This blog was started in January 2018 simultaneous with my first F&O Workshop at Bangalore.
What started as something random is now sought in anticipation by many sincere readers everyday. I try to post some content on daily basis but it is not always feasible. The support from the readers has been tremendous and they stood by me even when the trades were going wrong.
In March and April Series the theme was that picking stocks for trading was not very complicated. You do not need expert advice for that. Everyone can do it right. For this two month period it was demonstrated through the selection process that success could be achieved through very simple methods.
In two months, 28 trades were selected out of which 16 were right and 12 had gone wrong. If Futures were traded, these selections would have resulted into a profit of Rs. 363000.
For those readers who are new to this site, here are the links:
It was established that making selections for trading was simple.
There were requests from the readers that I should use the same selection process and apply it to Option Buying.
Not an easy thing to do.
It was a challenge. From May series we talked about Option Buying only.
Conventional wisdom was against us. Most of the options expire worthless. Option Buyers never make money. We had to work against the market bias.
Thankfully, our method worked and the markets obliged. In 7 months so far, we have been on the losing side in just one month. The loss was big, almost Rs. 100000 in August. It was followed by a profit of Rs. 430000 in September. In November, the profit was minuscule but any small profit is better than a loss.
How To Trade Options Profitably ? :
What follows here has been already written multiple times. It is mainly for the new readers.
Make selections based on strength and weakness of a stock.
See that it has good volatility.
Select an appropriate Strike Price which appears feasible based on the volatility of the stock.
Prefer 52 week high or low stocks.
There should be decent trading volume for the proposed strike.
Enter the trades based on above parameters and leave the rest to the market. We know that our loss can not be more than the premium paid. That part is already taken care of. Focus on the trades that are doing well. Do not get out of a good trade too soon. Let market reward you fully for your good selection. It is not easy to do, but without the patience in good trades, we shall never achieve our goal of good profits.
For the selection process detail here is the link:
Example of Waiting :
I had bought YESBANK PUT 190 NOV 2018 at about Rs. 18.00 on October 30. The stock kept moving up and few days later my PUT was worth only Rs. 6.00. At this stage, I bought another lot at Rs. 5.80.
Saw it go down to Rs. 1.40.
Did not get out at this stage. Most of us do some salvaging of capital and consider that we did the smart thing,
Trade turned around and on expiry day the stock made a low of Rs. 146.75 and PUT 190 touched a high of Rs. 43.00.
For the record, I exited from one lot at Rs. 13.00 on November 16 and waited with one lot. Again it went down to Rs. 1.70 before the stock price started moving down in the last 4 days to expiry. The second lot was exited on expiry day with a good profit.
Such incidents happen repeatedly and we need to take benefit of such moves. Our June series had many similar situations.
We have to keep the faith in the markets and our method.
Enjoy the Sunday. With update on how to trade, we shall be back to active trading tomorrow as the new week begins.
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.
Tarun December 2, 2018 at 3:33 pm
Shaleen Chhajer December 3, 2018 at 8:40 am
Thanks a lot for taking time and helping us out. I have never seen anyone explaining Option trading so beautifully.Reply
velavan December 3, 2018 at 10:46 am
How did you choose the last month , end of the month stock picking (3 PUTS ) which reduced all the lossess incurred ? Why these were not picked earlier in the month ?Reply
How from the trader point of view to pick such stocks , Even the basket is already RED.
admin December 3, 2018 at 11:25 am
The reasoning is given along with the selections. As to why they were not selected earlier– Either I did not notice the move or the premiums were very high. I do not get the meaning– The basket is already RED. Please clarify.
velavan December 3, 2018 at 9:54 pm
RED i meant , it is in loss – we used to call GREEN as gain ( AS shown in some of the stock portals)Reply
admin December 3, 2018 at 9:59 pm
I understand RED. But our selections are not in the red. Sunpharma trade alone has seen to that. Today, Titan too has gone right.Reply
Anyway a minor loss on a single day does not set alarms ringing. We are in for positional trades not for day trades.
velavan December 3, 2018 at 10:12 pm
i was talking about the last month end as RED ,when you have suggested new trades. thanks sirReply
admin December 3, 2018 at 10:22 pm
Ok. Got your point. Taking the trades at that point was important. Let the past losses not spoil your judgement. Keep on trying with your trusted method. In June similar situation had occurred but with a very good profit in the last two days.Reply
That is the beauty of options trading when it goes right.
DIVYANK December 4, 2018 at 11:21 am
Sir, then we should take more than half of trades in the last week of expiry only to get cheaper premium with which we can buy more stocks puts with more risk to reward because either way we are losing premium in the end.Reply
admin December 4, 2018 at 12:24 pm
Trades are to be taken as we see the opportunity. Show me a trader who can sit idle for even one day. We never know when HINDPETRO will happen or for that matter when SUNPHARMA happens. Timing the trades is impossible. If we are able to get the timing right, it is fine. Let us not lose sleep over it.
Anand Kumar December 4, 2018 at 8:51 am
One suggestion. Many a times, a new visitor keeps asking the questions, you have answered multiple times. The popular being, what’s the method you use to select the stocks and which strike price.
For that, you can write a post or use this post and make it sticky like how your events always shows up on top. Then any new visitor, can directly look at the method and avoid asking same questions.Reply