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.