Just a day ago I had written that our markets do not have a correlation with US Markets now. Markets were closed in US on December 05. NIFTY carried on from where it had left on Wednesday and moved lower steadily throughout the day on December 06. Finally over two day period, NIFTY almost achieved what Dow Jones Index did a day earlier.
A real big fall. Not a big hl to us though. Let us review our position.
SUNPHARMA moved up and then down ultimately to go nowhere. PUT 450 stayed where it was. The last traded price on Wednesday was Rs. 40.40 and on Thursday it was Rs. 41.00. So we stay where we were.
RELCAPITAL made another 52 week low at Rs. 208.85. For a while our PUT 210 became an ITM option. It finally closed at Rs. 210.35 and the PUT 210 traded at Rs. 14.45 at close.
TATAMOTORS too went down to make a low of Rs. 161.60. We had asked for an early move below 164.60 and the market obliged. Should have wished for a little more. PUT 160 closed at Rs. 6.65. This trade has become slightly ITM now. Now we need the trend to continue for a while more.
TATASTEEL PUT 480 trade did not look feasible at one stage as the stock opened lower and promptly moved to Rs. 501. Then the metal sector saw a pull back and it moved up to Rs. 521. It was possible to enter the trade at Rs. 7.00 or even slightly lower. For the record we take it as Rs. 7.00.
INFY PUT 620 too did fine today. Not yet in the profit zone but better than the previous day.
With such a huge decline in NIFTY there was no chance that any CALL will do well. TITAN CALL 980 lost a few more points.
Out of 6 trades, 4 are in profit zone now and we are thankful to the market for this position.
Picture is slightly better than previous day but a little disappointing considering the magnitude of the NIFTY fall. We take what the market gives and look forward to another day.
US Market Trend :
In the beginning the stocks crashed and the DJIA went down to 24242. ( – 785 points). Then it recovered to close at 24947 ( -79 points). Not a day for the faint hearted.
FTSE, DAX and CAC all made their 52 week low yesterday. But these markets had closed by the time DJIA made its recovery move.
At one point of time SGX NIFTY had gone down by 60 points. By the time US markets closed, it was up by 70 points. As I write, it is up 62 points.
Asia Markets are mildly in the green.
Accordingly we may also see a lot of choppiness with a positive bias today. We need to be careful with our trades. It is not going to be a one way journey.
New Trades :
With stocks falling all around and making new 52 week lows it should be easy to select a stock for buying a PUT. It is not. The fear of reversal and the high premiums are the two factors which force us to be prudent in trade execution. Gains look very good when they happen, but losses hurt us bad. In options trades, one has to live with the roller coaster of ups and downs.
I do not go too deep searching for the trades. It is better to stay with the tried and tested.
VEDL is down 12% for the 30 day period. It is in a down trend over 7 day period as well. The 52 week low of Rs. 190.20 was made as recently as on November 27, 2018 and it came very near to it at Rs. 191 yesterday.
A breach of the recent low should set in on the path to further decline.
I would go for PUT 185 at Rs. 4.00- 4.30 based on the close yesterday. Lot Size is 1750 and maximum risk is Rs. 7525. We shall not buy below Rs. 3.50 because that would mean a reversal in price direction.
If the trade can be taken, it will be out seventh trade for this month. A little on the higher side; we may be slowing down next week.
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.
Ranjith December 7, 2018 at 9:19 am
VEDL is now 3.45.Reply
Anand Kumar December 7, 2018 at 9:39 am
That’s a confusing range to take the trade. VEDL went below ₹3.5 but now at around ₹4.1. So is it a trade to be taken or not to be takenReply
admin December 7, 2018 at 9:43 am
Confusion is within us. When we see that price is going against us we avoid the trade.Reply
You have to take a trade because you are convinced, not because I am in the trade.
Trading is all about taking decisions.
Saket December 7, 2018 at 10:17 am
Got in VEDL at 3.45. A weak stock is a weak stock. Won’t repent even if it goes against usReply
Anand Kumar December 7, 2018 at 10:00 am
That’s very much true Sir. But this is just the second month we started doing it. So picking your brain. Eventually would like to get there.
I think I will avoid this trade.Reply
pankaj December 7, 2018 at 9:50 am
Sir can we take any fresh entry in your executed trades. I am a new reader of your blog.Reply
INZAMAMMUL AHMED December 7, 2018 at 11:59 am
Sir, Ashok Leyland is making new lows, how about 95 PE as a trade.Reply
admin December 8, 2018 at 9:05 am
Monday would likely be a weak day for our markets in view of big decline in US markets on Friday and the exit poll scenario for state assembly elections.Reply
It can be a useful trade.
vishal agarwal December 7, 2018 at 12:38 pm
Sir Idea 32PE might come into our buying range of .9 to 1. Should we wait to make sure trend is not reversing or make the entry?Reply
admin December 8, 2018 at 9:03 am
We are not getting a trend so far. It is alright to stay away for now. We may enter the trade at some other time.Reply
Abhinav December 7, 2018 at 12:49 pm
VEDL is down only 6% (mentioned 12% in blog post) in last 30 days and also in past 7 days there is no smooth down fall. It first made high of 206 on 4th dec and then fell to low of 191 yesterday.
Kindly point out if i am missing something!Reply
admin December 8, 2018 at 9:01 am
The 30 day move depends on the day you check. I had checked on 6th evening. You seem to have checked on 7th morning. Depending on the move on the first day of the 30 day period sometime there can be wide fluctuations in these figures.Reply
The low of 191 itself was enough for taking a trade as it shows that stock is very close to recent 52 week low of Rs. 190.20.
Tharik December 8, 2018 at 1:41 pm
TataGlobal is looking weak. Can we opt for 190 PUT sir?Reply
vishal agarwal December 8, 2018 at 5:01 pm
Sir Titan could not close at day high even though markets closed near high of day. I know its early to say that trend has reversed for Titan but given the market volatility will it be a good idea to exit Titan and enter into some PE like Relinfra?Reply
admin December 8, 2018 at 7:22 pm
We enter the trades with full knowledge about the likely loss. In case of TITAN 980 CALL bought at Rs. 13 it is Rs. 9750. We also know that any trade can go wrong. Nobody knows which way the market will move. Even on Friday when NIFTY closed higher by 92 points, there was a point when NIFTY had gone in negative zone. And what tells us that RELINFRA trade will work out? Every trade has same chance of winning or losing whether it is an existing trade or a new trade.
Let us focus on the trades that are doing well.
One of the main reason for option buyers losing money is that they pay too much attention to the wrong trades.
Anil Purswani December 8, 2018 at 7:48 pm
I am from ahmedabad. I am willing to attend your workshop anywhere in india. Can you please inform me about this..?
Thanks a lot
Avinash December 8, 2018 at 8:51 pm
Sir,I bought VEDL put 180 at 4.0 & it’s 2.60 now,what is advantage or disadvantage about I am not bought put 185.Reply
admin December 9, 2018 at 8:17 am
At the time of selection PUT 185 was a 10% away strike. PUT 180 is 12.5% away. I agree that the stock has good volatility but it has to move down by 15% quickly to be in profit.Reply
A slight up move will make it more unlikely.
This is the disadvantage of going for PUT 180 instead of PUT 185.
Advantage is that your loss will be lesser than the premium of PUT 185. By the way I had suggested PUT 185 at Rs. 4.00. What made you go for a lower strike at same price?
Avinash December 9, 2018 at 10:22 am
The day you suggested Tatasteel first, but I entered in Vedl on 6th Dec.
Market is down that day cost me high premium for put 185 so I bought 180 which is against our system n decsciplne.
I hope monday -ve sentiment will work for trade.