We are back to trading on Monday morning.
The last week was a one way ride down and since we were holding 5 PUT trades, it was a wonderful week for us. Biggest part of the notional profits comes from HINDPETRO PUT 240 thanks to decision by the Finance Minister to put additional burden of Rupee One per liter on oil marketing companies.
Most of the readers have got out of this trade and we need a new trade to replace this one.
Before taking a trade, a word of caution. There may be some recovery after a continuous fall over last 4 sessions. Whether the recovery is sustained or not is something we do not know.
Volatility is at its highest levels. That has already made Options very expensive.
We just can not go on buying costly options and then see volatility going down and losing premium even if the stock price moved down. We have time factor working against us all the time. Add to that the risk of reduced volatility which makes life more difficult for us.
Do we go for CALLS ?
I tried to look for CALL trades. In the present market scenario, I could not find any promising trades.
Do we go for PUTS ?
Almost every stock looks weak. It is a problem at plenty. As already stated, heightened volatility has caused the option prices to go beyond reasonable levels. A good alternative would be to wait for one or two days.
Cues From Asia:
As of 7:40 am, the signs from the Asia Markets are on the negative side.
The same trend is reflected in SGX NIFTY which quotes down by 37 points at this time:
If the trend actually continues for a while, our current trades may do better. Let us hope that it happens.
If we do have to look for a trade, I would look at SBIN.
The stock was staying in a range before cracking 4.8% on Friday.
It has been slightly weaker than NIFTY index over 30 day period. As the current decline is mostly led by financials, SBIN too may finally follow the trend and go down.
PUT 240 @ Rs. 4.00-4.50 ( with some luck we may get a lower price too) looks good to me. The 52 week low is Rs. 232.35 on March 23, 2018. We look towards the stock price breaching this level. Maximum risk in this trade is Rs. 12000-13500 as Lot Size is 3000.
With the other trades also we have to be cautious while waiting for further profits. 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.