This is the NIFTY journey since inception
Traders tend to be short sighted.
Everybody now talks about the tremendous gain the index made in 2020. The big fall in March 2020 is forgotten.
Same about year 2008 and another dip in 2011.
Crashes and corrections happen from time to time but it remains a fact that over a long period markets move higher.
This is true of all major indices world over.
In the same 20 year period DJIA, NASDAQ, S&P, FTSE all have almost similar charts.
An option buying method based on the almost certain long term move in the index is the key to long term profitability.
The NIFTY index has given these returns (Data from NSE website)
The returns over last 5 years are 14.29% and since inception the number is 11.62%.
We plan to do better than these numbers.
We plan to do it in the simplest manner possible.
We plan to do it through OPTION BUYING.
This may seem absurd to some people who swear by option writing or selling options.
Let us leave aside our prejudices and pre conceived notions about options and approach the matter of profit making with an open mind and clarity of thought.
Before we go further, here is a very short story:
A herd of sheep was grazing in a pasture.
One friend asked the other – “Can you count the number of sheep in that herd?”
The friend counted quickly and came up with the answer – “These are 280 sheep.”
“Wow, how did you count so fast?”
The reply –” It was simple. I counted the legs and divided by 4.”
The people who count the legs and divide by four are the modern-day Option Traders.
They have made it a habit to do things in a complicated way even when simple things are plainly visible.
There are so many strategies going around for option trading to confuse and confound the novice and expert all at the same time.
We refuse to count the legs.
We do not look for the implied smartness.
We shall keep it simple.
( More in tomorrow’s post )
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.