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

Naked option sellers may have lost at least three months of income. They will start selling again to “recover” lost money and in another 3-4 months again a tide will come and wipe away their entire profits. They will start selling options again to “recover” lost money … and the story will NEVER end in their entire life. 🙂

If you have done my course, this is a great time to learn what kinds of losses you can expect. This rally was that which falls under the 20% of the times when our trade loses small money. As you can see its very small compared to what you used to lose prior to doing the course.

Now everything looks fine, and we will start making profits again. We take small steps forward, a lot of them, and after a few months one small step back. Overall in a year we are in profit and that is what counts in the end.

If you have still not done my course its highly recommend you do it now. Do not waste your time and money selling naked options.

Always keep some extra cash to buy quality stocks when there is a crash

If you have cash there is no better time than buying your favorite stock when the markets crashes. This is the time when I don’t mind investing some extra money buying some great stocks. As per my risk management rules since I have spent extra last two months buying stocks, I may not bring in any money next two months to create a balance. In the end, I am still only investing what I am comfortable with investing in the stock markets. This is risk management – buy more when there is an opportunity – buy less when you speculate – but average out your investments over the year. Do not invest more than you are comfortable with.

Hey that was a very important lesson in risk management. Did you learn anything? I hope you did and henceforth will be more disciplined in your approach to money-management.

Of course I have a time horizon and most of you know that when I invest in stocks I look for 10-12% return in a year. (Well we can make more – I have discussed below). When you make that profit – get out and deposit that cash back into your bank – or increase your investing capital next year. Yes no doubt sometimes I exit in a loss in some stocks. But overall this method of regular investments (more when there is crash) has worked out very well.

Frankly there is nothing special about it – I just follow the basics of investments that is it. Most of you get swayed by emotions – I don’t. 🙂

This the reason you must have some extra cash to buy your favorite stocks whenever markets crashes.

Here is how you can make more than 10% a year

Once you buy, ask collateral against shares from your broker and trade. If you are trading well this will have a great effect.

One – you make money from the stock when it rises and,
Two – you make money from the options too. What more do you want?

Disclaimer: Here is one trade that you can do tomorrow but please trade with proper research and risk management. Please understand I do not get paid by giving these free advice so the risk in the following trade is entirely yours. I have given reasons why I think this could be a successful trade. Though most of my predictions come true, you must understand stock markets investments are subject to market risks and my advice may go wrong. So please trade after doing proper research.

Highest Open Interest

Highest Open Interest is at 7,000.00 PE both for March and April 16. Though I do not care much about open interest – this time opportunity looks very attractive.

You can see highest open interest here:

http://www.moneycontrol.com/stocks/fno/marketstats/options/high_oi/index.php

What you can trade?

Those who have done my course if you have free cash you can sell 7000 PE current or next month and hedge it with the way its written in strategy 2 of the course. You know where to take a stop loss.

Those who have not done my course sell 7000 PE at your own risk. I highly recommend hedging it with some other strike option. Since this email goes to all who have taken my course and also to who have not, I cannot reveal which strike is the best to hedge. If you like to learn do my course now.

Now here are some reasons for the 7000 PE sell:

1. Though not a big indicator or any assurances – Highest open interest lies at 7000 PE in both months. So markets expecting Nifty Not to fall below 7000 at least for the near term. And probability looks very high.

2. INDIA VIX is currently at 18.46 and is falling slowly. There is no reason for it to rise. 18.46 is good Vega to sell. VIX is not falling sharply due to the RBI news expectations next month.

3. Nifty had a great rally and is now looking stable and bullish. There is an expectation that RBI will once again ease interest rates during its policy meet next month. This expectation will ensure less fall for Nifty. Means speculators will buy stocks in expectations that it will give them profit if RBI actually eases rates – and this will stop huge fall for Nifty – which is exactly we want.

4. Nifty is still looking bullish and usually a trend does not reverse for no reason. There has to be strong reason for a trend-reversal. Right now I cannot see a strong reason. RBI policy is next month and if Nifty does not fall 7000 PE will lose its value this month itself. Current month will expire worthless and next month will lose a lot of its premium.

5. Why fear when you have bought protection? Calculated risks needs to be taken when probability looks high.

Lot size comes under risk management and it is up to you to decide how much risk you are willing to take.

Warning: If you trade naked options (whether you buy or sell it does not matter), its highly recommended that you learn how to trade conservatively. Aggressive trading makes more but losses double. Result is that your trading capital makes losses year after year. This is not why you are trading for. You are not trading to lose, you are trading to make money. If you can lose money slowly why you have a problem if you make money slowly? Think which is an better option – losing money slowly or making money slowly.

If you think making money slowly is a better option learn to trade conservatively today.

Update on 15-Mar-2016:

Book profit on 7000 PE sold on 8-Mar-16.

See this on 8th March 2016 it was going at around 26-24:

Today on 15th March 2016 it is currently below 10:

That is a profit of 16 points in 7 days or 16*75 = 1200/40000 = 0.03*100 = 3% return in 7 days.

Please remember that selling naked options is dangerous therefore you must learn hedging techniques. What if this trade went wrong? Losses could be unlimited. On top of that there was stress to close this trade in profit as soon as possible to get rid of unlimited losses. Therefore I highly recommend my course where you learn proper hedging techniques to not only limit losses but also make consistent profits month after month.

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.

But we are least bothered about it, because those who love arbitrage here is an opportunity:

Do ATM credit spread on the Put, and with the money you get buy a near Call. Three things can happen now:

1. If Nifty does not move then there is nothing much to lose as you did not pay anything from your pocket.

2. If Nifty goes up – great you make money for free. Best situation and very likely. 🙂

3. If Nifty goes down there can be loss. Right now it looks very difficult that Nifty will fall suddenly. But if that happens you must be ready to take a stop loss. Remember that credit spread means there is a protection so the losses are limited.

Disclaimer: Since the above strategy is Free For All – No support will be given on this. Please trade on your own risk. I am very busy helping my paid clients grow their income.

For those who have done my conservative course – What to do now?

Stop Loss Hit In Strategy 1 After Long Time.

So basically this unexpected swift movement of Nifty caused some damage and our Strategy 1 hit a Stop Loss after a long time. Remember my article of “6800 Bottom For Nifty” – well it reversed from there and how. 🙂

Please do not panic. The success rate is 80% anyway and as traders we should know that sometimes stop loss will be hit and we have to take a small loss. Those who are seeing this Stop Loss for the first time must be overjoyed. Why? Because earlier when they used to take stop loss (when they traded on tips or on their own) – the stop loss took away months of profits. But here with our highly conservative strategies, the losses are small and manageable. At max we go back 5-6 days. So we get enough time in the same month to recover our losses by trading Strategy 2.

Remember when you called me and inquired about the strategies, I told you the same that there can be losses but they will be far and few and small and manageable. This is the time to experience it. This is pretty normal and may happen 2-3 times a year.

Strangely some of my clients do not see losses for a long time. But lets not count them. Even I consider myself an average trader. But I have learned to control greed – that itself makes me much better than 80% of the traders. The rest the conservative strategies and discipline takes care.

Today I am happy with even 1% profit in a month. When I make only 1%, I tell myself 1% return a month is 12% return a year, which is much better than Fixed Deposit in a Bank, and is certainly much much better than losing money trading.

Fact is over a period of time we know we will make more than 12% a year. 🙂

When VIX is high usually I do not go to Strategy 2 if the SL is hit. We are still getting great premiums – so why not just shift the whole Strategy 1 to new strikes with 7400 as ATM?

Do that now if the stop loss is hit. Please shift the whole Strategy 1 to 7400 as ATM. Those who did not trade can still trade Strategy 1 now.

When we started this trade, VIX was high – but now it has fallen. Because of this the losses also gets small.

That’s the beauty of this strategy – if VIX falls then we also lose less even if the momentum of Nifty movement is high.

Once the movement stops – there will be calmness for months and we keep making money again for months.

Keep trading and enjoy the journey, and please do send me feedback by email.

Many Thanks.

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?

If you are absolutely certain you will make above 50k in today’s trading then trade – else just sit on sidelines and listen to budget. That’s more fun than actually trading fun. Yes if you are forcing yourself to trade then you are trading for fun – not to make money – not to create wealth.

People who trade for fun in reality want to escape from reality. Stress from job, family stress etc, and when you trade you get some fun – it relaxes your mind because you are eager for a result. You think you are working hard for your family, creating wealth for them. In reality its an excuse to trade. Most of the time you end up losing money, but you still want to trade because you have that excuse to escape from reality. Be practical – ask yourself the price you are paying for it. Is losing lakhs and crores of money trading just for some fun worth it?

If you really want to create wealth for you and for your family, then the only way out is conservative trading. Yes it ain’t fun, yes is boring, yes it makes small money slowly, but at the end of the day it makes money – and that is what counts. This is what you want from trading isn’t it?

Almost all brokers will block FULL margin today. There is no MIS (Margin Intraday Square-off – i.e. Margin for Intraday trading) allowed today. Only NRML will be allowed, which is margin blocked for delivery based trading or positional trading. There is going to be huge swings today, and with the swings your profits will turn into losses and losses will turn into profits and you will not understand when to take profits or when to get out with loss. That is the reason brokers will block full margin today.

Ultimately you may get out in loss. So yes you may have some fun, but you pay a heavy price for it.

So What To Trade On The Budget Day?

1. If you are a conservative trader and if you see a real good opportunity to trade for the medium term, you should trade. VIX will be high and dropping as the speech by the finance minister progresses. But there will be huge swings as well. Be ready to take your stop loss if that level is reached the same day. But remember you are not trading for Intraday, it’s for the medium term with proper protection. If everything looks good and you are not trading to become rich in one day of trading (I guarantee this – no one will suddenly become rich today and there is a 99.99% surety at least that person is not you), then please go ahead and trade.

2. It’s better to avoid trading today but if you cannot stop your urge to trade then try the Long Strangle not Long Straddle. You pay a lot for Long Straddle that’s why it must be avoided. March options are not going to expire tomorrow. There is still a lot of time left. But VIX will fall, so be aware. The only thing that favors you is a huge swing. As soon as you make 20-30 points profit – exit. And take the day off. No more trading. Enjoy the budget. This is pure Intraday trade. Do not take this trade to next day – you are guaranteed to lose if the opening is not with a huge gap.

3. Avoid selling naked options AT ANY COST. Do not press the SELL button today. Those who have taken my course, its better you trade strategy 1 tomorrow, not today. Yes there will be a drop in VIX, but its better to be safe than sorry for a few points. And it will still take some time for the VIX to come to the level of 15-17. It won’t happen in one day. A 10% VIX fall in next few days is guaranteed though.

4. Those who trade VIX, sell VIX today and enjoy the profits. A 10% fall will make you good money. Give me my commissions when you take the profits out. 🙂 OK, I am joking. At least send me an email that you made a profit – that’s enough for me.

5. DO NOT TRADE FUTURES. PERIOD. I cannot explain further why.

6. Technical Analysis, Candle Sticks, Bollinger Bands or whatever will NOT work today. Even the best of TAs will fail today. If they win it is pure fluke/luck.

7. Credit / Debit spreads on ATM options with 100 points gap in 1 or 2 lots for fun is OK. There is either 10-12 points to be made or lost. But do not try to time your exits – which is like taking profits out in one leg then trying to take profits out in another – stock markets will make you fool if you try that. Get in and out of both legs at the same time.

All in all its better not to trade – just because it’s a budget day. If you force yourself to trade, it doesn’t matter if its budget day or not, risk reward will not be in your favor.

I got too many messages on my WhatsApp to give some trade for the budget day, that’s the reason for this article. I hope you got the answer and will trade with caution on the budget day.

If you trade for fun, it’s OK keep trading and losing. But if you are serious in creating wealth trading conservatively in the long run, then I highly recommend do my course. It will help you not only to make money trading but also change your approach towards the stock markets.

This course is not just about making money, but about peaceful life and happy trading.

Happy Trading!!

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?

Yes it is. Nifty movement can come any day so try it. Directional strategy should be set BEFORE the move comes. If move comes in a day or two, you make money and end the game.

If you are setting up the directional strategy today, Monday is the Final day of results. You either make a profit before the budget or on the budget day. Be happy with a 30-50 points profit though and exit.

Those who are more comfortable with Bank Nifty can try the directional strategy there. Bank Nifty is known to move pretty fast and the profits may come earlier.

Do not trade this week without a hedge

It is suicidal to trade either Options or Futures this week without the hedge. Unfortunately most traders right now are on an non-hedged naked Futures trade. I just hope I am proved wrong – but these people are going to lose a lot of money in days to come. If they make a profit, it is going to be limited though.

Never bet on something you do not know. Budget times are uncertain and losses can be heavy. Profits will still be limited. Why? Because of the simple mistake of traders taking small profits out, and letting the losses run unlimited. When “unlimited profits” is ONLY in your mind and not while trading, then why you are doing a trade? Ask yourself – when was the last time you took “unlimited profits”? I mean unlimited profits by using your skills, not as a gift by markets with a gap up or down opening. I think the answer will be NEVER. If you do not have the skills to let the markets decide the profits – then you are trading with a bad formula. This:

“Limited Profits and Unlimited Losses.”

You should actually trade with:

“Unlimited Profits and limited Losses.”

But not many have the skills to learn that, so at least trade with:

“Limited Profits and Limited Losses.”

Tell me – Where Is The Money?

If you trade with the formula “Limited Profits and Unlimited Losses.” – where is the money?

And this you keep doing for your life. You only compound your losses and not your profits.

With stock market losses you are only reducing your Salary every month. A 1 Lakh loss in a year means your actual salary is 8000 less per month than what you actually get. But you pay taxes on what you get on paper, right? That’s double loss if you are not reporting your losses while filing your taxes. I am sure many do not. Strange! Please report your losses and at least get a tax refund.

Do not live on hope and trade

You will be 100 and you will still “hope” of the that day when you will make a lot of money trading. Trading on hope is the most foolish thing to do in a business. Aggressive traders without a plan, trade on hope. When they lose they bring more money and again “trade on hope”. This goes on for life.

Do not trade anything that you cannot compound

I hate any strategy that cannot be compounded – however good it is. What is point in making 5000 per month if you fear putting more capital into the strategy to trade?

With my course the non-directional strategies can be compounded. It means you can re-invest the profits in the strategies back again and again.

But the most important part about my strategies is trading with a peace of mind. Nothing for me is better than making money with a peace of mind. On top of that you make small profits almost every month. What more do you want? To become the richest man walking on Earth by trading?

Email me to know more about the course. If you do not know anything about Options and Futures please tell me, I will try to help you for free.

The budget week is a very dangerous week for option traders. Nifty can go anywhere and the options premium will reduce very fast.

We have entered into a dangerous week – the Budget Week.

Tomorrow the Budget Session of Parliament starts and government will present the General Budget on February 29, 2016.

Huge volatility can be seen in the markets.

It looks like expiry will be as usual, this Thursday the 25th of February 2016.

Are you buyer of Options?

If yes, it is better to shift to the next month – March 2016. Last 5 days are worst for options. It does not matter how much the VIX increases, theta will have a big effect on options and their premiums will decrease no matter what.

March options still have 38 days to expire and VIX not going down at least till Friday means chances of making money increases. Please note that risk is always there, but this one looks like a calculated risk.

As an option buyer it is very hard to fight melting premiums, therefore I highly recommend avoid trading current month options.

On the other hand February 2016 options will now be cheap and will lure buyers, unfortunately still they will lose money.

For example currently Nifty is at 7220 and the ATM Feb call option of 7200 is quoting at 59.40. That’s quite cheap isn’t it? But since only 4 days are left for expiry, even at 59.40 this is too costly.

If you are sure of a move then buy March 7200 Call option NOT February’s.

But remember VIX drops like a knife falling from Monday onward. So if you plan to buy options today you must close it on or before this Friday – 26th of February 2016.

So should you sell these options?

No selling now is even more dangerous. Why? Because you dont know what is in store in the budget day or any news coming before the budget day. There can be a sharp rally or a sharp fall. We dont know. So it will be better to stop selling this week.

When should I start selling options again?

From Monday onward. In fact Tuesday is the best day. All the news and movement will be out, and frankly the traders will be too tired to trade the rest of the week. So selling can be very lucrative from Tuesday – 1st of March 2016. Nifty will not move much at least from one week from 1st March, and VIX will keep falling – so premiums will drop heavily.

For People Who Have Done My Conservative Course:

Its highly recommended that you start trading strategy 1 from 1st of March 2016. If you are keen on trading now its better to trade with reduced lot size. Please show some patience and take less risk this week. Years are left to make money, one week cannot reduce your profits however this week has the potential to take away a lot of your profits you already made in last few trades.

Note: I have decided to send more newsletter henceforth. Probably 3-4 every week. When I don’t send a newsletter for a few days then people WhatsApp me to send newsletters. 🙂

Please also read my newsletters. I have to pay for the emails in the database. And its not cheap. If you do not read, unfortunately I will have to delete those emails.

Disclaimer: Views and opinions in this article is my personal opinion. Please do your own research before entering into any trade as suggested in this post. This is part of newsletter sent to my subscribers today. If you want to receive such newsletters please register your email here.

I got quite a lot of questions on my yesterday’s email on ideas to trade.

One of them was interesting and I would like to share with you:

This was the question:

Hi Dilip,

Hope you are doing good. I learned a lot through your conservative attitude & greed control articles. Thanks for your awesome conservative strategies.

I have one silly question to ask that in this article you recommended ICICI Nifty Index Mutual Fund.

When I see the top portfolio of such front line index funds I see that almost all mutual funds have mostly similar blue chips in their top holdings.

My question is what difference it takes if we directly invest in such blue chips which are already 40 to 50% down from their 52 week high instead of investing in same sticks via mutual fund which charge us yearly expense ratio.

Can you please share pros & cons between investing into index mutual funds than directly investing into stocks?

Thanks for your valuable guidance as always.

Best Regards
===============

Well good question. No question is silly question. Here is my answer:

When you invest in Nifty Index Fund for a short term, then you are rest assured that if Nifty rises then the Index Fund or Nifty Bees will also rise in value and you will surly make a profit.

It is but commonsense that one day or the other (and that day is not far) when Nifty will be around 8000 – which is almost 12-13% from current levels.

In that case your investment in Nifty Index Fund or Nifty Bees will give a guaranteed return of 11-12% (1% deducted for expenses) in few days or months.

On top of that you don’t have to do research for Stocks that may rise. You just cannot invest in ALL the basket of stocks that these mutual funds invest in. Tracking them is very difficult too. So you will chose 3 or 4. This will take time. And the worst part is there is no guarantee these stocks will beat returns of Nifty in a short period.

So when you invest in an Index mutual fund, your time is saved and your investment is also diversified. You can live in peace, and you can invest as much as you can, the money that you don’t need for 1 year.

Remember that this particular investment is for 1 year and our target is to make 12-15% return in one year. With investing in a stock it gets risky. You may choose a correct stock and make a stellar return from that stock, but there is a high chance that your chosen stock does not perform. Or if you are invested in 4-5 different stocks then one bad investment can pull down return from the entire portfolio. In the end your profit may be less than an Index fund even after deducting 1% of the expenses.

So if its for short to medium term I would rather invest in an Index fund or Nifty BeEs rather than a few stocks, to feel safe. I am ok with a lower return but with a very high chance of success.

You Mean To Say We Must NEVER Invest In Stocks?

I never said that. Nifty is currently 20% lower than its recent high about an year ago. Nifty for sure will try to reach its mean within months. Let us not get into math, but 8000 looks certain in few months. We are talking about making more or less 10-12% in 6-12 months. At present investing in an Index fund looks the safest option to me. That is it. Yes in a few months from now some good stocks will double and you will rant on me for giving a bad advice.

But do you know the name of that stock today? NO. If you don’t know then it is always better to sacrifice some greed to make more or less what we want to make. How many people you know have stuck in a bad stock for years? Many. How many people do you know are stuck in Index Funds or Nifty Bees for years? None.

Its simple logic. 🙂

Note: Some greedy trader out there might be thinking I am a fool. Why am I not investing in Nifty Future when I know Nifty will be at 8000 some day. Thank You Sir. Every investment has an objective and this one is to make 12% in 6-12 months only with low risk. For investing in Nifty Futures I have different cash, a bit lower amount though, through which I can take aggressive bets. But not buying a Future now and selling it when Nifty reaches 8000. That’s a foolish trade in my books.

So When Should You Invest In Stocks?

Yes you must have a portfolio of good stocks. It could be anywhere from 10 to 15 stocks max. And you should every month invest in them in equal amounts for ALL your earning life, which is 30-35 years.

80% of them will prove to be losers, after 30 years of investment. But 20% of them will be worth crores. I mean multi-crores. The dividends itself will far surpass the invested amount. Just this small investment every month can take care of your retirement years. Read this article on how to make crores from the stock markets.

Note that this is one part of diversification – a very small part indeed. Some money should get into trading for regular income. Some money in liquid funds or fixed deposits that you may need urgently.

What I am trying to say is that if you can save 100 rupees a month you should know what percentage of it to invest where. And you should stick to the rule – no matter how good you are doing with your trading.

Even after making good profits since last few years in trading I am not going to invest ALL my investments in trading. I believe in diversification and this is how I do it.

Diversifying your money is very important when its matter of investments. You must know how much you need in few months, years and decades from now. Ok you may not be perfect but you must have an idea. Its always better to invest and work towards achieving those goals in time or slightly before that time. Over all 20% return a year from all of your investment will be huge.

Frankly if you don’t need that money now – its really a useless exercise to try to make that RIGHT NOW. That’s the reason I believe in making small profits on a consistent basis, rather try to make a lot in couple of months. That’s the exact reason I do not promise anyone more than 3% per month from the strategies in my course. Its a different matter that some of my customers are making more than that, but I really don’t care.

These small steps will become BIG STEPS in matter of years. And it is possible for every trader. Unfortunately this website will keep getting traffic for making 5000 per day from stock markets, or 1 lakh per month. Some even search for 50 crore a year – lol. Well nothing wrong in having such targets after all we trade to make money – but the problem lies somewhere else. The problem is when I get calls from such people, all they have is paltry 25000 in their account. These people are the targets of the tips providers. In a couple of month their account shows ZERO rupees. Hope you are not one of them.

Dilip, I don’t have patience to wait for 20-30 years to make crores, I want it now

Really? Then you must have lost a lot of money in stock markets. 🙂

People who don’t have patience are the biggest losers in stock markets. And they still don’t learn and keep losing for years. And you know what, they retire at 60 with heavy losses. Believe me world is full of them. At least 10 emails I get from such people every month. 🙁

You know what – it does not matter if you have patience or not. If you survive then you will turn 60 anyway – you can’t stop the aging process, can you? And if you don’t, then even all the money in the world if given to you is worthless. Hope you get the point. This attitude of “I need more and I need it now” is a sure shot way of destroying your wealth.

So learn to be happy with small profits. Occasionally if big profits do come be happy – but don’t lose it again to make big profits.

Smart trading and patience is the key in making money in stock markets. When I didn’t have patience I lost a lot. When I started being happy even with 1% return a month, I started making good money. If you don’t know 1% return a month is NOT 12% return a year – its 15% return a year compounded.

For most of us even 15% a year is a great return.

This is an email by one of my paid customers of the course. I added this as I think it can add value to this post:

I genuinely believe its a real good write-up with the links to support it. There’s a multitude out there still groping with little or no knowledge about investments or trading, and yet venturing out to boldly make some ‘easy money’. Life is tough out there. Perhaps its not their fault – we were once like that too – I believe – not so long ago – but wiser after all the setbacks and failures.

Whatever, I think people should invest in knowledge, if not at least learn from their costly mistakes, and not keep repeating the same mistakes again. It reminds me of a quote: “Learn from your losses. They are expensive lessons. You paid for them”.

Whatever is written here may please not be made public. (At least not with my name) It was written in confidence only for your reading after seeing so many of my friends continuing to remain the same despite their setbacks. Some don’t want to learn, I suppose.

Some want to learn but don’t want to spend, and some just want it all ready-made.

Well the world has all types.

That’s all for now.
Best Regards

Please note that the person who wrote the above email is my paid customer of my course. Did you notice the change in his attitude towards the stock markets? He is now very happy with the small profits he makes every month. The course will not only teach you five conservative strategies, but will also change your view towards the markets. In other words, it will help you control greed which is one of the biggest enemy of the stock markets.

His last sentence is very correct. “Some want to learn but don’t want to spend, and some just want it all ready-made.” More than 99% of people who visit this blog do not pay for the course. I think the biggest reason is they don’t want to spend money to learn something that can make them 3% a month. For most its too less. Its strange that they keep losing money month after month, but are still looking for strategies that can double their money in few months. Let me tell you such strategies do not exist. You will keep looking for it for years and still will not find it. And mind it, 3% a month is not a low return, compounded this can be great return in years to come.

Nifty after falling relentlessly since last few months can see bottom at 6800. Read this post to also get other ideas to trade.

I have a strong feeling that Nifty has found its bottom and will not break 6800 at least in the medium term.

I have already written earlier a post on how you can trade this month. Apart from that there are many other ways to trade.

Remember the arbitrage opportunity on the stocks and Futures article? If you have not read that post I highly recommend read that now.

The premiums in Futures must have swelled and its time to make a guaranteed return of 1-2% in a month.

But it doesn’t end here. People who have done my course – its a great time to trade the conservative stock options strategy. If you think the markets may slide further then try BOTH the arbitrage in stocks and the non-directional trade (strategy 1) together. You may have to ask collateral margin against the stock bought though. That’s ok, as you make 1-2% from the arbitrage opportunity and another 3-4% from the strategy 1. That’s excellent return in 30-40 days.

Nifty BeES

Yes collect Nifty BeES if you are bad at selecting stocks. Approx 7100 is Nifty currently. What is 10% plus of 7100 = 7100+710 = 7810. I really don’t think Nifty will take more than 6 months to reach there. 10% return in 6 months is amazing. Any extra money that you don’t need for the next 1 year can be invested in Nifty Bees Exchange-Traded Fund (ETF).

Why 1 Year why not 6 months? Because when you invest money, you should always think of the worst case scenario. It may reach 7800 in 6 months, but you must be prepared mentally to stay invested for about a year.

Mutual Funds

Yes you can shift a percentage of funds from debt/liquid funds to Index fund. ICICI Prudential Nifty Index Fund is one such good fund to invest now. It has 0.71% Expense rate with ZERO exit load, which is great. But if Expense is bothering you Nifty BeES are cheaper (Expense: 0.54%). Frankly 0.71-0.54 = 0.17% don’t bother me. I am more comfortable trading Mutual Funds and Nifty Options, and I rarely trade in any other product. Yes I am a long term investor too.

I believe too much of diversification in trading is useless and is counter productive. Master a couple of trading strategies and make money form them. That is it.

Some people trade options and cash in morning and then commodities, oil, gold, etc in evening and then USD/INR (Forex trading) the whole day. I don’t think these people make money trading. Yes I do get calls from people who trade till 11 in the night. Don’t do this. It will not only take your health away, but also money away and peace away, family away, everything away.

I am not against working, I myself work till late in night sometimes. I am against chasing money. Don’t become slave of money. Don’t always keep thinking about money, if you work smart it will come. But if you work only to make more and more money without any reason, it will never come to you. Actually it will go away.

Ultimately you want to earn money to be happy, but what’s the point if you are unhappy earning it?

Buy Stocks For Medium to Long Term

Now when it looks like Nifty has found its bottom, its a great time to buy some value stocks as well. Banking stocks are now looking strong and are set for a reversal. Agreed banking stocks are volatile, but over the long run the banking stocks have produced stellar returns. If a stock is not volatile, you will never get an opportunity to invest. Do not invest all your money in a single stock or on a single day. Divide your money in 4-5 equal installments and invest in 4 great stocks of your choice in next 3-4 months.

You see you must act according to opportunity offered by the markets, and you are sure to win most of the times.

India VIX

Its around 21.93. Understand that this will not fall much, in fact will only go up until the budget. Then you will see it crashing from the budget day only which is on 29-Feb-2016. By mid March it will be back to 15-17 area.

Reduce the number of lots traded

Please do not get aggressive this month. Budget month is the WORST month to trade. So please reduce the number of lots traded. Its ok to make 1-2% this month, but its NOT ok to lose 5% trading aggressively.

Its matter of few days, I hope this much patience you have.

All of the above as you can see is smart trading. Invest, show some patience and make money.

I have told this 100 times I and will repeat it again – just 20% return on your portfolio year after year can make you very rich. (20% is just 1.66% a month) And top of that the process of making that money with ease will keep you stress free, happier and healthier.

Don’t believe me? Just 1 Lakh invested every year for 20 years at 20% return a year can make over 2.6 crores. (At 30% it is over 10 crores) But you have to make 20% from your ENTIRE portfolio of 1 lakh invested every year. This is only possible through trading options conservatively. Yes investing in some stocks can make you extremely rich in a few years, but the only problem is you don’t know which stocks – so where you invest? You can always trade with a small percentage of your money aggressively to try to make more – but NOT all the money at any cost even if you are the best trader in the world.

I hope I am making sense. If you really want to learn conservative trading then I highly recommend my course. If you think 3% a month is just too less, I wish you good luck.

Read to know how you can trade the budget month of February and March 2016. Vega (VIX) will increase so buying options may be profitable.

The Budget session of Parliament will commence from February 23, 2016 and the government will present the General Budget on February 29, 2016.

Expiry day is on February 25, 2016.

Many a times, stock market makers will postpone the February expiry date to the budget day to help traders make the most of the budget day. Unfortunately it only helps traders trade more and lose more. Not sure if they are going to do that again this year and I hope they don’t, but for now 25th is the expiry date. If they extend the expiry day, I will inform you.

So even though the expiry happens in February, there will be interesting things happening in March Expiry as well.

So, How to Trade The General Budget February and March Expiry 2016

INDIA VIX:

It is is around 25 now, and I am quite sure until the budget is over this is NOT going to fall very much. May be it will be in a range from 22-25. But as the budget day approaches it may well be near 30.

People who buy options, February is the only month that favors you. VIX doesn’t fall. Huge volatility in markets. What more do you want?

Long Straddles / Long Strangles Will Work

This is the time to go long option buyers. 🙂

Note for traders who have done my course. With 10-20% of your trading capital, you can try going long with options.

You can trade Long Straddles or Long Strangles.

If you do not know what is a long straddle, then its buying of both Call and Puts Options of the same strike (usually traders buy ATM (At The Money) options), same quantity (no. of lots) and same expiry and waiting for a big movement. In the Long Strangle the trader can buy any strike call and any strike put option (usually out of the money (OTM) options are bought). In Long Strangle too number of lots bought remains same and the expiry also remains same.

Please note that payoff will differ in both the strategies. Long Straddle will almost always outperform the profits from the Long Strangle. The reason being the trader is taking more risk by paying more premium, why shouldn’t they make more for the same move? There is a technical reason as well, and that is the movement will take at least one of the options In The Money (ITM). Since the other side’s premium will not melt fast due to increasing VIX, it minimizes the effect of theta (time) on options, thus overall profits can be huge.

Warning: Movement has to come to make a profit in long straddles and strangle. But risk is low this month as premiums will not see a sudden drop. And we all know movement will come in the budget month.

Since VIX will not fall, its quite easy to assume that the options premium will not evaporate fast. And if the options premium will not evaporate fast, a movement of even 1% can bring great results. Please remember to square your positions Intraday (within the same day) or within a max of 3 days, no more. One day or the other theta will have to effect the premiums, irrespective of the increasing volatility, and so it gets dangerous to stay more than 3 days in a long straddle or strangle.

Do not trade long strangles of FEB 2016 expiry during the last 5 trading days of this month. Vega will fall very fast due to lack of time – no amount of increasing VIX will help. During the last five days, shift to the March month expiry. That is all trades taken on or after 22 FEB must be shifted to March expiry. Please also note that on the day of the budget, VIX will fall swiftly as its being read, so its very important to stop trading positional long strangles or straddles one day before the budget day, that is 26th of February, 2016.

What To Trade On The Budget 2016 Day?

On the budget day, trade the long straddle only and Intraday only. Huge swings will ensure huge profits. Sometimes 100 points down, sometimes 100 points up, but you target 20-30 points and exit. Do not trade again once you book profits. Take the day off and enjoy. Don’t even look at the markets. If time permits I will write another email on how to trade on the budget day.

Long Straddle or Long Strangle

If you are an Intra day trader I would suggest Long Straddle because in a few hours premiums will not erode and Nifty movement will bring huge profits. Remember that this is applicable to this month only and till budget day. After that long strangle or straddle will become very dangerous to trade. VIX will drop pretty fast taking away all the premiums. After budget these kinds of trades will lose money. That does not mean Short Straddles or Strangles will become profitable.

If you are planning to wait for a bigger move, its better to trade the Long Strangle as your risk will reduce when you buy out of the money options. You can leave long strangles overnight.

Once the budget is over – VIX will fall swiftly and within a few days will start trading in a narrow range making both the long as well as short straddle difficult to trade.

So this advice is valid only until the budget 2016 is over.

Which Strikes to Chose?

For the long straddle there is nothing to be told. You can buy Call and Put Options At The Money (ATM).

If trading Intraday, Long Straddle works great if VIX is increasing.

If you are planning to hold the options overnight then the strike prices you chose becomes extremely important. I would suggest not risking a total of 100 points on one lot trade. So basically the total points you may risk from both the call and put should NOT increase 100 points or Rs. 7500 per lot CE and PE. If its 2 lot 15,000 is at risk.

In reality you will not lose all

Fact is its notional loss. We will look at a profit of 20-30 points that is 20% to 30% return on the long options. OR exit at 30 points loss. VIX will not fall fast. So a combined loss of 30 points in 3 days looks very difficult. And for sure due to Volatility there will be a big move once in 3 days. There you go. That day when the total points of CE and PE exceeds 120-130 odd points – click the sell button on both.

Do not wait for reversal – exit both the positions

Though the possibility of reversal is very high during high volatility times – its a huge risk to get off one side of the trade thus making huge profits and waiting for a reversal. If Nifty does not reverse, then that 20 point profit may go down the drain.

Why are Puts costlier than Calls during high Volatility Time?

Right now, do you notice the difference between At The Money Call and Puts premiums? The reason is pretty simple. During high volatility times there is fear in the markets. The high net worth individuals and institutional investors have stocks worth crores and its a must that they save their portfolio from going down in value in case there is a severe crash. The only way to protect their portfolio is to buy Puts.

Market makers know this. So to make sure that the markets remain a level playing filed for all, they make the Puts costly. Please note that its not done manually. The software controlling options premium knows important event dates and acts accordingly. You see if during these times if Puts are not costly, who will sell puts? For example right now there is panic in markets, can you sell naked puts even 200 points out of the money? So until and unless I am paid pretty well to sell puts I won’t sell. And if there are no sellers, there can’t be any buyers and trading halts. Market makers do not want this to happen, so its obvious Puts will explode in value.

During normal times getting less premium is ok. But when the risk is high why shouldn’t the put sellers get more money to sell these dangerous options.

If puts are not priced high, no one would dare to sell them and the whole market place would stop trading. Also not that as time passes, Puts will get even more costly compared to the Calls. Until of course the budget.

The calls also needs to increased in prices, though not as big as puts just to make sure there is parity in pricing of the options.

Trade Calendar Spreads

Experienced traders can trade calendar spreads. These are spreads where the trader sells options this month and buys far month options. It does not matter which far month – but in this situation its better to be long in March options and Short in February 2016 options.

WHY?

That’s because Calendar Spreads are Long Vega (Volatility). Now its pretty simple to understand that VIX is not going to fall until 29th of this month. However February options have to expire on 25th only. Now whatever the VIX, even 60, on the expiry day it has to become NIL by 3.25 pm. But VEGA of next month options cannot expire so they keep the VIX of 60. Do you get the point?

This situation can be exploited beautifully trading the the Calendar Spreads.

On the expiry day, this months options expire worthless, and there is huge probability to make money from bought next month options as well. So both the sell and the buy trades makes money. 🙂

So the trade is SELL an OTM (Out Of Money) Call Option expiring February 2016, and buy the same strike Call Option March 2016.

Similarly SELL an OTM (Out Of Money) Put Option expiring February 2016, and buy the same strike Put Option March 2016.

Keep an eye an exit at reasonable profits.

Warning: Calendar Spreads are for experienced traders. Its not an easy trade. My course has much better and easier trades than this. These spreads work great when next month Vega will increase and current month Vega may drop or get finished by expiry. As you can see, this is the only month in the year when we are sure of that. The other months Calendar Spreads may not work.

Well for most, budget trading is not a easy trading. Most people who sell options lose big time during this month and they don’t know why. Reason is huge movements like you saw today and an increase in volatility. I am sure a lot of option sellers lost a lot of money today.

That’s the reason my emphasis on hedging. If you lose small money it won’t pinch. Imagine losing months of profits in a single day’s trade. That’s not something you want. My course will teach you better hedging techniques and also strategies that can help you make money from the stock markets peacefully. I don’t promise a lot, like others do, but I can only say that after one year of trading my strategies you will be in good profits. Isn’t it better than losing money trying to make too much money from trading? You decide.

Please do ask questions in the comments section below.

Here is some help for people who have taken my course and are trying to back test strategy 1 and strategy 2 of my course. He is a full time trader since the last 4 years. He has already done the job of back-testing my strategies for you.

If you cannot read the below testimonial please click on the image to enlarge and read. This will help people who trade Strategy 1 and Strategy 2 in huge number of lots:

Testimonial – 30 January 2016 – Results may vary for users – Click on the image to enlarge and read

Here is the text of the email if you are seeing this post on mobile phone and for some reason cannot enlarge the image:

Hi Dilip,

As promised, here is the testimonial.

I am a full time trader since last 4 years. I took your course 7 months back and was really impressed. I had read lot of books before that but your strategy 2 rang the bell in my head.

I backtested 2 years of 15 minutes data of Nifty (Amibroker) and kept on playing with some parameters. I noticed that when VIX > 17 and Nifty premium received ( from Strategy 1) > 0.004 of Nifty current value, results were superb.

In last 7 months, I took 8 trades and all were profitable. The best thing about this strategy is it is scale-able. Right now I am doing it on 14 lots.

Once again thanks for sharing your knowledge.

Please don’t share my name 🙂

Regards,

Name Withheld

See that he trades on 14 lots which is 14*75 = 1050. So basically margin blocked is 40,000 * 14 = 560,000 (Five Lakhs Sixty Thousand.) I think slightly less than that.

Whatever, 3% of 560,000 is Rs. 16,800 per month. Remember that good traders do make more and specially Strategy 2 makes around 5% a month. But lets calculate on the average case scenario on Strategy 1. He has NEVER lost money. So his profits in last 7 months is 16800 * 8 = Rs. 134,400.00.

Remember when you call me to inquire about the course I say success rate is 80-90%? But here we have a trader whose success rate is 100%. If you can time the VIX your success rate also can be near 100%.

134,400 is 24% of 560,000. This means in 14 months around 48% returns. Lets take out 8% just in case he makes small losses in couple of trades. How is 40% return in 1 year and 2 months? And this in the conservative strategies alone. I am not even taking into account what the other strategies can do – the conservative stock option and the directional trades.

One more thing – these are ALL REAL traders doing REAL trades – just like you.

In my view this is MUCH BETTER than what Ravi accomplished. Why? Because he is sticking to very conservative approach and making sure that his growth is slow and steady and forever. No fear, no Intraday – just pure conservative approach to trading.

We have not even looking at the compounding effect this can have. Today he is trading with 14 lots, tomorrow 24 and then 50, 100? Sky is the limit when you trade conservatively. When you know the max loss is 10 or 20 points why stop at 14-20 lots. SCALE. That’s my idea of my conservative and compounded trading strategies.

I hope if you have taken my course, you are enjoying trading too. 🙂

If not here is the details of my conservative option trading course.