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. 🙂
Had VIX fallen more our strategy 1 could have been in profits. Until RBI policy is not out VIX will hover around 16-18 range, then fall to 14-16 range.
But its OK we only suffered a 10-12 point loss which is manageable.
Now lets see what happens to naked traders in these kind of situations
(Naked traders are traders who do not hedge their positions and try to make as much as possible)
Traders who were short when Nifty was at 7000, lost huge money. For option traders all puts bought at 7000 or 6900 is worth almost ZERO now. So all money gone. If you had done that trade please take back whatever is left, because it is now guaranteed these options will expire worthless. Do not wait for some magic to happen. Magics do not happen in stock markets in few days. Magic does happen over the years though.
Traders who were long made money – BUT how many went long at 7000 and booked profit now at 7700? I do not think even a single trader out there would have taken this odd 700 points. IMPOSSIBLE.
EXACTLY Above is the life of a naked trader. Take huge losses but, when its time for profits take 20-30 points profit and out. Overall they are losers – BIG LOSERS. Be happy for a short term – live a miserable life for the long term.
Forget profits – they bring money to their account to gift it to smart traders and their brokers. 🙂
Ok so what about our conservative strategy?
Yes those who were on Strategy 1 would have also lost. Question is how much? 10-12 points that is it. Manageable? Very much. Because we know our next trade may make more than that.
So basically assuming we lose 5 trades in a year – we lose a maximum of 50-60 points in a year. But for the rest of the times there are going to be profits. 2-3% in every trade and some 20-24 trades in a year – do your own calculations. And do not forget the Strategy 2 which helps to get our money back.
So what can you do now if Strategy 1 hits stop loss – or will hit stop loss today?
India VIX currently around 16.33.
This will surly drop once the RBI interest rate policy is announced next month. So I would suggest do the following:
1. If SL hit, exit and then wait and watch the markets till the RBI news is out. Trade the same day (Strategy 1) just before the news (1-2 hour the best) or trade 1 day before. VIX will be very high – small movement cannot damage our strategy. Once the news is out falling VIX will help us tremendously.
2. Go to strategy 2 today itself, but DO NOT double the no of lots. If not hit you get back the money lost in few days only. Remember that its only 10-12 points we need back so do not get too aggressive. Be realistic.
3. Shift the Strategy 1 to safer position with 7700 as base – we want to be safe on the call side. Nifty may go up further.
I hope this will help.
Thanks Everyone for very nice comments on my last post on “People Hate Free Advice Even By Experts On Stock Markets“.
Please understand that I will keep writing on Options and share whatever little knowledge I have on options on this blog with you. The only thing as you can see in this newsletter is that I will not directly tell you which option to buy or sell. I will try to help my paid subscribers more henceforth. But since they are less than 1% of my newsletter subscribers – I cannot totally ignore the ones who have not paid. I love writing about options strategies and I will keep writing.
If you trade options then it is very important you know proper hedging methods. You will never make money trading naked futures or options. You may not know but the institutional investors NEVER trade naked options – they use options to hedge their portfolio worth crores. And if they ever want to make money through options then they ALWAYS hedge it with other option.
You can also learn some great hedging methods in my course.
Learn Proper Hedging Methods In My Conservative Course:
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Dilip Shaw, Founder
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