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What To Do If Sold Short Options Are Losing Money

In this post you will learn that shorting naked (not-hedged) options will never bring profits and will always lead to losses.

I am getting to know from various sources that even traders who have done my course are shorting options naked, means selling without hedging.

When I wrote the email that VIX will start falling after the RBI results, some people thought that it is a great time to short options without hedge because in any case the VIX will fall and they can profit.

Well the whole essence of my course is that you learn how to hedge.

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7.86% Increase in India VIX

Nifty is stable, India VIX above 17 and has increased more that 6% from previous close at 16.04. At the time of writing it had increased by 7.86%, it has dropped slightly now.

Some of you had booked profits in Strategy 1 after the RBI news helped VIX to drop significantly.

So today is a great day to enter Strategy 1 again.

We made a profit and since VIX is high we will make it again.

I do not think there is any real reason for the VIX to increase except the falling prices of crude oil.

It has tumbled 5% and it looks like the panic in commodity markets have spilled over into the equity markets as well. Otherwise there is no reason for the VIX to have increased so much today.

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How To Trade The RBI Rate Cut

We had back to back 2 volatile months and therefore some of you who have done my course may not have been able to make too much money. And it is perfectly ok, one or two months in a year can be very volatile and its accepted that the 3% target in a month cannot be met. These months teach us a lot. You may have seen that the losses are pretty small and manageable, and the best part is you do not worry about these losses as they cannot damage your portfolio.

We are traders and we have to live with it. Please remember that my strategies are not one day wonders, they are a life time wonders and you must have patience to keep trading them to make money, in fact a lot of money over a period of 8-10 years.

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10 Point Loss in Strategy 1 Please DO Not Worry

I do not run away from the fact that my strategies can lose money. Till now in this month we are in red. But we will see what can be done to get back our money and overall what may happen to our portfolio if we keep trading conservative strategies.

On the other hand some of the experienced trades who have done my course, must have traded the directional strategy and made good profits. Unfortunately not many inform me. Please let me know (via email) if you traded and made money.

Nifty from 7000 to almost 7700 in 21 days. 10% in 20 days is considered fast and not normal. This is NOT usual and Nifty cannot rise or fall 10% in 20 days more than 5 times in a year. Keep this in mind while reading this post. This is where our strategies will have issue but most of the time Nifty goes nowhere and we keep making money. 🙂

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I have been explaining for long why I do not offer my course for free, because people do not give value to anything free. This post will prove the point. This is an interesting post, nothing to do with options but human psychology. Please read and let me know what you think. There is something I have decided which you will know in the end.

Even before I started this blog, I acquired good knowledge of finance, money management, investing, stock markets etc. So whenever my friends talked about their financial advisers/bank managers giving them investing advice – I used to give them free advice – usually telling them not to go by their advice. I do not like advice from these people as most sell ULIP (Unit Linked Insurance Plans – A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan) to generate commissions. Customers make almost nil returns when these plans mature, while the agents/employees make hefty commissions. Customers realize only when these products mature. Most do not even pay the full term and close the plan in 3-4 years making huge losses.

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The idea to write this article came from a single comment from someone very educated, experienced and a senior person.

Of course I will not give the link to that article to hide the identity of that person. It is more about how most of us think – the collective human mindset (especially Indians) and not about that one person. Please also note that this is not a political post. It is rather my point of view on blaming someone else for our own misfortunes in stock markets or in life.

Recently someone told me that people in India do not invest in good companies shares, instead they get their hands burned by investing in blade companies like Saradha Chit funds, Rose Valley Scam, Pearls Ponzi Scheme, Agri Gold Scam, Sahara etc. So the government should launch some kind of Personal Finance Education. When will our rulers wake up to the reality and do the needful, he asked.

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Highest Open Interest at 7000 PE Sell It

We will discuss about the Highest Open Interest at 7000 PE and why its a great option to sell, but first some news on Nifty.

Nifty Is Back To Normal Behavior

Last few days were bad for option sellers. Even though the call options did not explode as expected (in fact they are trading at a discount compared to puts) – the put options did not go down in value the way it usually happens whenever there is a rally, and to rub salt into the wound Nifty rallied and how.

From 7000 to almost 7500 in matter of days

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Puts are Costly than Calls Arbitrage Opportunity

Puts are Costly than Calls – Arbitrage opportunity:

Nifty is currently at 7450. Considering 7450 as ATM (At The Money) here are the prices.

31-Mar-16 PE 7,450.00 158.50
31-Mar-16 CE 7,450.00 109.20

There can be lots of reasons why one call is costlier than puts (70% of the times), and why puts are costlier than calls (30% of the times). Every time the reason can be different but this time I think since Nifty was falling sharply since long, the Puts became costly and it will take some time for both the Options to get normalized.

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How To Trade The Budget Day 2016

Today is one of the most important day for our country. It’s the Budget Day 2016.

Traders get too excited today to trade. And almost everyone trades. The reason? It’s the budget day. Ask yourself if you are the one who is forcing yourself to trade – will one day of trading make you very rich? Is budget day a good enough reason to trade? If the answer is no – then ask why are you trading at all?

How much will you make even if you win? 10k, 20k, 30k how much? Even if its 30k, will it change your life? And you know what odds are NOT in your favor to win, risk-reward is not good today so you might come out as a loser at 3.30 pm. On this day its easy to lose 10k, 20k, 30k may be more. Why take the risk at all. Why not stop all urge of trading just for today. Stock markets will again open tomorrow. 24 hours of waiting is not a big deal right?

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Nifty Not Moving Much Despite Budget Week

Those who have taken my course know that 100-200 points move DO NOT bother us. Strangely this is a budget week and Nifty is moving in a narrow range. 7100 on the lower band, and 7300 on the upper band.

But when things are calm and cool, there is a storm waiting in the hide-out. This will break this week for sure either on the Railway budget day or before.

Is it the right time to do the directional strategy?

Lots of people who have done my course called me and asked if this is the correct time to do Directional Strategy?

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INCOME DISCLAIMER: Any references in this site of income made from the trades by the traders taken the course are 100% correct and genuine.
I will give you their trades as proof.
However every trade depends on the trader and his level of risk taking capability and knowledge.
Moreover stock market investments are subject to market risks.
Therefore there is no guarantee that everyone will achieve the same or similar results.
My aim is to make you a better & disciplined trader with the strategies you get from it. Thank You.