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Terms & Conditions
Dos & Donts -Must follow
Dos & Donts -Must follow
- We can only suggest/advise. Decision to act upon it is entirely yours. Once initiated, the trade is yours and you own it. We cannot be held accountable for any losses you might suffer. All profit and losses are entirely yours.
- We assume your risk is properly managed at all time and you don’t leverage excessively.
- Your trade is personal (consider it like your salary slip or ATM PIN). Details like what have you bought/how much quantity/what price, never disclose it to anyone (including us). Its your personal data keep it with you only
- Don't get carried away after seeing 2-3 favorable trades and start leveraging/trading big. Usually that is the time to be cautious. We cannot be right all the times and after a string a right trades its highly likely that next couple of trades will be a wrong so be cautious and preserve your capital.
- Trading is a disciplined (but at the same time fun) game. If each time you open a trade, the thought of 100-150 point loss is causing you to panic & lose your sleep then you are not trading but playing 'satta'. Our recommendations are not for 'satta' players. If you are one of those then you are at a wrong place. Please do not approach us we cant help.
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Dos & Donts -Good to follow
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We only advise when to buy/sell. What to buy/sell is upto you. FYI- we never recommend buying out of the money call and puts ( doesn’t matter how bearish and bullish we are) we generally recommend the following-
- Call & put writing ( i.e. when we give buy signal you may write/sell PUTS and similarly when we give sell signals you may write/sell CALLS)
- Trading nifty futures with call/put writing ( i.e, When we give buy signal you buy Nifty future + sell call similarly when there is a sell signal you sell Nifty + sell Put). You hedge your position while initiating trade
- Trading Nifty future without hedging i.e, naked trade
- We measure our performance using 3rd option always.
For any feedback ( negative or positive) or in case of any query feel free to write to us @ rahulrtn412@yahoo.com or whatsapp# 9319321906
Hi. How is the first option last risky? In fact it's worse than option 3
ReplyDeleteLet me explain, first and foremost reason is that when you write call/put you are not able to leverage as it requires full margin payment (main cause of losses in trading is leveraging i.e, putting 100% of your capital at stake.
DeleteSecondly, lets take this example. Suppose you sell Nifty 10800 Jan Call @150 ( Nifty CMP is 10700). Now lets say market doesn't move the way you expected it to be and Nifty is trading at same price around 10th Jan. Now using option 3 you will be at par but option 1 the call value would have reduced 30% atleast ( from 150 to 100)so you will be sitting at a profit of 50 point even though market hasnt moved at all.
Now take another scenario, Nifty rises 200 points by 10th Jan. Option 3 your loss is 200 points whereas in option 1 your loss would hardly be 70-80 points. hence its always less risky.
When trading you should always be first looking at protecting your capital and then making profits.
Professional players always write call/puts and retail investors buy them ( don't have to explain who end up making money in the end)
I have seen people deploying their entire capital( thousand of lots) in buying calls/puts and losing all at the time of expiry. Reason is greed, when someone has 1 lakh capital he wont trade in single lot by paying full margin but would want to buy 50 lots (in call and puts) and put entire capital at stake. All because he thinks "ek lot me kya banega". whereas he should always trade in one lot and build his way to multiple lots gradually. 80% of the time out of calls and puts you buy will end up in losses ( it might work occasionally in day trade but for positional trade they are a strict no no)
Apologies for such a longish reply, but I hope I have been able to answer your question :)
As you have discussed two point above, i still have some doubts.
Deletefirst: Buying with NRML order won't result into leveraged trading.
Secondly: as you have explained to sell Nifty 10800 Jan call @150, why we are not buying Nifty 10800 Jan Put.
I just want to understand, why we go for writing instead of long. because
if i am writing i will be needing large some in form of margin and second loss is limited to the premium what i have paid for long, obviously in case of write we can square off if market doesn't move accordingly.
understand your point. let me explain
Deletea) Buying with NRML order ( if you are buying out of money call/put) does create a leveraged position. If some has 1 lakh capital and he is trading in 'out of money option he will buy 10 lots for say 100.If he is buying just 1 lot then its fine as only 10% of his capital is at stake. However people trade big and buy multiple lots and put 100% capital at risk. if you write call/put( i.e. sell first) then you can buy/sell only one lot with 1 lakh capital so you are automatically restricted by exchanges to leverage. General rule of mkt is 1 lakh for one lot ( if you want to trade in 5 lots you should have 5 lakh capital) but how many people do you think do that? every one want to trade 10 lot with 50K
b) Coming to your second question why we are not buying out of money put (10800) is that when you buy put you pay a premium. lets say nifty is at 10800 and 10800 put is available at 200 rs. Now nifty has to fall below 10600 in order for you to make any realistic profit. There is no guarantee that Nifty will start moving down the moment you buy puts. When you sell Nifty you lose only when Nifty moves up (so chances of losing are 50-50). Now if you buy puts you lose when a) when nifty goes up and you lose b) when nifty does nothing and stay at same place so chances of you losing increases to 66%.
pls remember that markets don't move or dont do anything 80% of times they move big only 20% of time. So 80% of the times your put and call will become zero.If you buy call/puts then 4 out 5 times you will end up incurring losses its simple math. You might make money occasionally buying puts and calls ( if you are intraday trader) but if you are a positional trader and trading in out of money call/put then I am afraid you are going to lose most of the times. Premium you pay keep deteriorating every hour every day If the movement of market is not as per your expectations.
In nutshell you need 2 things to be in your favour if you want to make money by buying call puts a) overall trend and b) speed of rise/fall and even if neither of this happens then you are done.
Out of money call/puts have no intrinsic value, its just a premium you pay to gamble on the underlying price and that premium keep on reducing everyday. If you really want to trade call/puts then go for ' in the money' like right now 11200 put is available for 500rs ( 11200-10700= 500) so you NIL premium. Always see how much premium you are paying for calls and puts and that premium is nothing but pure gamble. Just see around yourself and ask any trader if hes made money consistently by buying and holding call and puts (its just not difficult its bloody impossible with odds and maths totally stacked against you). Why do you think people lose at casinos? its only because math is always tilted in the favour of casino owner and not in the favour of gambler. Same is here. for you to succeed bare minimum odds you need are 50:50 if its less than that then sorry I am not interested. That's the reason big players always sell calls ( and collect premium)and retail investors buy them and lose it all.
I have seen lots of people wiping out their millions by buying calls and puts.
Super, eye opener reply. Appreciate it
ReplyDelete"ek lot me kya banega"
ReplyDelete100% right
But for option1, your profit is limited to say 3-5% on monthly basis whilst option 3 or option 2 is unlimited
Option 2 is limted too as you have written call and put so you have a liability to settle it. Anywyas lets assume you make 100 points every month by writing calls that gives you roughly 10% return to your capital in 1 month almost 100% return in one year. Your 1 lac capital will be more than 10 crores in 10 years. If this is not enough for someone than I dont know what will be. problem is peple expect their 1 lac to turn into 1 crore in one month.
DeleteWent thru yr posts viz rules and analysis again. Most imp is protecting capital and you've tome and over emphasized on it. Thanks
ReplyDeleteYes, preserving capital is must key to do this a) never over trade/leverage and b) never be afraid to book small losses.
Delete