On Monday, we saw volatile trades within a 200 point range.

Yesterday, it was more of the same but the range was reduced to 118 points. There was a sudden big down move at 3:00 pm which succeeded in keeping NIFTY on the negative side for the day. It was a classical bear trap. Just few minutes ago, NIFTY was near the high point of the day and came tumbling down. It is such situations which are impossible to explain. Anyway, explanations do not make money.

This fall of 47 points did nothing for us.

ZEEL was among the big gainers for the day. TATASTEEL went very high and then cooled some but damage has been caused to the option value. IDEA too conquered its downtrend for the day which was not good for us. Only SBIN among our trades made slight improvement.

Such days happen. We have to take them in our stride.

This is the position as on October 09.

From a gain of Rs. 168000 we have come down to Rs. 149000 in these two days. Let us remember that all profits are notional and all losses are real. Status can change really fast in option trades.

Last night US market closed flat. But we see Asia in green this morning.

SGX NIFTY is up 32 points. NIFTY is likely to open positive. But that was the case yesterday as well. So the reality is that we do not know which way the market will go. Same with our trades. We stay with the trades with conviction that these were entered with some conviction and those reasons have not gone away.

New Trade :

It is becoming very difficult to spot a good trade because of high volatility.

Premiums in volatile stocks are at such high levels that it would be very difficult to squeeze out some profit. The conventional market wisdom about Option Buyers not making money apparently was the outcome of such situation where traders paid very high premiums and saw them vanishing as the days went by.

For this trade, I am not going for very high volatility but expect that the trend will make the trade good.

ITC is down 12.59% over the 30 day period while NIFTY is down by 9.94%.

Over last 5 trading sessions, the stock price has moved lower by almost 10%.

We do not go for a very far away option but stay close to the current price.

Last traded price for PUT 260 was Rs. 3.90.

With market likely to open positive, there is a chance to get this Option for around Rs. 3.50. Any price between Rs. 3.50-4.00 is fine depending on the movement of the stock price.

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.