Three days left to Expiry of Futures and Options Contracts for April.
Worries begin to haunt the Option Buyers. How long to stay in the trade? Whether to encash a profitable setup or wait for extra profit? Or just watch the profits being eroded next day as the price moves in reverse direction of the trade?
Who said Option Trading was easy?
Most likely I was the only person who said it.
Easy if you are the type who believes in leaving things to the market. Easy if you are the type who can bear with few small losses for one big gain. Easy if you are not scalping small profits .
Yesterday, we had discussed 4 Stock Option trades for the period till expiry.
This is what happened:
Reliance Capital 400 PUT :
Suggested Buy Price was Rs. 2.00. It closed at Rs. 1.35. A losing bet. Maximum loss can be Rs. 1500.
Bharti Airtel 390 PUT :
The stock closed higher than previous trading day. Still the PUT closed higher than the Last Traded Price. Increased volatility due to the results today. Can go either way after the results are announced.
Suggested price was Rs. 3.20. Last Traded Price was Rs. 4.35.
Tata Motors 330 PUT :
This stock did what it does almost everyday. Opened higher, went lower and then touched the day’s high. Gave up the gains in the end to close lower.
So the PUT gained slightly.
Suggested price was Rs. 2.00. Ended up at Rs. 2.55.
Vedanta 300 PUT :
Vedanta lost about 1% yesterday.
Suggested price for this PUT was Rs. 1.80 and it ended the day at Rs. 2.60.
None of the stocks made any spectacular up or down move. But 3 out of 4 PUTS gained in value on a day when NIFTY was up more than 70 points at some stage before giving up the gains.
We wait for a good move in at least one of the trades and it would be very good if two of them could oblige.
Would not add any other trade for the day. Watch these trades carefully.
Exit ? :
The real tough question. Markets can be volatile in either direction and all the notional profits could be wiped out.
I will exit if a trade has given at least 4 times the price paid for buying the Option. Or I will just book the losses.
Let us see what actually happens.
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.