We closed the December Expiry trades yesterday with a loss of Rs. 47000. The month went from being very good to very bad for our trades. Overall the Index ended flat for the December Expiry month and we too landed flat on our backside for the month. Time to forget the hurt , get up and do better in January.
January contracts expire on January 31, 2019. So there is full one month ahead of us. We get 25 trading days this time. Not that we intend to stay in the trades that long but having a little extra time for the trades to work out is always better. So different from the thought that time is the number one enemy of the option buyer. We know that fact. It is just that we are focused on the right trades. Something which goes wrong does not concern us too much. We know the maximum damage it can cause.
Trades for the day :
Let us look at the gainers and losers over last 30 day period in NIFTY 50 stocks.
IBULHSGFIN tops the list of the gainers. Do we just go and buy a CALL in this stock. Easy does it. The financials specially NBFCs gained last month after the resignation of the RBI Governor and his replacement by the new incumbent. The understanding is that the borrowings by these companies will be eased now. Whether that actually happens or not is not sure but the stock prices have run up a lot. For the moment I am leaving NBFCs alone whether for right reasons or wrong.
We made one wrong decision last month in M&M PUT. ( Many wrong decisions were made, M&M was one of them)
It is giving all indications of a likely upside.
We stay with our small list of stocks most of the time, so we stay with M&M but this time with a CALL option.
Looking at the IV of the CALLS for January, we see that this is around 22-25 range. Just on this score, I am giving a miss to this trade at least for the present.
INFY CALL 700 is a good choice. Only the price of Rs. 13.00 ( on yesterday close ) is a deterrent. But the prices are determined by the market. We can take it or leave it.
INFY CALL 700 at Rs. 12.00-13.00 is my choice for a trade today.
In the losers list, SUNPHARMA tops the list.
It was the only stock option which gave us some money last month. Do we stay with it this time too?
It meets all the criteria for selection. Weak over 30 days and 7 days. IV of around 38 for the near strike PUTS.
We go for SUNPHARMA PUT 380 at around Rs. 6.00.
Another one that fits the bill is TATASTEEL.
TATASTEEL PUT 480 at Rs. 9.00 is my second PUT choice for the day.
These three trades for the day are enough to begin the new expiry month.
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.
Sankha December 28, 2018 at 8:09 am
Nifty is trading in a broad range between 10400 and 11000.Now it is at the mid point of the range.Will it not be better buying puts /calls of stocks near higher/lower Nifty ranges – just a suggestion.Reply
admin December 28, 2018 at 8:18 am
We always have the wonderful option of not entering a trade when not comfortable with it. With that we surely do not lose any money. I would like more clarity on your suggestion.
Nathan December 28, 2018 at 11:00 am
There are two points to remember:Reply
1. It is true that on many occasions, there is no direct correlation between the index and the particular stock we are trading. So waiting for a particular index level to initiate a trade in a specific stock may not provide any edge or advantage to us. If you are trading index options, it may make sense, my personal view.
2. As option traders, period available for a favourable move is important.
Assuming we wait for the index levels as pointed out by you, there are many possibilities.
the prescribed trade may be already in profit by that time (missing the opportunity)..Or
we may get the options cheaper but the time remaining may be less for the underlying to move in our favour.
You may remember, many times, the underlying moving in our favour just after the expiry day.
So one has to decide when and at what price a trade has to be taken.
Mahesh December 28, 2018 at 9:08 am
Sir.. Tata steel might go up.. it is stressed lot.Reply
vishal agarwal December 28, 2018 at 10:19 am
Sir for Bharti Airtel trade you mentioned that when stock gaps up and we want to buy put, we wait for it to start reversing. Do you think same applies to sunpharma and tata steel and we should wait right now to take the trades?Reply
admin December 28, 2018 at 11:22 am
You are right. Waiting for some reversal is better. I would go for SUNPHARMA PUT 400 at current price. This would give a better opportunity to succeed. The risk is a little higher. Instead of Rs. 6.00 it now becomes Rs. 7.60-7.80. Otherwise no trade.Reply
Nathan December 28, 2018 at 10:39 am
Good Morning to all !Reply
So far, I have either missed one of the well performing trade Or
took large positions in some of the trades.
Net result : not positive, as expected.
For me, the need is to be more disciplined.
This new series, I am determined to be more disciplined.
Bought TATSTEEL 490 PE (instead of 480 PE) at 9.00 as TATASTEEL is moving up today.
There is sufficient time in this series..Let the market decide what to give .
Watching SUNPHARMA and INFY for now.
Will enter today or may wait and enter after watching it for some more time.
I am not in a hurry..but watching closely.
admin December 28, 2018 at 11:23 am
viki December 28, 2018 at 10:56 am
Sir. Entered Sunpharma@5.75 and Tatasteel@7.05. As you said, we are the traders and let the market decides the outcome.Reply
Last couple of months Nifty moving in a zigzag manner. Near term Nifty CE and PE s are trading around 100 rupees premium. Why don’t you consider those options?
Nathan December 28, 2018 at 11:05 am
Bought SUNPHARMA 390PE (instead of 380 PE) at 5.40Reply
Placed order for INFY 700 CE at 12.90 and waiting..not going to chase this one..will wait to enter later, if today’s order is not executed.
With talk of some buyback, INFY is likely to go up..let us see.
Sudheer January 19, 2019 at 3:25 am
May I know how did you short list Infy? There are other stocks in the gainers list but you chose InfyReply