It is amazing how simple methods and strategies work most of the time.

It is equally amazing how nobody bothers to notice this fact.

Simplicity does not have many takers among option traders.

We can not do anything about it. Let us stay on our chosen path to profitability.

In my post yesterday about the new market highs, it was pointed out how the top 10 heavy weight stocks have not done too well as compared to NIFTY.

RELIANCE — 18.08%


TCS ————- 28.66%

HDFCBANK — 39.25%

KOTAKBANK — 49.03%

INFY ——- 50.75%

ITC ——— 52.74%

ICICIBANK — 78.56%

LT —– 95.26%

How much did NIFTY gain in 365 days — 53.19%

Our Strategy:

We sell 2-3% out of money PUT options for all these 10 stocks ( 1 lot each ) and BUY 10 lots of NIFTY PUTS, about 4% out of money.

The logic is that most of the time the heavy weight stocks would outperform the index.

That is what normally happens.

NIFTY PUT will work out under an extreme market fall situation and prevent a very big loss.

Reality usually turns out to be different from the assumptions.

We have seen that outperformance by the heavy weights has not happened over last 1 year.

In fact, there is a serious underperformance.

How did it affect the strategy performance?:

Let us look at the numbers.

Since we are comparing for last 1 year, we take the numbers from November 2020 onwards.

The profit is Rs. 408608 with 1 losing month out of 9 months in which trades were set up.

With a capital requirement of around 14.50 lakhs, this return works out to 28.18% in 9 months or 37.57% per annum.

Quite a reasonable return when the top stocks have not actually done too well.

October 2021 series trades too are doing well but let us not count that. A profit is not a profit till it is booked.


Simple things work.

Profit comes from having a method, belief in that method and continuing with that.

Losses are a part of the trading process and have to be faced from time to time.

Enjoy the Sunday.

Be back tomorrow for the trading day.