Yesterday, market opened with a bang and made a new high.
Within an hour of opening, it came down by 100 points from the high of the day and then moved within that range for the rest of the day with a negative bias. a look at the NIFTY chart tells the story of the day.
The new record high is 11856. 15.
Let us see how long this status is maintained.
Our Trades :
We had hopes from INDUSINDBK and RELCAPITAL.
One obliged and one did not. INDUSINDBK which had moved strongly up the previous day, did the exact opposite yesterday. It was down by more than 3%. The CALL 1860 came down from Rs. 19 to Rs. 5.85.
RELCAPITAL had gone down by 7% on previous trading day. It fell by another 12% yesterday. PUT 170 is now in the money by a significant margin. The stock price closed below Rs. 150. PUT 170 closed at Rs. 25.00. A little more downside may see the stock going to Rs. 140 level. That would be the time to look for an exit.
This is the only trade which has gone right in this month. But what else should we expect when market is making record high in 2 out of 3 trading days in the week. It was a blessing from the market which we should accept with humility.
BHARATFORG too moved down to Rs. 500 level. A down move by 6% would bring it At The Money. But will a 6% move happen within remaining 4 trading days? Let us leave it to the market.
The position of our trades has improved considerably though still in loss.
This is a good improvement from the loss of Rs. 42000 two days earlier.
Let us hope that few more of our trades do well over next 4 days.
Would Buying Calls been a better way ? :
It is human nature to have second thoughts when things go wrong.
Many readers have pointed out that keeping in line with the market trend, we should have bought CALLS.
Option trading is a different ball game.
One of our readers Mr. YOGI had bought CALLS. He was very vehement about his trades. We reviewed those positions last week and here is the review for this week:
The status as on April 18, 2019 :
The loss is reduced from Rs. 44000 on last Friday but still it is a loss.
It shows that buying CALLS or PUTS does not matter. What matters is being right in the trade.
Enjoy the weekend but keep visiting here everyday including the holidays.
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.
Dev April 19, 2019 at 10:58 am
The single thing which favours put buyer is the fear of people while selling .It all takes 3-4days for sellers. 🙂Reply
Azar Shaikh April 19, 2019 at 12:55 pm
Sir you taught us to Protect Profit from winning trade by moving to next strike price. But You still holding 170PE Any specific reason sir.Reply
vishal agarwal April 19, 2019 at 1:27 pm
Hey Azar, I think it is a personal choice to move or not based on risk capacity. Plus a little bit of past experience. I have noticed that when a huge fall happens for the day the lower strike options have huge time value due to a spike in implied volatility. The next day even if the stock falls by some points then the lower strike still lose some premium since it is OTM and this is more prominent near to expiry. In this case, 150PE is at 9.8 which is all time value while 170PE is 25 in which time value is 5. If by expiry the stock stays around the same level or even if it falls till 140, 150PE will not make money however, 170PE will be worth Rs30. I personally feel through this blog we have learnt to get into trades based on the specific method but getting out and managing the trade is based on an individual’s risk capacity. There is no right or wrong method. Same method of moving to next strike can be right at one instance and wrong in another.Reply
Azar Shaikh April 19, 2019 at 2:16 pm
Thanks vishal for explanation.Its new learning to meReply
Chirag April 19, 2019 at 3:36 pm
One method I tried is the past in M&M and it worked…Whenever we had good fall in a stock and our put comes profitable…we can close the existing trade and can enter lower strike bear put spread….in this way even if there is any reversal loss would be very small.Reply
vishal agarwal April 19, 2019 at 4:43 pm
Chirag, you would need to have a lot of margin in that case. Here we are talking to people with capital up to 2 lakh.Reply
vishal agarwal April 19, 2019 at 7:11 pm
Our dear Relcapital is in FnO ban now. We will have to either pay more margin to hold the PE till expiry day or just square off and forget.Reply
Prabhu April 19, 2019 at 11:04 pm
I just learnt now that FnO ban is to limit participants from taking new positions but we can square off existing trades.
Does this have any impact on the stock itself? Does the perception change from Bearish sentiment?Reply
vishal agarwal April 20, 2019 at 12:41 am
Ban dries up the liquidity and thus number of trades reduce considerably, making the price discovery inefficient. We will see huge difference in bid and ask prices. Since new participants are not able to speculate the buyers might not be too aggressive in paying the higher price as these are essentially the option writers who are covering their position. However if the spot price falls drastically they will be forced to cover even at higher prices in panic. So it will be wise to place the sell order in the system to book profits since there can be sporadic instances where suddenly the trade gets executed at higher price.Reply
But there should not be any impact on the stock trend of this ban since heavy selling is happening in the cash segment.
Anand Kumar April 20, 2019 at 8:01 am
I never really understood how during FnO ban we call close the trade but cannot open fresh position. If we have to close, there must be a counter party who needs to buy it right?
Can you please help me understand this?Reply
vishal agarwal April 20, 2019 at 9:46 am
Hey Anand, the security reaches fno ban once the open interest reaches a limit. Due to which fresh positions are not allowed to be added. Now to reduce the OI, people who are already in the trade need to square off. So the option writer will square off the trade by buying the option while the guy who bought the option at the first place now becomes the seller. So when these opposite trades happen between existing contracts holders the OI starts reducing.Reply
Hope that clears your doubt.
Anand Kumar April 20, 2019 at 8:21 pm
Awesome, I never really thought of option writers!! That explains it. Thanks a lotReply
Gourav Basu April 20, 2019 at 12:54 am
I think we have to tweak our trading strategy as per the physical settlement mode. Waiting till expiry is going to be far more trickier in the upcoming months. The bid ask spread in Reliance capital was already significant on Thursday, considering 4 more days are still left till expiryReply
vishal agarwal April 21, 2019 at 3:21 pm
Sir aren’t your Thrusday Thrillers term reserved for expiry day:)Reply
admin April 21, 2019 at 3:25 pm
This time, the thrills came earlier.Reply
And by the way, brokers are making out this day as expiry day for us by asking for margins or suggesting to close the trade unilaterally in Relcapital put 170.
vishal agarwal April 21, 2019 at 3:48 pm
Not sure how much profit will be booken on Relcapital PE but it gave us enough material to discuss over the long weekend 😉 . Plus it updated us of the new rules. Lets try to bring up this issue on the right platform like Sebi, exchanges etc.Reply
Vishal Agarwal April 22, 2019 at 9:31 pm
Sir next month election results are to be announced. IV is very high. For the benefit of all readers would request you to share a post on your Nifty no loss strategy. I have worked it out like this:Reply
Based on today’s close prices, May30 expiry calls:
Buy 1 lot 10600CE @ 410 : debit 30750
Sell 1 lot 10700CE @ 360: credit 27000
Sell 1 lot 12000CE @ 210: credit 15750
Net credit of Rs 12000.
Zerodha will block around Rs 180000 margin.
Please share your thoughts.