This week started with the huge losses. I had the 3 positions of calls sold of the banknifty for the strike price of the 25100 weekly , 25000 monthly and 26000 monthly at the premiums of the 60,100 and 100 respectively.
Today that is on Monday 31 Aug 2020 , as the banknifty opened up with the gap up opening and hence the premiums of the calls drastically increased. These increased in the premiums caused the loss of around 45000Rs to me.
I had the portfolio of the sbi nifty bank , which too increased but I had to square it off in order to neutralize the loss. At the end of the day I will be able to get the complete details of the overall loss.
Lesson Learned from it.
As I had the portfolio of equivalent to 1 lot of the Bank Nifty even then I sold the 3 lots of the banknifty, Which means my loss will be 3 times and that happened.
The value of the ETF didnt increased that much but the premiums of the calls increased alot and causing me the huge lose. So the lesson I learned is never ever loose the hedging, plan to earn big and loose small than earning small and loose big or even earning big and loose big
What will be the next strategy
As I have zero positions at the moment and I have cash available I will plan to take the next position on the bank nifty etf. I will try to buy the etf of around 1 lot in small quantity on each fall. Then I will send the covered call of banknifty but this time it will be limited to just one lot of either weekly or the monthly , not more than this.
BankNifty trend this week.
I feel the banknifty has moved a lot towards the north , now there may be some profit booking at the current levels and hence which may give a little correction.
But still a trader should remain hedge.
What are the other strategies that can work in this scenario of banknifty
There are a lot of option trading strategies that could work in the current scenario of the banknifty. The ratio strategy can also be implemented at this point of time or buying a put can be a good strategy right now.
But as for me, as I have already mentioned I prefer to buy the stock at the falling market and sell at the rising , so I will wait for few time and then I will buy the etf again at the lower price and then I will again start selling the covered call of the banknifty.
What if the bank nifty keeps moving up
If the banknifty keeps moving up, I would avoid buying the etf for some time untill it shows some correction. Meanwhile I will prefer to park my money on the bharat bond or the liquid bees etf. This way the idle money will keep on earning some interest on it.
Why not go for the stocks.
Buying and selling of the options in the stocks can be alot more riskier than the index. As I am still new to the options I will take some more time to learn while trading and index are much better and stable for this purpose.
Conclusion
1. While anyone trades with the option , he should be strictly hedged.
2. Decide your stop loss in the premiums as well or you may incur a huge loss.
3. Never hesitate to square of your positions if the trade is going against you. Taking small loss may prevent the big loss.
4. Be prepared to square off the portfolio as well if the call gets in the money.
5. Market will always give opportunity to buy a stock at low price, just be prepared it by having cash or parked money for it.
Keep trading :)
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