This series about a strategy with the banking stocks was started from November 2019.
Yesterday we closed the trades of September Series. This was the third set up in September and a loss was booked in this. Before that we had booked profits twice in this series.
Let us look at those numbers.
After giving back some part of the profit earned earlier, the September Series ended with a profit of Rs. 13458.
Performance Since November 2019:
The basic principle here is very simple. Good stocks out perform the index most of the time. We are selling PUTS in 3 top stocks of the Bank Nifty index and hedge our risk by buying PUTS in Bank Nifty.
As these 3 stocks carry around 65% of the index weight, their movement causes almost same effect in Bank Nifty. The difference makes profit or loss.
Simple principle, simple execution and not much action is all that is required and fortunately it works.
Let us review the results since November 2019:
The returns over a period of 11 months have been good and the two losses were not too big to disturb the overall position. The margin requirement of around Rs. 5.00 lakhs ( it was lower before February 2020 ) makes the returns close to 50% for the year.
We shall continue with the strategy in the coming months and see how it fares over an extended period of time.
Looking at the result never gives the true picture. It never tells us about the daily dilemma a trader faces. In August series, the trades were at a loss of about Rs. 200 a day before closing. The entire profit of Rs. 7453 came in a single day. In the same month, we had actually came back from a loss of Rs. 26000.
It pays to keep the belief in the strategy and let the results work out.
Keep it simple and it works.
I understand that many readers are trading this strategy. Some are doing it with some modifications from their side. I would like to get their suggestions about making further improvements to the strategy while still keeping it simple.
Please share your views through comments.
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Thanks for reading.