Musings

Finally after 10 months of fight between me and santosh - we resolved the issue yesterday (25th July 2020) and settle for 3.5 lakhs against 5 lakhs payable to me. in return i had to return the share certificate  Learning from the overall dealing  1. Cash is not the only qualification or competitive  advantage in a business and stay relevant. Because business man who are in need of cash will get attracted to you at that point of  time for partnership when there is need of cash and later when the need erodes partnership is being questioned or trust breaks. In these situation where only cash is provided for partnership - strong agreement to be in place favouring the cash provider as the cash provider does not directly get involved in the business nor know the details to safeguard his interest. 2. Never trust a story which is too good to be true. Rather lose the opportunity than regreting later - Nvron came with a proposition that was too good to be true. Know your stren...

Like in all initiatives- be it business, exercise, job, hobbies or any passion- Consistency is what differentiates winners from "wanna-be" winners. Theoretically all of us have potential to learn and implement the learning, but practically only few achieve what they want to achieve.  With the advancements in information technologies like Youtube, udemy - learning is democratized- whoever has time and inclination can learn at their own comfort and at their own speed.  So when anyone can learn- why not all who learns cannot implement and win. Partly because they do not have required resources be it time or money or support  and if they have all the resources, then it is because of lack of discipline to implement.  However, most of the impediments of implementation is used as filtration criteria even before learning. For e.g: If i do not have agricultural land or have no intention to buy one in future - there is no use of learning about agriculture and you will not lear...

What should be used as Margin for options Writing - Cash / Bharat Bond / Stock We need to keep atleast 10% of margin as buffer for doing any adjustments trading  Also, we need to follow strategies that are complementing each other  If one strategy is range bound and other strategy should gain when market does not depend on market being rangebound - so when requirement for adjustments comes- we need not do adjustments for all trades If one strategy is long - other strategy should be short and likewise  Trade setup should be bi directional- so that only one side is adjusted any point of time    1. Cash - least effective Margin because we dont earn interest on this amount 2. ETF / Bharat Bond - Comparatively better instrument hold than cash and can be pledged for margin within minimal haircut (8 to 15%)- relevant to put in money during uncertain times or at the times when market is likely to fall - Return on the underying bond is 6% appreciation per year  3. S...

Inorder to make money by selling options in consistent manner  1. We need have high safety factor & sufficient cushion (sell low premium option strikes)   2. Decent return - sell high number of lots - hence need high margin  Hence to make the money we want - we need to ensure there is high margin money in disposal. hence margin management is very essential and one need to know the trick to pick trades that requires less margin - hence more lots can be purchased 1. Always take trade on both sides to reduce margin- selling 1 call and 1 put nifty is 1.1 lakhs while selling 1 call or 1 put alone will need 0.85 lakhs which means if we take on both sides it will lead to risk mitigation as 1 side will always be profitable for us and also reduction in margin 2. Margin reduces as we go farther in OTM- hence try to take as far strike price possible to reduce the margin  3. Farther the expiry - lesser the premium - options of same strike between the expires -  Clo...

Stock Short Strangle option strategy  Background of this strategy  Hedges minimizes our profit and risk. We cannot go blind w/o hedges which is against my principles of trade. However, hedges that we buy on nifty weekly position expires worthless at the expiry- I was thinking how do we replace this expiring hedge to long term hedge which does not decay with time. One option is to buy long expiry hedge at high premium to hedge or to buy underlying stocks.  Buy underlying stock (incase of nifty that can be bought by purchasing 7500 units Nifty Bees) costs almost 7.5 lakhs for each lot of Nifty which hardly gives 500 rs per week and 2 K per month which is very less ROI- hence it it is not worth buying Nifty Bees for hedging purposes  We are comparatively OK to put up  with the losses on the equity since it is notional but losses on Options positions is realizable on expiry - until we do adjustments to keep rolling up options which involves active tracking / trading...

My principles for option trading  1. Sell option not buy irrespective of the of the profit potential buy option offers - because I play by probability and not by luck  2. Always hedge to have piece of mind and not to make losses by wrong trades when the direction of market goes opposite to your trade 3. Square off hedge as soon as it is not required ( when probability of making loss is less than 5% and the expiry is only 2 days away)  4. Buy hedges that are long lasting than the main trade- which means buy hedges which can be used for multiple trades - which means expiry date of hedge should be long or it should not have expiry date at all  5. Always take bi-directional view or if you are view sure take Complementary view (Market will not go above this or market will not below this- due to recent run up or correction)  6. Take calculate risk - "if we keep thinking without action" - we will regret the inaction rather than the regretting the loss by trying out...

Date : 25-06-2020 Time : 11:51 AM Day : 25 Jun 2020 I analyses profitability of the IRON condor positions for the 25 Jun series . Even the +3% to - 3% IC is giving only 0.4% ROI  It very much evident there is not point in taking fresh trade at the the expiry trade for IC- its not worth the effort Also. in order to bring the margin block down, I made a mistake of selling the hedge instead of squaring off the sold position. This is absolutely a oversight mistake which warrants the claim that- do not try to square off in haste Put limit order for 0.05 for squaring off to avoid any penalties from the broker for leaving it to expire without squaring off Time decay through the day in % terms is highest in the last day of expiry session - however the value wise its low as the gap down on the premium on the start of expiry day from the previous day is highest Hence max time decay happend on the gap down in premium from expiry -1 day to expiry day