What a day it turned out to be?
Many readers have commented that they had not seen such volatility ever. Probably those readers were not trading in the year 2008. Yesterday reminded me of 2008 when such volatility was normal. Your decision making capacity is impacted by the sudden volatile moves. We watch the moves and at times miss the opportunity on taking benefit from it. I believe this happened with many of us yesterday. The power to make wishes come true is certainly with us but using that power rightly is not easy.
A look at NIFTY.
It is the period in the middle of the day which worked for us. Yesterday I had hoped that at least 3 out of the 6 stocks in which we are into trades should be making new lows. How nicely they did it?
Beyond our wildest imagination. 5 out of 6 ( except BHARTIARTL) made the new lows. The new trades suggested yesterday , PNB and SUNTV also went on to create new lows.
It was a dream day for PUT BUYERS. A kind of day rarely seen. We are not likely to forget it in a hurry.
Even when NIFTY was up 100 points in the morning, this stock was not showing strength. It was moving down slowly. When NIFTY went down, this stock just crashed. At one stage it was down 35%.
PUT 1160 traded for a high of Rs. 353. When deep in the money, liquidity vanishes and the bid ask spread becomes bigger. Such moves are difficult to trade. Some readers haveposted in comments that they exited at Rs. 290 or 230 or at some other price. Well, congratulations to all those who made good money in these trade.
I am still in the trade. It can prove to be a wrong decision or it can turn out right over next 4 days. We never know what the future has in store for us.
I was very happy when it came down to Rs. 140 level. Previous 52 week low was Rs. 140.55. In no time, it fell to Rs. 124.10.
We know that deep in the money options do not have any time value. At this lowest price, PUT 150 should have a price of Rs. 26.00. I noticed that the BUY BID is at Rs. 28.00. It was too good an offer to be missed. I exited at Rs. 28.00, which happened to be the high price of the day. At the end of day, the stock came back to Rs. 140 and the PUT 150 to Rs. 11.35.
For me a wonderful trade, I had bought the option for Rs. 1.95.
We had taken this trade few days back. The price at that time was Rs. 410 and we anticipated 5-6% down move and had gone for PUT 390 at a suggested price of about Rs. 5.00.
The stock obliged immediately and fell over next two days to Rs. 360 to bring PUT 390 to Rs. 30 level.
Yesterday it went below the previous 52 week low and recovered from their to close near Rs. 336.
I have taken an exit from this trade at Rs. 53.00 ( Buy Price — Rs. 5.05) which is also the last trade price.
PNB and SUNTV also did exceptionally well at one stage and then recovered strongly. Those who booked profits did well. Those who did not, well, that is market. We may get another chance.
BHARTI and ZEEL ended up positive and the PUTS lost value. At one stage these were also profitable.
TATAMOTORS did well but this stock also recovered sharply from the new 52 week low.
Here is the chart for booked and notional profits:
I know it is mainly because of L&TF, but many of the readers have booked better profits in SUNTV, PNB and IBULHSGFIN. Overall, it balances out.
Just a snapshot of my two exits yesterday:
Let us enjoy the heady feeling for the weekend. It is surely a big relief from the brutally wrong trades in August. Like I have stated again and again, it is all about belief in the methods and sticking to your job. We did our part and the market in its own wisdom decided to reward us handsomely this time.
We wait for Monday with anticipation.
Reshmi P R September 22, 2018 at 9:20 am
Sir , I have l&tfh 120 pe at 5. And relcapital 320pe at 10. What do you suggest. Should I hold or sell on MondayReply
admin September 22, 2018 at 10:19 am
Wait for the market to decide what is best for you. I think this is the lesson learnt this month.Reply
Jayesh September 22, 2018 at 9:34 am
I did not trade much in this month as was not feeling confident due to a huge loss in last month but took few trades near expiry (i am glad that I was at least in few trades).
I want to know what was the reason behind not booking profit in other stocks? as it was down by 5-15% in a day and we are near expiry.Reply
admin September 22, 2018 at 10:20 am
What could be the reason of not booking profit?Reply
Simple. Expectation of more profit which did not come and the trend reversed. Still it is better than previous day.
Tharik September 22, 2018 at 11:00 am
I was lucky to take SBI 280 PE @2.80 and exited @25 during the volatile move… Missed out on RELCAP and L&TFH trades as I was short of capital at that time..
Took PNB 77.5 PE @ 1.65 during the beginning of month… Couldn’t exit yesterday due to liquidity issues .Still holding at 5rs with notional profit of 19k
Thank you Sir.. Without you, this wasn’t possible as I used to take out small profits and loss big earlier..Now things have changed psychologically to look for bigger profits and stay in the tradeReply
Ganesh Khalane September 22, 2018 at 11:11 am
I think there is more to come…..Reply
Mayank Vijay September 22, 2018 at 11:16 am
Sir was it a wise move to continue with positions in n fc’s? I mean i have never seen such vol, wouldn’t they definitely correct q bit after falling so much?Reply
admin September 22, 2018 at 11:43 am
We did not know what was to happen on Friday. Similarly we do not know what the future holds. Why be bothered about what we can not control.Reply
At the most the puts will lose some value. But if the trend continues we stand to benefit.
It is a risk worth taking.
Rajesh September 22, 2018 at 12:17 pm
I bought pnb 75 pe at 0.45 and exit at 7. But I feel bad not having ibulhsg, L&TFH and relcapital.Reply
Ravi kumar September 22, 2018 at 12:27 pm
What’s your view for below:
DHFL – root cause of today’s mayhem.. worth a PE?
IDBI & SBI- they both r lenders of brancrupt il&fs..SBI is even a share holder (also LIC..a majority shareholder in it)
Yes BANK, BajajFin & India bulls – all finance stocks which fell big time today.. worth a PE?
Options galore for Monday’s options!Reply
Andy September 22, 2018 at 12:37 pm
Congratulations to everyone who booked incredible profits yesterday!
More importantly, congratulations to everyone who stuck to the code laid out by Mr.Pramod Kumar – Belief and Patience.
The day of reckoning has brought cheers all around, but I am here to tell a different version of it.
For I am not one of the above, I really envy you – and envy is all people like me can do now.
Before you ask, yes, I did take up the trades suggested by Mr.Pramod Kumar in a scrupulous manner. I believed market will be in oscillatory mode and whenever the slightest of the swings happen I would take profit and reenter when the entry price is again favourable. This way I would benefit from the well curated trade list and also I would be one step ahead of my own Guru! A ‘real smart thinking’ indeed!
I do not feel shame in admitting my failure story. I do want it be known to every one. You may not hear such stories at least for some days as there is euphoria everywhere in the PUT option buyers circuit.
I exited the winning horses L&TFH, IBULHSGFIN and RELCAPITAL at the following prices respectively
on 17th and 18th September: 1.6, 16 and 8 with profits of 3600, 3750 and 5250. I thought when they dip again on 19th I would buy them. I could never get back into these trades again as the prices were not ‘attractive enough’ get in again. Even IBULHSGFIN was available in the morning for as low as 15 and I did not want to buy it again. Waited for it to reach 13. Waited only to see it getting to 300 and above helplessly and with no amusement to myself at all. Similar scene with almost other scrips that nosedived.
Short sightedness can cost fortune or at least prevent you from getting one. Mind somehow refuses to accept the Options Premium as Stop Loss. After August fiasco where everyone of us lost out, the mind wants to be too careful in counting pennies ‘unmindful’ of pounds lying nearby. Lack of patience and belief will certainly rub salt to the wound. This seems to have cost me dear.
I did book some profits with PNB and SUNTV (not at their peak); I am saying ‘some’ because Zerodha curiously rejects or does not want you to book profits when you want it; it misdirected my SELL orders as MIS orders. Panic sets in. You are not sure what to do. If your reaction time does not beat the market pace as things unfold, you don’t succeed. If your broker’s platform decides to have fun at this crucial time, you will almost never succeed.
Plenty of times ‘greed/fear’ factor has been discussed. Mr. Pramod Kumar has taken us through what he believes as a structured and disciplined protocol in this otherwise unpredictable market. I disrespected it at my own peril.
It would be great to have experiences like this from others.
Stories of missed opportunities are always lessons.
Stories of ‘so near, yet so far’ are much better insights for the entrants as well as the practitioners of this field.
Thanks for reading.Reply
admin September 22, 2018 at 2:07 pm
Thanks Andy for sharing your thoughts.Reply
I myself could not have expressed it better.
Probably your method would have worked in August and loss would have been a little less.But for big profits, patience in winning trades is the key. We could have got out at Rs. 10.00 in RELCAP on the first day and at Rs. 31 on second day. The wait gave Rs. 53 ( even 55-56 was possible) on third day. We had to do nothing. It is doing nothing which actually most traders are not comfortable with. One needs to learn and practice the art of doing nothing.
Once again thanks for sharing your story.
Azar September 22, 2018 at 2:52 pm
Sir not booked profit due to busy in office meeting. Hoping for Monday. but its looks like early Diwali.Reply
Madan Mohan September 22, 2018 at 3:29 pm
Some where it is said, when bulls come they come with a big noise, but bears come silently with fiercely.Reply
Ragav September 23, 2018 at 10:14 am
When the option becomes in the money by greater than 1 or 2%, it is prudent to move to the next strike (higher or lower) depending on whether it is a call or put option. Of course, when the market/stock is moving quickly as it did in Friday, moving to the next strike is not favourable as you have to bear a higher impact cost when paying the big difference between bid/ask of both strikes. When the stock settles down, you can move on to the next strike price.Reply
Gourav Basu September 22, 2018 at 5:01 pm
At the onset, I would like to congratulate everyone for their splendid profits. Sharing another story very similar to Andy. After the drubbing in August, was desperate to be in green. Had exited Indiabulls at 48 on 11th Sep and didnt re-enter/enter any lower strike after it went up by 80 rs on 14th Sep. Similarly, didn’t enter RELCAP and L&T FH as the stocks are pretty volatile and any wrong move could have almost erased the gains of this month. However, I have few questions to ask Pramod Sir. In Aug, when Yesbank 400 call had reached 12, u had suggested that the sensible thing to do would have been book profit and move to next strike. Why sir, then the same was not followed for RELCAP when it had reached 30? This is especially true for Friday as the premium for 390 put was stranded for a long time at 31 inspite of price downmove and only in the late afternoon did the price change to 53. Similar is the case for L&T FH. So I was just wondering if there was any thumb rule to follow that if the option premium reaches a certain multiple of the buy price (lets say 4-5 times) then we exit and move to the next strike? Thanks and regardsReply
Tharik September 23, 2018 at 9:50 am
I don’t think there is any thumb rule Gourav. Promod Sir was just asking the safe traders, to exit and move to next strike CALL or PUT, if we are conservative enough. From my observation, his trading style is never to get out on small profits (he is happy in taking profits when the script goes above 6 times the buying price, but still he would get in next strike prices if the risk is worth taking and minimal).
Please correct me if I am wrong .. Those were my observations. 🙂
Alok September 23, 2018 at 10:49 am
I had intraday trades in Suntv and PNB after reading your blog.
Suntv 640 put trade was from 3.6 to 6 and PNB put from 0.4 to 0.9. Both I had exited before the flash crash.
IBULHSG i had bought 1160 put last week at 6 and exited at 10 the next day due to liquidity and it has now taught me a solid lesson.
Have booked good profits intraday in HDFCBank, Nifty and BankNifty puts though!
Please keep sharing your wisdom.Reply