The generator FD for the investment purpose

In the title of this post I used the word the generator FD, what is it and what do I mean by it?

As we know that the fixed deposit is considered to be one of the safe investment in India. The rate of return is also somewhat good. The main thing is it do not poses the risks that are in the stock market.

What is generator FD

Well, there is no such thing as the generator FD , this is a word that I have created or at least I do use it for my investment.

I consider it as an investment strategy.

What sort of strategy is it?

As per this I invest a sum of amount each month in the fixed deposit or I start a new fixed deposit account each month for a small amount. Now I choose to take out the interest each month by choosing the monthly interest payout options for it, further I will invest this payout interest to take any positions in the stock market.

What could be its benefit?

As I will be putting some amount for the fixed deposit , I will be getting some interest amount each month, as the fixed amount is increasing each month the interest from them will also increase each month. Now as the interest amount is also increasing each month and we are only investing the interest amount each month our principle amount is safe.

Who can use this strategy

Anyone who is investing some amount of money in the stock market who is having a source of income from job or anything else can use this.

Instead of investing the amount directly on the stocks or mutual funds create a FD of it and use the interest amount to invest in the stock market.

How can this strategy be implemented

There are many ways by which this strategy can be implemented. 

Anyone can start a new FD in any of the bank account these days and can handle that account from his mobile phone.

If you do not want to start multiple FD's you can go with the liquid funds as well and can even choose to cash out a small amount from it to invest in the stock market.

This strategy for the investors and traders who wants to play safe with their capital. As per this strategy the risk is just of the interest earned amount and the principle amount is safe in your fixed deposits.

NOTE : I donot recommend any strategy , this is just for the education purpose. This is just a way which I too prefer and I am sharing my personal experience in this.

I have created few generator FD's and now instead of directly investing my money into the stock market I will create the FD of that amount and will invest just the interest amount for investment. Each month the investment amount will increase and further when it reaches to a higher amount I may choose to start a small SIP of that amount with the small investment.

I feel this is a way that could work for me to build a portfolio with the small amount and by investing small in the riskier but investing regularly a small amount without hesitating.

I will probably create a FD of 8000 Rs each month and will invest the earned interest of this 8000RS each month in the recursive manner.

 

Took a position in banknifty @22200

 I was waiting for the right time to invest in the banknifty my target price was 22800 but I failed to take the position at the 22800 price, Now as the price came down a little more I took the position at 22200. I purchased the sbi banknifty etf for that.

Is it a good price to purchase banknifty 

I am a long term investor and I feel that the banking sector is already at a discount price and probably it would be a great time for me to take a position. As I will be selling the covered calls , I needed the portfolio for that and hence this is the price I feel will be good to take the position.

I have invested just 60000 Rs for now and if the price falls more I will try to average out the price and when I have almost invested the 3 Lakhs and 50 Thousand amount I will be selling the calls for the higher price.

This is the good time to build the portfolio as the banking sector still looks downtrend from the past few days and as no one can time the market it is good to take small positions at each fall.

Can banknifty reach 26000 price

In the recent up move the banknifty crossed the 25000 price , I believe it can always reach 26000 price , one cannot predict the market it can just take the decisions based on the movements.

I will target the 26000 while selling the calls this time, as they will be covered calls It will be a good price to sell the calls for me.

Other investment strategies

Because of the new margin rules the pledging and unpledging of the stocks are going to take place but to avoid this and to have enough margins I will accumulate the liquid funds and I will pledge them to get the margin from them , this way I will be having enough margins to trade the options and futures.

Probably I will be opening an account in the zerodha as well, I came to know that they have the system where one can pledge the mutual funds as well.

Meanwhile I am exploring other ways also and I will share whatever I finds out.

10 September banknifty expiry plan

I feel the banknifty will remain the downtrend for some time and may expire between 21800 to 22600 on 10 Sep 2020 expiry. As I have not taken any option position I am just focusing on building the portfolio of the ETF's and this time I wont do the mistake of selling the naked calls as I did last time and ended up in loss.

The stock market is full of risks and all the trades and investments should be handled very carefully and one should be ready with entry and exit plans in advance and should be prepared for the worst case scenario.

 

 

Missed the first oppurtunity

I totally failed to take a position for the banknifty at my decided price of the 22800. The price even went down by 22700 but as I was away and the price was in that range for the very small duration of time, I totally missed the oppurtunity.

What Now?

Well, the market always give you the opportunity and I will wait for it for some more time.

What will be my monthly investment

I invest a small amount between 5000 to 6000 thousand in the stock market and this month I will be investing these in the combination of the mutual fund and the stocks.

Which mutual fund would be I purchasing 

I am planning to invest in the liquid fund this month , I am planning to build a liquid fund portfolio as well this will be helpful for me for the margin related things , I will keep all of it pledged for the margins.

Which stocks will I be purchasing this month.

For the stocks I may choose the consumer sector , I may go with the consumer etf and ofcourse a small amount will go for the nifty etf as well which I have already told in my previous posts.

I will also share in details the investments that I will make with the proper screenshot.

When am I going to explain other option strategies

I am currently working on creating some of the content to give proper information in the high quality manner. I will soon post about a new option strategy in the post as well in my youtube channel.

Any plan to buy banknifty etf this month 

From my investment account ...NO , but from my trading account I will surely.

Banknifty is something where I see the good price and the good liquidity and of course a good opportunity .

I will buy the etf in small quantity on every dip.

How to handle tax for the option trading 

As option selling is considered as a business it will be taxed as the business income. This should be taken care while filing the ITR.

Banknifty is slowly coming into my range

 I have decided to take new position for the banknifty at the 22800 price, the banknifty came to the price of the 22850 which I failed to take position , this was the ideal price to take any position.

What now?

Now I will see the new levels to take any positions 

How will I handle the new Margin rules?

Unfortunately , I will keep a cash reserve for the margin and will not utilize the complete amount for trading and investing. I will utilize the 10 percent at each fall and will probably utilize only the 70 to 80 percent of my investment amount.

Will I be taking position in nifty as well?

I will stick to my plan to invest on the banknifty for now but slowly with time once I reaches a value of the 6 lakhs I will start taking the position in the nifty as well. I will probably invest in the kotak nifty etf for the same of it could be nifty bees, I will decide about it accordingly but I have already started accumulating the same in small quantities.

Nifty vs BankNifty what is my favorite?

As per the lot size the nifty has a lot size of 75 as on today and the banknifty has the lot size of the 25 as of today hence I feel the total amount for one lot for the banknifty is less than the nifty and also for the ease in the calculation I feel the 25 multiple are easier to calculate and just because of these two factors I like to invest and trade on the banknifty. These both always have good volumes and hence there is high liquidity and as they both are index I feel they are quite stable.

Low Beta stocks 

Recently I have given some thoughts on a strategy that includes the investment in the low beta future and option stocks, the stocks having the low beta values moves a little lower when compared to the stock and hence they can be proved to be good investments in terms of the future and options.

What is long term strategy of mine for the option trading 

I am planning to accumulate the stocks and etf slowly and when I have enough amount of the stocks I will enter into the option trading for them. I am already doing it for the banknifty and I will start for the nifty and low beta stocks as well.

Also, I have started creating a website of my own where I will be working on some tools to automate the calculations of some important levels which could help in studying the important levels to take any trading positions.

Conclusion

I am actively working on each fronts weather it is in the blogging , investing , trading , coding , developing or any other thing I am gradually working to get the success in each fields. I am trying to create a automated way to study and analyze which will help me in taking the faster decisions.

For Banknifty I will be soon taking the positions as soon as I get the good prices for it.

 

When I am planning to enter the market and why?

In my previous posts I have explained the reason on why I squared off my all positions in options as well as in portfolio when the banknifty reached to the level of 25000. I am waiting for the perfect time to re enter the market now I have kept my cash idle for the time.

How will I be entering the market now

As I am waiting for the right time to enter the market I feel the market is quite high on prices at the moment. As I prefer to invest in the banknifty my target price would be around the 22800 or lower and this time I will not be entering with my full cash but will invest little by little money on each fall.

Why have I chosen to invest at the 22800 price.

As per my own analysis I feel at 22800 there is strong support, that is the only reason for me now.

What if the price of banknifty don't reaches the 22800 price

I will wait and even I may park my idle cash on the liquid etf or Bharat bond to earn a little from there till the right time comes but even then if it don't comes any near to the 22800 I may take tiny positions from the interest earned from the liquid etf.

Why don't I sell the put option of the banknifty 

I am still observing the market behavior and may be I would start selling the put option but still I feel covered call is the best strategy that could work for me and hence I am waiting for the right time and I may buy the banknifty etf to build the portfolio.

How is new margin policy is working for me

Honestly speaking the T+2 day rule keeps the margin blocked the exchanges and broker should work on settling down the stocks on the daily basis so that the margin amount do not gets locked for a longer time. As I will not be able to square off a position and start a new position immediately I will be waiting for the right time and price and also will be very very careful before entering for any trade. I feel the sebi will bring some changes for the existing policy.

This new margin rules is really impacting my decision to enter the trade, now I had to give a lot of thinking to decide when to enter and exit.

Conclusion 

I will enter the market as per my plan with small amount this time and I will be very careful with the new margin rules so that in any case I do not get penalized for the shortage of margin. I will again create the positions to take the covered call strategy as I feel it is the most suitable strategy for me and this time I wont be selling the naked calls as I did last time which even caused me the loss and I totally loosed a good opportunity.

Impact of new margin rule on me and my loss from banknifty for 3 september 2020 expiry

As in my previous post I told about the loss that I booked from the banknifty , the loss was because of the upmove and then the downmove of the banknifty. The banknifty showed a big upmove and then it got corrected few minutes later after opening up and I squared off all my positions at the peak of the upmove.

 

I made the loss in that move as I had 3 positions of the call options sold.

I sold 2 naked calls and one covered call.

Although banknifty reverted back after touching the 25000 strike. I had sold the calls of 25100 ce weekly , 26000 ce monthly and 25000 ce monthly also I had the banknifty etf.

I had to square off the positions because of the below mentioned things

1. The selling up of the calls were giving me more loss as compared to the profit from the etf and hence I squared off all the calls and portfolio. 

2. The new margin rule from the sebi was going to be implemented from September 2020 and hence I wanted to check how it would work in order to avoid any charges and penalties.

My overall P/L

I am still at a overall profit that I managed to get from my covered call in the past 2 months.

Although this week it was huge loss but still overall i am in profit.

I will post about it in the upcoming post when I will be having clear idea about the margin rules.

How will the new margin rule from sebi impact me

As i have been working on the future and options I am already familiar with how margins works, now with the new rules only pledging and unpledging will be more frequent and the money will be locked for T plus 2 days .

I used to trade on banknifty for a weekly position. I used to start a position on Friday and sqaureoff on the expiry day that is on thursday.

Now as the money will be locked there will be chances that I may not be able to take new positions on the next day or I will have to keep the extra cash or margin to take the new positions.

SEBI what have you done and why have you done this.

This new margin rule is full of pledging and unpledging activity. Most the money will be locked in order to get buy and sell of the stocks. I feel the retail investor is the worst effected by this as he will be required a little more money to trade and there will be delay in squaring off and taking new positions.

With the advancement in the technology we have taken a step backward ,things that should have made the processing faster has made the processing slower.