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.
New Trade:
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.
Comments
Ankit October 8, 2018 at 8:49 am
Sir, despite so much fall in Nifty, Wipro was able to hold its ground. Request you to put some light on Wipro Oct 340 CE.
ReplySaket October 8, 2018 at 10:34 am
It doesn’t have enough liquidity in F&O section currently. For 340 CE, hardly see a volume of 40.
ReplyAnkit October 8, 2018 at 4:24 pm
Yes you are right Saket. Also, it fell today. Glad haven’t took the trade 🙂
ReplyTeja October 8, 2018 at 10:01 am
Sbin is going up. Currently @ 262. Do we play with sl or loose all the put value?
Replyadmin October 8, 2018 at 3:37 pm
Our job is take the trade. After that stop worrying about it. In this kind of volatile market no one knows what is going to be the final outcome. And if you are a type of trader who thinks of stop loss with such small movements, you are not likely to succeed in option buying. It needs patience and nerves of steel.
ReplyCheers.
Rahul October 8, 2018 at 5:01 pm
Sir, your words are very powerful. You are right and I agree, once we take the trade, its all about letting it play out. We spend too much time, energy and effort in getting in and out of trades that a big win, followed by bites and pieces of losses, ends up putting a big negative in total. Rather than that, your approach of taking time to spot trades, and go long is much better and easy on the nerves. As we are sure of max possible loss. I took my first trade inspired by OptionsNext knowledge – SBI.
ReplyMEENAKSHISUNDARAM October 8, 2018 at 3:19 pm
SBI 240PE BOUGHT AT RS 3.50 CHEAPER THAN THE PRICE QUOTED. WHY THIS TURN OF EVENTS.?ANY RENAISSANCE HAPPENED IN PSU BANKS?
Replyadmin October 8, 2018 at 3:41 pm
i think your momentary happiness has now given way to despair. In volatile markets we should necer be happy with our trades till they are concluded. Reasoning for the market behaviour is a futile exercise. How can anyone explain the moves — Down 100 points, then up 85, then again down by more than 100 only to recover to +70.
Stay cool and calm. If the trade has to work out, it will.
Cheers.
ReplyAvinash October 8, 2018 at 5:25 pm
Sir,when is next workshop at Pune.
ReplyNaren October 8, 2018 at 6:07 pm
Please start telegram group, it would be more easy to manage.
ReplyTeja October 8, 2018 at 9:04 pm
Sir, how do you decide what is the reasonable price to buy the option. Like in above post you said 4-4.5.
ReplyDinesh October 8, 2018 at 11:39 pm
A student said to his master “you teach me fighting but you talk about peace.how do you reconcile the two? The master replied ” it is better to be a warrior in a garden than to be Gardner in a war.
This sums of Pramod sir Wit.
Replyadmin October 9, 2018 at 7:35 am
Thanks for the kind words. You call it wit, I call it the experiences gained from the situations faced.
As regards fighting, we all know that the best fight is the one which we are able to avoid. Any fight against the market is unwinnable. So stay with the trend.
Cheers.
Reply