We enter the last trading day of the week.
NIFTY went up again yesterday but there was no steam in the rally. Experts are not likely to agree but that does not matter. The top weighted stocks are not gaining momentum. Till they start moving up, we have a chance to cash some of our PUTS.
Experts are happy that NIFTY closed above 10600. As if anyone made money.
Now the next target is 10700, then 10800 and so on. It may happen for all we know. Or the market may do what it has been doing since last month. Open high and then go down. Let us be ready for the roller coaster ride. Talking about the likely NIFTY moves will not make money for us. Trades make money, talk is free.
Today our idea about IDEA came through. The stock went to a low of Rs. 36.25 during the day and the PUT 40 traded at a high of Rs. 4.00. Ended the day at Rs. 3.35.
SUNTV also decided to move down. It closed below Rs. 600 after a very long time. Let us hope its downward journey continues.
TATAMOTORS went quite high initially but then gave up all the gains. RELINFRA went higher.
MARUTI, M&M, INDUSINDBK all added a little bit to the loss.
But generally one good trade is enough to counter few bad ones. That job was ably done by IDEA.
This is how the position looked at the end of day.
The loss is now brought within a reasonable limit. But still it is a loss. I wish that TATAMOTORS and SUNTV would do what has been done by IDEA 40 PUT i.e. to show some good profit.
New Trades :
If we look at NIFTY stocks, the following 4 stocks are the biggest losers over the 30 day period.
CIPLA and SUNPHARMA are the two from Pharma Sector. IBULHSGFIN and YESBANK are having problems of their own. All these stocks would make for good choices for buying PUTS.
They are volatile, well traded and look weak.
Yesterday I had written that no more trades are being suggested as protection of capital is also a priority. Notwithstanding that statement, trading is about assessing the risk and taking a trade.
For the time being, I am not taking a trade in YESBANK as I already have the INDUSINDBK trade. Out of CIPLA and SUNPHARMA, my choice is CIPLA as it is very close to the 52 week low of Rs. 507.20 made in May 2018.
CIPLA PUT 500 at Rs. 5.50-6.00 has a maximum risk of Rs. 6000 and can do well.
IBULHSGFIN is hugely volatile. It is currently trading at Rs. 803 and moved sharply lower yesterday after doing nothing for the last few days. We shall go for a PUT about 8% away. That would be PUT 740.
It traded for Rs. 16.75 at close yesterday. With a likely positive open, it may be possible to get this trade for Rs. 13-15. Lot size being 500, maximum risk is Rs. 7500.
It goes without saying that there will be a lot of volatility. The trades can go wrong and the entire premium can be lost. So do not venture into the trades if you do not have the appetite for risk.
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.
Sachin November 16, 2018 at 10:17 am
IBULHSG put is now trading at 26..can we enter now, as couldn’t enter in the morning.
Also, for Idea, is it good to enter at 38PE at 2.25 now ?
admin November 16, 2018 at 10:34 am
For IDEA. I would suggest 37.5 PUT. This is a regular strike. Other strikes were recently created. More volumes are seen at 2.50 intervals.
Can enter IBULHSGFIN at Rs. 25 but the risk increases.
vishal agarwal November 16, 2018 at 12:13 pm
Congrats Sir! Great pick Ibulhsgfin. Double in first hour itself. Although I checked the market late so could not take the trade.Reply
AN November 16, 2018 at 12:24 pm
Any suggestions for Maruti Suzuki why it crashed so much from about 10000 to 7500Reply
Azar Shaikh November 16, 2018 at 3:48 pm
Booked Relinfra 340 then try moved to 330. But then I saw there is difference between bid and ask price. So waited for a while but finally did not enter due to suddenly spike in premium.
How you suggest how to handle such
Alok Chaudhary November 16, 2018 at 4:38 pm
I also booked reliance infra 340 put at 18 as the stocks are very volatile nowdays, that example was set by idea to avoid this is booked reliance infra.Reply
vishal agarwal November 16, 2018 at 9:43 pm
Agreed. Same thing happend with tatamotors, hit 8 then back to 5 -5.5. Tatamotors stuck in a range. Can try to enter on Mon again though. However question for Pramod Sir, as we are already past half of the expiry, premiums will fall faster how do you plan the trades going forward?Reply
We can’t wait too long for a stock to work.
VISHNUPRIYAN J S November 17, 2018 at 12:47 pm
Sir, Seems like Yes bank will work wellReply
divyank November 17, 2018 at 1:07 pm
Sir If we go on data: 1 million on 40 , 1.7million on 42 new puts are written. 5millon on 42.5, 6million on 45strike calls are existing if IDEA decides to go up now, there may be huge short covering take place resulting in sharp up move.Reply
admin November 18, 2018 at 8:48 am
Even if goes up we do not lose more than our premium paid.Reply
I hope most if the readers have already cashed out. Otherwise it is just another trade with a maximum loss of Rs. 7000.
There should be no anxiety.
vishal agarwal November 18, 2018 at 2:56 pm
Yes Sir, tried to move down the strike. Booked from 40PE at 4 on thu but waited for a bounce in stock to enter 37.5PE. Did enter on fri at .9 but since the stock moved far away from 37.5 to 43 decided to exit at minor loss at .65. Idea may give us a better chance to enter again once the operators are done pumping the stock/ shorts covering.Reply
Chirag November 17, 2018 at 2:59 pm
Just sharing something I found on web….A hedge fund operating by the name of optionseller.com has gone bust trading short option on crude oil….when a professional hedge can go bust….what chance does a small retailer has in option selling…..it got me thinking….Here the linkReply
vishal agarwal November 18, 2018 at 3:12 pm
Sir I think we should consider the OMCs stock for PEs now. Given that they have gathered enough juice in the latest rally from the lows on back of falling crude. Given the volatility in crude prices, these stocks have again started to fall. Anyways this is not 2015 when oil producing countries were not united and could not come to a consensus of cutting the oil production. These countries are better cordinated now and can announce production cuts to support prices. Also from the demand side countries like India and China are still hungry for crude. Given yhe winters are approaching even the demand from US/ Canada etc. will also increase from here.Reply
All this make me believe that the current fall in crude prices are temp and the gain in omc stocks should be used as selling opportunity. Your thoughts please and suggestion on which one among BP HP and IOC is better gor PE?
MADAN MOHAN M November 18, 2018 at 6:45 pm
Sir, Relcap also started showing downward movement on Friday along with DHFL, India Bull Housing. ZEEL tried to reach 470 but could not sustain there more than 30 minutes. Best RegardsReply
Madan Mohan November 18, 2018 at 9:06 pm
Lessons learned but hard to digest. In this volatile market, people can lose money on either side of the trade. Once clicked the button means we committed an expense (for options sellers, it is a liability) and that is it. If we keep on hoping profit out of each trade on each day (or keep on fearing of loosing money on each day) means we are prone to make more mistakes and loose more money than we committed.
It is at the time of pushing the button we should take a call. Once your pushed the button means you committed to loose it entirely. Most of the times we start analysing the the trade after entering the trade. If Adimin does not give a trade, we ask why he is silent, Once he gives a trade we enter it blindly and then later we start hammer our brains. Most of retail traders like us, suffering with this mentality. It is high Time to learn how to convert our dumb money into smart money by sticking with basic simple principles learned form our guru. One big rule i am still struggling to implement: how to stop a trade if i am not ready to loose it entirely. Ultimately luck also plays its own role in our trading business. My 2 cents.Reply