December 2018— Option Buying — Day 11

We are now at the end of the week with nothing to show for the 4 days of trading. When NIFTY tanked 205 points on Monday, it was like a wish come true. From Tuesday the nightmare started and our profits were taken away by the sudden turn of events.

NIFTY gained 60 points, 188 points and 53 points respectively over next 3 days to make Monday a distant memory. This is the nature of option trades. Moves in the other direction can hurt very badly.

SUNPHARMA, TATASTEEL and RELINFRA moved lower during the day to raise some hope. But the other trades did not contribute positively and we had to see the little profit being eroded further. M&M PUT 700 was taken at Rs. 7.00 on Wednesday. It was suggested at Rs. 9.00-10.00. But within few minutes of open, it had moved down in price. actually the trade should have been avoided based on the price but making mistakes is something which we normally do. I got it at Rs. 7.00 so that is the price considered for the profit/loss statement.

Today, Asia Markets are in the red and SGX NIFTY too shows a fall of 51 points. If NIFTY ends up negative for the day and some of our stocks too follow that direction, the position will improve.

New Trade:

Time for another sunshine?

Let us hope so.

SUNTV has moved down from Rs. 613 to Rs. 560 level over last one month.

Over last 7 days it has moved down from Rs. 594 to Rs. 560. The recent rally also did not help it much. It is very close to the 52 week low of Rs. 552.85 made on December 11, 2018 before the market had reversed on that day.

PUT 540 at Rs. 9.00-10.00 has a maximum risk of Rs. 10000. ( Lot Size 1000 ). If the current trend in the stock persists, we can see a breach of the 52 week low very soon followed by another good down move. If that does not happen, we know our position.

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

Manas December 14, 2018 at 9:39 am

Dear Pramod…a friendly piece of advice, if you are in a position to listen

1. If a stock with good ‘value’ has reduced in ‘price’ because of high market uncertainity/volatility, ‘price’ is bound to mean revert to the the value once the volatility fizzles off. M&M is the example here. 30+ brokerages have given a buy call when it was trading around 760 and i couldn’t agree with your reason to buy put when it has fallen to a low of 694 because of election uncertainity

2. Our decisions may not be right always and ss traders, we should periodically adjust our positions when things don’t go as we expected. We should give ourselves a healthy room for error and we should believe in our conviction rather than keeping hopes on SGXNIFTY or DJIA. It is similar to putting a candle in the middle of air and hoping that there won’t be any wind. In my opinion, SGXNIFTY is the most phudhu parameter

Thanks,
Manas

admin December 14, 2018 at 10:26 am

Dear Manas,

Thanks for sharing your thoughts. I appreciate any good advice and you are welcome to post your views here. Those views will provide a different perspective to the readers.

If you have been following this blog fr sometime, you must have noted that it is all about doing things differently than most than most buyers do. It is a method of selection, deciding the strike price and taking a trade. It works few times and fails more times than it succeeds. Still it makes money for me. I am not overly concerned if few trades go wrong as long as one or two of them go right.
What if M&M has gone wrong. Any trade can go wrong with all the right analysis. Maybe I went wrong with the wrong analysis. Effect is the same. Money is lost.
It is not that I am not willing to take your advice. The fact is that trades can go wrong for any reason and there is no point mulling over a single trade. We are here for a long haul, not for a day. Profit and loss will keep on alternating. I trust the method which has worked for us so far.

Once again, thanks for sharing your views. Looking forward to your active participation here.
Reply
- Uwaraj December 14, 2018 at 10:50 am
  
  And we do enter the trade with premium paid as our SL. So, that’s our healthy room for error. If one is not willing to get-in with higher premium and keep low risk profile then one can move to next strike or wait for a pullback to enter. Our conviction lies with selection process.
  Reply
Ravi kumar December 14, 2018 at 10:42 am

Manas,

Can you please share your strategy, if you one?
Reply
- Devendra December 14, 2018 at 12:27 pm
  
  Welcome to only Profit making zone in the stock market:-)
  
  Here one will make ONLY profit. Tossing the coin has 50% probability of winning. Here with the same logic, even if 25% stocks ( I’m not considering 50%) move in predicated direction, will cover rest 75% stock’s premium and on top will get some profit. So in the end one will be in profit.
  For this Key is strike selection and profit booking (moving to next strike) ONLY when one is in huge Profit(5-10 times of premium paid).
  
  All the best !
  Reply
  - admin December 14, 2018 at 12:34 pm
    
    We must be thankful to the market for whatever success we have had so far. The facts bear out that the method actually works. In 7 months, only 31 trades earned profit out of a total of 99. The profit through these trades stands at a little above Rs. 590000. Who are we to complain with such results?
    Some trades will surely go wrong. But trading and life in general is about winners not losers. Let us not lose our focus.
    Thanks for sharing your views.
    Reply
- KV Rao December 15, 2018 at 7:30 am
  
  you can attend Promodji’s seminars. Visit
  https://optionsnext.com/blog/
  for details
  Reply

Manas December 14, 2018 at 11:55 am

I primarily scalp intraday futures and write monthly options/covered calls. So my line of thinking may be different from that of an option buyer but i got intrigued in option buying seeing pramodji’s answers in Quora. I recently started option buying and wanted to improve my knowledge from discussions here. I think that’s why as traders we are all here to improve ourselves

I’m here for a healthy debate though 🙂

admin December 14, 2018 at 12:11 pm

Like I said earlier, you are welcome to share your views any time.
Reply
Rohan December 14, 2018 at 3:09 pm

Dear Manas,
M&M was not down due to election result. It was down to auto sales figure 🙂
Reply
admin December 17, 2018 at 8:29 am

Dear Manas,

You are welcome to a healthy debate. I welcome every viewpoint however different it maybe from my beliefs. The problem with traders is that their beliefs change within minutes if they see a slight loss. I stay committed to my beliefs because I have seen they pay off finally. I am not much concerned about day to day notional loss or profit or even actual loss over a month as there is always a next month to make money. I do not have to be right in every trade. If a trade foes wrong, we accept being wrong and move on. Focus should be on the right trades. We already know what the loss can be from the wrong trade. I understand this kind of thought process may sound strange to someone new here, but this method has been making money consistently.
Your views are welcome.
Cheers.
Reply

dev December 14, 2018 at 2:45 pm

Sir, I think the time for gear up for IDEA swing.

ForexFury July 4, 2019 at 12:58 am

I’m delighted with your considerate method, we should
link up some point.

Manas December 14, 2018 at 9:39 am

Dear Pramod…a friendly piece of advice, if you are in a position to listen

1. If a stock with good ‘value’ has reduced in ‘price’ because of high market uncertainity/volatility, ‘price’ is bound to mean revert to the the value once the volatility fizzles off. M&M is the example here. 30+ brokerages have given a buy call when it was trading around 760 and i couldn’t agree with your reason to buy put when it has fallen to a low of 694 because of election uncertainity

2. Our decisions may not be right always and ss traders, we should periodically adjust our positions when things don’t go as we expected. We should give ourselves a healthy room for error and we should believe in our conviction rather than keeping hopes on SGXNIFTY or DJIA. It is similar to putting a candle in the middle of air and hoping that there won’t be any wind. In my opinion, SGXNIFTY is the most phudhu parameter

Thanks,
Manas
- admin December 14, 2018 at 10:26 am
  
  Dear Manas,
  
  Thanks for sharing your thoughts. I appreciate any good advice and you are welcome to post your views here. Those views will provide a different perspective to the readers.
  
  If you have been following this blog fr sometime, you must have noted that it is all about doing things differently than most than most buyers do. It is a method of selection, deciding the strike price and taking a trade. It works few times and fails more times than it succeeds. Still it makes money for me. I am not overly concerned if few trades go wrong as long as one or two of them go right.
  What if M&M has gone wrong. Any trade can go wrong with all the right analysis. Maybe I went wrong with the wrong analysis. Effect is the same. Money is lost.
  It is not that I am not willing to take your advice. The fact is that trades can go wrong for any reason and there is no point mulling over a single trade. We are here for a long haul, not for a day. Profit and loss will keep on alternating. I trust the method which has worked for us so far.
  
  Once again, thanks for sharing your views. Looking forward to your active participation here.
  - Uwaraj December 14, 2018 at 10:50 am
    
    And we do enter the trade with premium paid as our SL. So, that’s our healthy room for error. If one is not willing to get-in with higher premium and keep low risk profile then one can move to next strike or wait for a pullback to enter. Our conviction lies with selection process.
- Ravi kumar December 14, 2018 at 10:42 am
  
  Manas,
  
  Can you please share your strategy, if you one?
  - Devendra December 14, 2018 at 12:27 pm
    
    Welcome to only Profit making zone in the stock market:-)
    
    Here one will make ONLY profit. Tossing the coin has 50% probability of winning. Here with the same logic, even if 25% stocks ( I’m not considering 50%) move in predicated direction, will cover rest 75% stock’s premium and on top will get some profit. So in the end one will be in profit.
    For this Key is strike selection and profit booking (moving to next strike) ONLY when one is in huge Profit(5-10 times of premium paid).
    
    All the best !
    - admin December 14, 2018 at 12:34 pm
      
      We must be thankful to the market for whatever success we have had so far. The facts bear out that the method actually works. In 7 months, only 31 trades earned profit out of a total of 99. The profit through these trades stands at a little above Rs. 590000. Who are we to complain with such results?
      Some trades will surely go wrong. But trading and life in general is about winners not losers. Let us not lose our focus.
      Thanks for sharing your views.
  - KV Rao December 15, 2018 at 7:30 am
    
    you can attend Promodji’s seminars. Visit
    https://optionsnext.com/blog/
    for details
Manas December 14, 2018 at 11:55 am

I primarily scalp intraday futures and write monthly options/covered calls. So my line of thinking may be different from that of an option buyer but i got intrigued in option buying seeing pramodji’s answers in Quora. I recently started option buying and wanted to improve my knowledge from discussions here. I think that’s why as traders we are all here to improve ourselves

I’m here for a healthy debate though 🙂
- admin December 14, 2018 at 12:11 pm
  
  Like I said earlier, you are welcome to share your views any time.
- Rohan December 14, 2018 at 3:09 pm
  
  Dear Manas,
  M&M was not down due to election result. It was down to auto sales figure 🙂
- admin December 17, 2018 at 8:29 am
  
  Dear Manas,
  
  You are welcome to a healthy debate. I welcome every viewpoint however different it maybe from my beliefs. The problem with traders is that their beliefs change within minutes if they see a slight loss. I stay committed to my beliefs because I have seen they pay off finally. I am not much concerned about day to day notional loss or profit or even actual loss over a month as there is always a next month to make money. I do not have to be right in every trade. If a trade foes wrong, we accept being wrong and move on. Focus should be on the right trades. We already know what the loss can be from the wrong trade. I understand this kind of thought process may sound strange to someone new here, but this method has been making money consistently.
  Your views are welcome.
  Cheers.
dev December 14, 2018 at 2:45 pm

Sir, I think the time for gear up for IDEA swing.
ForexFury July 4, 2019 at 12:58 am

I’m delighted with your considerate method, we should
link up some point.

share

December 2018— Option Buying — Day 11