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Great VIX Trade in August 2015


Note: This is part of newsletter sent to this website’s subscribers on 13th of August, 2015. Its partly edited for public viewing. Signing up for newsletter is free. You can find the sign-up box at the end of the post.

Nifty is at 8391 and VIX at 17.02. Its a great time for option sellers. If you have taken my course then you can directly trade Strategy 2 or enter Strategy 1 now. You will get good premiums. I also bet VIX will go down soon, since no major news is coming in short term. We can exit in quick profits.

Nifty fell because of China, it will rise because of India or some other country – who cares – when we are making money. πŸ™‚

The more Nifty goes nowhere, the more non-directional strategies make. πŸ™‚

Important: When you are trading options, do not forget the hedges. I get quite a lot of messages from people who have taken my course, saying why hedge when they can make more? Their rationale is that the trade produces an excellent return of 5% a month – it may vary though every month. Please remember that accidents don’t come telling in advance, they can come any day. You should be well insured for it. You will know the value of insurance that day and will be smiling all the way.

Ask yourself is making 2-3% a month worse than losing money every month in search for looking strategies that make 10% a month? They do not exist by the way. Even after 100 years you will not find that one strategy that makes 10% a month. (Most people who call me want to give them a strategy that makes 10% a month – how to tell them that options were not made to make 10% a month.)

Or, spending money on the course, looks like too much while a loss of 10,000 while trading is ok?

Money is money. Either it should return more money, or a thing that you need or knowledge. Otherwise money that has gone just went down the drain.

Update: Edited part of newsletter send to my subscribers the very next day, i.e. 14th of August 2015:

Refer my email yesterday where I asked my course subscribers to trade Strategy 2.

Nifty today is already up by more than 100 points and VIX too dropped by 5.11% to 16.15 from 17. This is big drop in options premium. Option sellers must be in good profits, so close your trade. Like I told Nifty went down because of China – it will go up because of India, and option VIX is poised to go down as well. It happened and result? We win. πŸ™‚

Note that Nifty on that day rose almost 2%.

For those who think why every time I predict and the prediction comes true: (Another example was the Greece crises trade in month of July 2015.)

1. I don’t do any technical analysis because its based on very short term movement. I don’t care for short term movements. I take a call on probability in the next 30 days.

2. This is pure experience – the fact is that markets overreact – we should take benefit of this overreaction. Easiest way is to find out why there was a drop or rise? If the scale of drop or rise does not justify the news there is a 95% chance the stock will reverse direction within 2-3 days. Of course if the news is big, you should wait for things to settle down before you start trading again.

3. I can be wrong but I do not fear because I buy insurance first and then trade the original trade. You should practice this as well – buy protection first, then do the real trade. Make sure both trades are completed within 5 minutes. That makes sure if I am wrong its ok, all I lose is a few points. If there is protection, a big accident for naked traders, will be a small accident for you. After all the insurance guys will give you your money back. Probably you only pay 20% for the treatment (loss) + brokerage – rest the insurance trade will pay. That’s my thinking before I trade, so insurance comes first.

4. If VIX drops it tries to go up, and if it goes up it tries to go down – that’s just inbuilt – that will not change. Same for Nifty. Only exception is a major news that can change future. At those times just do not trade.

5. Its not important to be in markets every second or every day. People who can identify an opportunity – get in and get out are the ones who make money.

If you keep the above in mind two great things will happen. One – because of the protection you will not fear trading. Tow – because of the protection the losses if any will be small and you can be in the game for long and for better. One loss will not kick you out of the game forever. Hope the above helps in shaping you as a better trader.

Note that the above trade was done for a quick profit. When actually the profits came too quickly, there is no point in waiting for more. Why? Because that was the original plan. Moreover, you should always compare profits vs time. Frankly, I am a 2-3% a month man. Now when I am getting 1% or more profit in one day that too in a trade we took as volatility play, for me the return is equivalent to 30% a month because I got 1% in a day. In that view, we must exit as the trade did its job. This is how I control greed. πŸ™‚

If you listened to my advice and traded too may lots – get out of a few, probably 50% of lots – rest when more profits come.

This is how you should trade. When you are in quick profit you should take some profits out. Your thinking should not be like, “I will take every inch because I am correct”. My dear buddy in half an hour things can dramatically change in stock markets. When the plan was volatility play to make quick profits then stick to the plan.

Those who are stuck in Strategy 1 – just stick to what is written in the course.

Just Enjoy the Profits that’s what I want.

Update: Edited part of newsletter sent to my subscribers on 17th of August 2015:

Clarification: Because of my Nifty prediction on Thursday that it will go up, I received quite a few emails and congratulatory messages. Fact is, no one can predict the markets but one can always take a calculated call. Now it does not matter it goes up on Friday or next Friday. For me it was a good situation to take a calculated risk and I informed you. That was the idea. Yes markets going up the very next day was a surprise and a welcome move.

When you are protected you know it does not matter even if Nifty goes a bit further down – this feeling of protection takes the Fear factor out. I am sure a lot of speculators bought Puts that day because of the falling markets – the very next day they must have stopped out with huge losses.

For example, I receive quite a few newsletters from a lot of websites and all of them recommended to be short on markets, with most saying short term trend remains down so be short. This is technical analysis – it cannot predict an overreaction. There must be thousand of followers and all of them lost. I pity especially the Future trades. 160 points loss – that’s a lot. I am not saying they are wrong and I am right, I am only saying predicting Nifty or any stock’s direction on a daily basis is waste of time and a Futile exercise. But taking a calculated risk for the next 15-30 days on what might happen is perfectly OK. It needs no software – it only needs common sense.

And everyone has it. πŸ™‚

My Best Wishes.

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Hi, I am Dilip Shaw, owner of this website. I am a trader like you. I have been trading since 2007, but lost a lot of money till 2010. I then stopped trading and studied options like college exams. Started trading again from 2011 and never looked back since. I did a lot of research, read books and did countless paper-trading before being profitable. You can read about me here.

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Profit in Trade Despite Loss in Futures
Why Should You Trade in Nifty Options?

About the author: I started trading stock markets since 2007. However my first 3 years were losses. Then I dedicated almost 1 year on studying, researching, paper trading options and learned a lot in that time. Since 2011 I am trading Nifty options profitably. Call me if you need any help trading options on 9051143004.

{ 2 comments… add one }
  • LAKSHMINARASIMHA August 18, 2015, 9:58 pm

    Dear sir
    I don’t know how i missed your news letter on 14th august and further follow up newsletter on 17th august. I have subscirbed to your course. Just in case do register my email id so that i will not miss any newsletter from you sir.

    Lakshminarasimha

    • Dilip Shaw August 19, 2015, 7:03 pm

      Lakshminarasimha I have subscribed your email to receive newsletters. Subscription is free and it is on the visitor to subscribe – I can only subscribe if you allow me too. If I subscribe your email without your permission – its called SPAM and therefore I did not subscribe. However since you requested I have subscribed your email. Thanks.

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