Musings

 Time :7 am  I’m wiring this with early in the morning being awake for the entire night worrying about my future , last 3.5 months have been mostly like this since October 5.  My previous blog post was in July 2021 and writing this after almost 7 months. I feel I’m more toned down as a personality now  October 5 2021 - client went thru org change Tammy tookover the charge as poc for us. I had a bad meeting with client (mondelez) senior decision maker - hector . Hector newly took over this positions and he is hell bent on the moving ur contract to Accenture . I was worried after the meeting as my entire business case for director was evacuate of mondelez and suddenly my future looked bleak. This also accompanied with one of my key guy Vignesh resigning . I suddenly felt lonely with future bleak in job at the same time the algo which I was trying out and very hopeful was not giving expected result as the fix was continuously down previous 3 months. Whatever little mone...

 Hi There Here i'm writing this on 11th July 2021, - Haven't introspected for long  about my future. But had a chance to think through today & yesterday about the journey so far and the direction that i'm taking towards achieving my goal has led to write this post.  Corporate work has been rewarding this year, was busy in work for most part of the last year bringing in good revenue for the team . Boss is happy and colleagues are appreciative about the work and i;m also promoted to Director. While the promotion is good, it also made me to think what next in this company. I have only 3 choices as this position / role is almost at the pinnacle of position what i could achieve as employee withing EY. After this,  A. I would need to take a role of Partner- which would require myself to take a long term commitment within the company - B. leave EY and settle in other company for higher salary probably.  C. Move to other EY firms outside of India and take up Sr Mana...

Time: 8:50 AM  1.  Nifty #14721  2. Nifty Straddle  14700 ce - 96.7 14700 PE - 65.55 St Premium = 162.25 3. Overnight Fed has kept the interest rate unchanged which has led to rally across asian markets and all asian markets are up 4. Nifty expected to gap up - SGX Nifty is up by 177 at 14949 5. We will see how much is the overnight premium eating and the corresponding Nifty pot change and VIX change 6. Vix is at 20.16 5. Domestic cues are positive       

My going in mindset for the trade on 6th Jan   1. Nifty was very upbeat with last 10 continuous days of uptrend (680 points up) and no reason to consolidate. 2. I was frustrated with the continuous upmove even without much of solid +ve news - Never go against the market which is flooded with liquidity 3. On 5th Jan -  nifty ran up 125 points on and closed at 14200 only 100 points below from my strike price of 14300 CE for 7th Jan - It seemed easy for NIfty to run up 100 points in 2 days  4. I was not able to sleep on 5th Jan as i feared my CE position will run into ITM and i was determined to do adjustments - but this time w/o giving away any money to market by moving to next expiry- I made 3 plans - (a) agressive adjustment - to sell 14000 PE in 7th and take out all money in the same expiry (b) sell PE and CE on next weekly expiry with 300 to 400 points distance (c) Move to monthly expiry or 21st Jan  I was also on weekly Connect call with my office team- So de...

  If one day if i can go back and rectify in my past that would 21st December and particularly 2:30 to 3:00 PM I'm not sure what has gone into my mind- its absolutely ridiculous and unbelievable how i reacted to the market drop I very well know that there is high probability that the market is going to crash, but yet i was not prepared to / rehearsed my actions when the market crashes You know that consolidating market is always dangerous and you knew that several times in the past market if it consolidates for longer duration it is more likely to break out - when you know that upmove and all the good news for which the market trended positive are factored in (stimulus bill) then you should know that crash is highly likely and you should have closed all positions or atleast reduced your position.  Not closing     

 Swing trading is a trading methodology that seeks to capture a swing (or “one move”) in the markets. The idea is to endure as “little pain” as possible by exiting your trades before the opposing pressure comes in When the market is trending, it doesn’t go up in one straight line. Instead… It moves higher, pullback towards an area of value, and then continue trading higher. And where does the market retrace to? Possibly towards the Moving Average In a strong trending market, the price tends to pullback towards the 20MA. In a healthy trending, the price tends to pullback towards the 50MA. In a weak trend, the price tends to pullback towards the 100MA and beyond. Here’s how to do it: 1. Identify a range market (market condition) 2. Wait for the price to reach Support (area of value) 3. If the price reaches Support, then wait for a False Break (entry trigger) 4. Set your stop loss 1 ATR below the candle low and take profits before Resistance (stop loss and target profit)

Support – An area on the chart with potential buying pressure to push the price higher. Resistance - An area on the chart with potential selling pressure to push the price lower.  Role reversal If the price breaks below support, previous support becomes resistance. If the price breaks above resistance, previous resistance becomes support. Dynamic Support & Resistance Support & Resistance can also move along with price, which is called Dynamic Support & Resistance. Dynamic support occurs in an uptrend, and dynamic resistance in a downtrend. They can be identified using moving averages (I use 20 & 50 EMA). Impulse & Corrective moves Impulse move - "Longer leg" on the chart, which points towards the direction of the trend. Candlestick size is usually larger, signaling momentum behind the move. Corrective move - "Shorter" leg on the chart, which is against the current trend. Candlestick size is usually smaller because of traders taking profits, witho...

 Option pricing methods Black-Scholes Model The Black-Scholes Model is probably the most used model for pricing options. It was developed in 1973 by the economists Fischer Black, Myron Scholes, and Robert Merton. This model is used to calculate the price of European options. The formula for the model is complicated and most traders will not want to do the calculations themselves but will instead rely on one of the online options trading calculators. Cox-Rubenstein Binomial Option Pricing Model This model is a variation of the Black-Scholes formula. This model uses the value of the underlying security over a period time, instead of just at the expiration date. For this reason, this model is often used for valuing American options which can be exercised at any time during the contract period. Again, calculating this formula by hand is probably not what most investors are going to do and a variety of online calculators can be used for this purpose. Put/Call Parity Put/call parity refe...

 The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliché, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short. Trading tips for Iron Condor option Strategy: This strategy works best on the stocks which have low  volatility. My advice is to open Iron Condor option strategy on any of the stocks if it fulfills all the below criterion: The stocks which have average daily volatility less than 1.25% The underlying stock price has not crossed any significant level on any side within past 4-5 days. The technical analysis is not showing significant movement on either side. There is no important announcement by the company management in next 10 days Close the trade if you have achieved more than 30% of the maximum profit calculated or before that depending on the situation. Trading tips for Short-...

 Date 25-11-2020  One day before expiry- if 190ce was held till expiry and its in ITM then its possible to move to next month 10 points above to DEC 200 CE at a profit. if in ITC falls then 200 CE will depreciate and you can get out of this CE position w/o loss   in case 200 CE gets in ITM slightly we can make same adjustment next month and push to jan otherwise in case if 200 CE is deep ITM then below is the premium difference during the expiry  Learning :  1. Choose a stock which does move continuously in the same direction , even if it moves it should not move drastically 10% month after month - Deep ITM adjustment will lead to loss while light ITM option can be moved for profit  2. When you know that your one side is getting into ITM- sell more on the other side to make more profit which  can used to get out of losing position 

 All my losses has been made with the intention to cut losses out of fear of making losses. however would not have resulted in the losses had i left the position as it is as the positions were anyway sufficiently OTM and the position has recovered after i booked losses.  Most of the losses is after the day of fall - which means that having seen the fall has shattered the confidence and subsequent news flows has already shatter our confidence in the market. the next day even if there is slight indication of market falling further, i cover the loss positions in the fear.  Some of the adjustment that i have made - has resulted in avoiding losses and these adjustments were thought through with exact scenarios played back in mind in the morning and implemented during the day. However the trade that i have taken in panic without plan has always resulted in losses and not let me to think of adjustment trade.  Now that we know that my losses are majorly because of 2 reasons ...

1. Over come fear of losses - 4 out of 5 times your sold positions won't be ITM - hence do not book losses with the fear to cut losses early on - since all your trades are already taken far from the strike with conservative return expectation - there is no point to fear- next time in case if you are incurring wait for the vix to go down , if it sustains do adjustment If the delta increases through the expiry      - move the trade farther away with increase in capital deployment      - wait till it reaches ITM and roll over      - if 50% distance covered on call side- move the put side closer by 25% and move call side by 25%      - if 50% distance covered on put side - move the call side closer by 50% and move the put side by 50%      - roll over early on when roll down position of next expiry is equal to the current expiry- so that the loss on adjustment is minimised (e.g ITC October to november roll over) ...

1. Unpreparedness for extreme situation / scenarios - lack of adjustment trade plan 2. Taking trades that you are not fully convinced enough (Sep series short straddle based on suggestion from PR Sundar)  3. Lack of conviction / stickiness to the plan (sep 1) 4. Tendency to take the revenge trade as soon as possible - it is a very common behaviours to scout of revenge trades to cover up the losses. First of all,we need to understand while we took profits with smile, we should also take losses without too much regrets. Losses should give us learnings and not regrets, because at the end of day it is you who made losses not some one else - hence don't get too harsh or angry on yourself and take revenge trade . Secondly, whenever you are taking losses it means like market might have moved violently and  it would hit your stop loss. Which means that markets are volatile and most likely it will stay like that for some time- even if market shows some form of stability- we need to be ...

In the beginning of the month on 2nd august - i did the analysis on the high risk width IC strategy and found selling call & put ~ 10% away from strike and taking hedge 500 points further away will give ROI of 4 to 5% find below the chart- return is 4.28% Tday 29th Aug if i analyse the same setup for september trade - the ROI is for 500 RW is 1.57 % the ROI has decreased from 4.8% to 1.57% - this is because of fall in VIX from 25.1 to 18.3  Find below the Sep IC month chart  This brings the question to our earlier analysis of monthly movement of nifty for the last 5 years purely based on points movement. The analysis has to be done with respect to VIX as well. Having said that is IC is not worth taking on low vix environment- not really. the strike price has to be chosen based on prevailing VIX. which means during higher vix the spread of the trade can be higher and during lower vix spread of the trade can be narrower. What is the formula to find the risk free or mini...

In the beginning of the month on 2nd august - i did the analysis on the high risk width IC strategy and found selling call & put ~ 10% away from strike and taking hedge 500 points further away will give ROI of 4 to 5% - I deployed the strategy and kept adjusting the trade by moving the sell positions closer to strike every week and took additional 1% return every week. Learnings from trade  1. The margin when i took the trade was 60000 (base of 40K for 100 point RW + 5.3K every additional 100 point RW) and the margin requirement increased as the strike price moved closer to any side of my sell position- it is safe to assume that we would need 75K margin for 5000 point rw IC strategy 2. Through the month as i moved only the sell position closer to the strike and not the bought hedged position - the margin requirement kept increasing. Beyond 1000 points RW, there is no margin benefit of having hedge position, hence we can as well sell the hedge position and convert it to sho...

Which Strategy gives better ROI in options selling Last week i did the analysis on maximising the ROI on Iron condor and identified that taking 500 to 600 risk width is giving more ROI than the traditional 100 points risk width Iron condor- taking 600 RW IC is very well applicable in our case as our selling strike price is anyway far away (800 to 1000 points) from current market price in case of monthly option. And also since this is monthly, even if the positions go wrong in short term there is time for retracements and its is liquid However my preliminary analysis on short strangle showed that SSG (short strangle) gives less ROI than the IC. I had taken a short strangle over last week and analysed the ROI on that. As you can see below the short strangle ROI and the IC ROI is more or less the same. Infact considering only weekly ROI - the SSG ROI is more than that of IC  However SSG comes with a lower break even spread and unlimited risk which makes you to lose sleep compared to I...