is trading near its 52 week low, and broke the levels which it was respecting from previous 2 months.

admin December 5, 2018 at 8:59 pm

It fits our criteria for taking a trade. What happens after that depends on the market.
Cheers.
Reply

Badrinath December 5, 2018 at 9:14 pm

Sir,
Can you tell us why there was 700 points upmove for last month in NSE. is there any specific reason or any global thing happened. If you check last month NSE it was bullish and only for few days and if im not wrong less than 4 days it was negative which didnt give major impact.
just want your idea on this.

admin December 5, 2018 at 9:32 pm

I do not like to spend time analysing Nifty. As I am not trading Nifty it doesn’t matter to me. Individual stocks keep showing strength or weakness and that is where we look for trades.
Trying to find reasons for Nifty moves leads us nowhere.
Cheers.
Reply

Tharik December 5, 2018 at 9:28 pm

Sir,
I am seeing the same kind of miss in Relinfra. It would have been a wonderful trade if the price moved one week before in our direction. Unlucky for us. No other option for us other than living with what the market gives us

admin December 5, 2018 at 9:34 pm

We take what the market gives.
Cheers.
Reply

Varun December 5, 2018 at 9:54 pm

Sir, at what point do you think we should sell of SUNPHARMA puts. I mean at what price point or profit?

admin December 5, 2018 at 10:08 pm

One can exit put 450 at current price and move to put 390 or 380.
If the down trend continues we get some more profit. In case of reversal, loss will be less. Part of profit gets booked.
Cheers.
Reply

Badrinath December 5, 2018 at 9:08 am

Sir, is it mandatory that if US markets are down Indian markets should be also end in negative with same type of 3% down. Daily i watch Moneycontrol and investing.com to check their price, but Indian markets are acting reverse of them.
few months back when 1000 points down in US markets and same has happened for the Indian markets. After that i didnt see the differences. US and Indian markets are totally differing.
- admin December 5, 2018 at 8:41 pm
  
  I had stated that till few years back it was normal to expect a similar move to US markets. Not exactly but with reasonable similarity.Now that correlation is missing.
  Cheers.
Narayanan December 5, 2018 at 10:05 am

Is it advisable to buy IDEA PUT 32 now quoting at Rs.1.20?
Avinash December 5, 2018 at 10:07 am

Sir,is it feasible to buy idea PE 32 at 1.20?
Tharik December 5, 2018 at 11:11 am

Dear Promod Sir,

Relinfra looks like a good candidate for PUT . What are your suggestions
Anand December 5, 2018 at 2:34 pm

Guys,

Any one planning to quit Sunpharma and move to next put @ 390?
- Varun December 5, 2018 at 5:16 pm
  
  I have moved to 420 puts. Will move to 390 puts only if it manages to break 390
  - Anand December 5, 2018 at 9:02 pm
    
    Hey Varun,
    
    When we checked, 420 was at high premium. How much did you get it for?
    - Varun December 5, 2018 at 9:18 pm
      
      Yeah I got it at high price Rs 30. I sold 440 puts at 40. I usually sell the puts once it becomes ITM. I do that to ensure profit protection, but it does come at a cost on the profit.
      - admin December 5, 2018 at 9:34 pm
        
        Not clear how selling 440 put protects your profit.
        I agree it becomes a credit spread but the risk reward is not favorable.
      - Anand December 6, 2018 at 12:38 am
        
        No sir, he means he will exit from the trade once PUT comes into ITM and goes to next lower strike. But here spending 30 rs to protect 40 rs profit does not look correct
Satish Kumar December 5, 2018 at 5:50 pm

Sunpharma is just another magic. I quit at 30.55. It went peak at 50.5 and then back to 40. In same time, I took future and make couple bucks, which i missed in option. And took another 380 PE. Lets see if this much greed will work or not ? Thanks Sir for the wonderful month beginning.
vishal agarwal December 5, 2018 at 8:23 pm

Sir, for the benefit of all, could you please throw some light on timing of trade. We usually have a selection of stocks at the beginning of month. But how do you decide which ones to enter when. Like you mentioned in one of comments that you don’t want to suggest all trades on day 1. I was one of the unfortunates to miss sunpharma trade this month and ibulshgfin last month(in that could not enter since price moved swiftly and never got a chance later). The goal is not to just follow your suggestions but to learn to take decisions independently. Sunpharma was in my list too but since initially it was rising in price was planning to enter a bit later once the price rise stablize. Your guidance here will be very helpful.

Regards,
Vishal
- admin December 5, 2018 at 8:38 pm
  
  Dear Vishal,
  The process is simple. Having decided on a likely trade one should not be hesitating. I am mostly suggesting the likely price based on previous day close and likely opening price of the stock. Sometime it is not possible to get that price like I did not get IDEA PUT 32 price today. No point in regretting it. Move on to other likely trades.
  All this will come with practice and definitely there shall be some mistakes and some costly misses like SUNPHARMA this time. I was keeping an eye on SUNTV. Had suggested a PUT 560 trade last month which went worthless. Same PUT 560 trade if taken 2-3 days earlier would have given good profit by now. it looks bad to miss the opportunities but one has to live with it.
  Cheers.
vishal agarwal December 5, 2018 at 8:54 pm

True Sir, we have to live with the misses. Anyways if I would have not seen the suggestions here before the price fall or you would have not suggested it, we would not be regretting as we don’t regret for n number of stocks that go up and down daily. Its just emotions that play with us. Again for my question on entering trades, say at the begining of month I have a list of 5-7 probable trades, should I just enter into them at once without trying to time it? What goes behind your process of suggesting trades. For ex we knew Idea was weak and that was most obvious trade to take on day 1. Infact we make good money in last month with Idea. Why did you waited to suggest that trade for 2-3 days? Was there any signal you were waiting for? Please clarify this sir, this point has become blocker for me after learning how to pick stock for trading.
Thanks a lot for all the guidance. You have changed my perspective towards trading.
Regards,
Vishal
- admin December 5, 2018 at 9:04 pm
  
  I am writing on a public platform. I have to be cautious and careful of the risk involved due to higher premiums. For this reason I stagger the trades. If I suggest 5-6 trades right in the beginning, it will be very good if they go right. In case of going wrong, we lose heavily. So we keep on moving slowly and surely. There are always new opportunities.
  Cheers.
  - vishal agarwal December 5, 2018 at 9:17 pm
    
    That is a genuine concern Sir that premiums are too high initially and one would like to carefully keep on adding the probable trades as the days progress. Even I entered 5-6 trades over 2-3 days keeping in mind not to overpay for the options. But may be its just matter of luck that sunpharma performed before my entering into it. I am just wondering how could I have done it better so that next time I dont miss such opportunities by not entering into the trades which were in my list of probable trades.
Inzamammul Ahmed December 5, 2018 at 8:55 pm

Sir, do you think Sun TV is a missed opportunity or it can move further down as it is trading near its 52 week low, and broke the levels which it was respecting from previous 2 months.
- admin December 5, 2018 at 8:59 pm
  
  It fits our criteria for taking a trade. What happens after that depends on the market.
  Cheers.
Badrinath December 5, 2018 at 9:14 pm

Sir,
Can you tell us why there was 700 points upmove for last month in NSE. is there any specific reason or any global thing happened. If you check last month NSE it was bullish and only for few days and if im not wrong less than 4 days it was negative which didnt give major impact.
just want your idea on this.
- admin December 5, 2018 at 9:32 pm
  
  I do not like to spend time analysing Nifty. As I am not trading Nifty it doesn’t matter to me. Individual stocks keep showing strength or weakness and that is where we look for trades.
  Trying to find reasons for Nifty moves leads us nowhere.
  Cheers.
Tharik December 5, 2018 at 9:28 pm

Sir,
I am seeing the same kind of miss in Relinfra. It would have been a wonderful trade if the price moved one week before in our direction. Unlucky for us. No other option for us other than living with what the market gives us
- admin December 5, 2018 at 9:34 pm
  
  We take what the market gives.
  Cheers.
Varun December 5, 2018 at 9:54 pm

Sir, at what point do you think we should sell of SUNPHARMA puts. I mean at what price point or profit?
- admin December 5, 2018 at 10:08 pm
  
  One can exit put 450 at current price and move to put 390 or 380.
  If the down trend continues we get some more profit. In case of reversal, loss will be less. Part of profit gets booked.
  Cheers.

share