Yesterday NIFTY decided to make a down move.
Slowly but surely it kept moving lower throughout the day and the speed increased in the last hour of trading. At one point there was some partial recovery but finally it ended up 82 points lower.
Let us not forget that even after yesterday’s decline , NIFTY is 347 points higher than it was on June Expiry day.
And we have selected all PUTS this month.
Apparently that is not the way to make money in a rising market.
Like I have written earlier, NIFTY gains are concentrated in few stocks only. Rest of the market is weak. Our selection process is based on looking at strength or weakness and then taking a trade decision based on the likely volatility of the stock. The results of this month prove that this method works quite nicely.
Let us see how various selection performed yesterday.
BHEL : Again down. Made a new 52 week low at Rs. 64.60. PUT 67.5 is now nicely in the money. High price for the day was Rs. 4.00. I am of the opinion that one can now book profit in this trade. It is another matter that it may still go down or reverse.
BHARTIAIRTEL : Yesterday it did what I was expecting and waiting for. Made the fresh 52 week low at Rs. 344.80. Now PUT 360 is in the money. We have to watch it carefully. Any price reversal will take away the value fast. At the same time, another move like yesterday will make it much more profitable. Let us stay with the trade for a while.
RELCAPITAL : From a high of Rs. 370.20 to a low of Rs. 334.30 on the same day. Ended up lower by 9%. This is the kind of trade a PUT buyer is looking for. PUT 360 moved from a low of Rs. 9.35 to a high of Rs. 33.40 . The patience with the trade over last few days finally paid off today. I would have suggested to get out of this trade and move to PUT 330 ( out of money option ), but the premium for that is Rs. 14.20. That would be leaving too much money on the table. So we do what we did in case of UPL. If the PUT goes up in value, we stay in the trade, otherwise get out at Rs. 26. We shall try to find fresh opportunity 2-3 days before expiry of contracts.
TATAMOTORS also made 52 week low at Rs. 250.50. PUT 250 is not yet in the money option but has become a profitable trade.
Among other trades, HINDALCO added on Friday ( June 13 ) and HINDPETRO added yesterday are doing fine after having gone slightly wrong. We stay with these.
Among the three Banking Stocks PUTS, all of them did better yesterday. ICICIBANK went down to Rs. 256.50 during the day which is just Rs. 1.5 shy of its 52 week low of Rs. 255. So it would be worthwhile to wait with this trade considering the inquiry and going on leave of CEO. SBIN and PNB too moved lower. Only I wish that PNB do it faster.
With all that happening yesterday, our trades now show this picture:
A profit of Rs. 118161. On a risk capital of Rs. 101885. Out of this the last two trades could be taken out of the profit booked on UPL. Hence the capital actually remains what it was a day earlier i.e. Rs. 84735.
So it is time to be watchful. Let us try that this profit increases if the market gives us the chance. In case the trend reverses we need to protect the profit by suitable exits.
Watchful in HINDPETRO :
The trade was taken based on Crude Prices moving up and for the day the trade worked.
Yesterday Crude Oil prices went lower considerably. By the same logic, this trade is very likely to go wrong today. What would happen tomorrow is unknown but for today this trade is not doing us any favors. If appropriate exit is possible it could be taken. Otherwise it is a maximum risk of Rs. 7875.
Last Few Days :
This week has shown us how things can turn around in Option Trades.
At the end of day on July 10 we were looking at a loss of Rs. 42265.
Just after 4 trading days, the picture has changed to a profit of Rs. 118161.
It is a matter of keeping the belief and letting the market do what it does.
Response from the readers :
It is heartening to get good feedback from the readers. It is nice to know that some readers are applying the same methods to their own trades and staying with the right trades with patience. These are the same traders who were earlier getting out booking small profits. Like one reader has written in comments that he is into good trades in Jain Irrigation, Ashok Leyland etc. Do your own search and research too. That will give better satisfaction.
That was the whole purpose of writing. Taking your option trading to next level. I hope for some of the readers that journey to the next level has begun.
New Trades :
We are already in 9 trades. Let us manage them rightly. If profit is to come it can come from these trades itself. There is no need to run around.
Let us stay with the trades.
Stay cautious, 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.