What are the indices doing

crop ethnic trader using smartphone against laptop at home

The very first watchlist on my trading terminal is made up of major NSE indices. We directly trade only 3 of them directly, NF, BNF and FNF. Out of these, I have never traded FNF, and by looking at the option chain, the liquidity seems pretty low. NF has about 15 lac open contracts. By comparison, FNF has only 3000 for the current weekly expiry.

So let us look at Nifty:

After a mind blowing rally for a year, Nifty seems to be taking a breather. My charts say that the lowest nifty can go is about 13500. That is a roughly 10% correction from current levels. The trendline originating from the March lows of previous year was very steep so it was expected that NF will break below it at some point in time. But shorting the market in anticipation of a trendline breakdown would have proved to be much too costly throughout 2020.

It will be interesting to see which sectors will be leading this correction. RJ in his recent statement said that valuations of the metal stocks are too high for his comfort. I personally think banks can see a good correction. Market will likely be supported by IT stocks. One rationale of this can be found in USDINR chart.

If sectoral rotations take place, a lot of good stocks could be available at a reasonable valuation. The word reasonable might have to be redefined here. With more cash running behind same number of assets, prices of them are likely to rise. In stock market that converts in quality or in demand companies commanding higher and higher multiples.

In terms of trading ideas, I will consider writing hedged 15500 CEs if ATH is tested. I have a long portfolio which roughly equates in value to 50% of notional value of one lot of NF so it wont be all that risky. Though some of the companies have relatively small correlation to NF. Should the markets fall, I will go long in NIFTYBEES or enter into Bull Put Spreads at 13600 levels. I am extremely tempted to do iron condor for 14500-15500 range, but with VIX likely to spike, the NF might break that range, or if nothing else give fakeouts. And since NF is not near the middle of the range the iron condor will have a directional bias.

In BNF I will either wait for ATH of 2020 or the upward sloping trendline to be tested before going long. My go to strategy will be next month FUT long with call writing. If 30000 is tested again, my strategy will be to buy far month ITM call and sell current week OTM call. This will be cheaper than naked long and won’t require EOD cash settlement which comes with a FUT contract.

Markets are showing some signs of exhaustion. If we get a period of sideways movement, I will have a field day with options writing, but the volatility trend doesn’t seem to suggest that.

It will be wait and watch for me till the market picks a direction. What are your thoughts?

Practicing targets

abstract accuracy accurate aim

If there’s one thing we see consistently across all self help books, it’s setting goals. They talk obsessively about setting goals and breaking them down into sub goals and sub sub goals and planning every hour of your day….

Some goals require that kind of dedication and hard work. But some goals require work with carefully selected targets. Much like a company sets sales targets for its employee to reach the goal of profitability, we need to set ourselves some targets to reach our goal of consistency in trading.

As I wrote previously in my blog post, we must focus on what we can control and hence the targets that we set ourselves must be aligned to the same philosophy.

Most traders set targets for profit, or return on capital. I realized I wasn’t walking the talk. Market doesn’t owe me my target. I can’t force the market to give me the returns I expect or want.

Target setting varies from system to system. An intraday trader can reasonable expect to take several trades in a week. For her it might be statistically correct to check the PnL at the end of the month. For a swing trader there could be months where she doesn’t close any traders and PnL will be zero. Or a month could force her to book 3 losses in that month while several trades end in good profit the next. In such cases, monthly PnL isn’t a right measure.

Setting unrealistic targets can mess with your psychology too. If it looks like you won’t meet your weekly target, which you shouldn’t have set to begin with, you might force the trades and give up any gains that you might have made so far.

Also if you have multiple streams of income, you can set a collective quarterly target across all. I would consider trading in Equities, currency and commodities as three separate streams since required fundamental understanding of markets is quiet different in all three.

So set the targets you can achieve realistically with the capital you have. Follow prudent risk management and work on a trading system that gives you consistent market beating risk adjusted returns.

Happy Trading…

P.S. – Due to some personal reasons I will not be able to publish a post for two weeks.

Monthly Options portfolio October 2020

I did make a simulated options portfolio for October as well. I focused a lot more on some experimental strategies this month as compared to simple delta strategies of September. Also I apologize for not making a sheet as promised for ease of tracking of the positions instead of such screenshots. Hopefully I will get some time this series to make it. This is directly the update post like the last month. Since not all of this portfolio was built at a time, there was no point in writing a ‘Start of the month’ article. Also this time it is difficult to gauge maximum profit on portfolio since some of the strategies did not have a fixed maximum reward. So let’s get into it.

BIG DISCLAIMER - I may not have position in the strategies I post here due to margin reasons. Derivatives are the most risky instruments available to retail traders. Please do your own studies before taking any trades in the stock market. I will not be responsible for outcomes of these trades. I do not own any charts or data I share here. Everything is for educational purposes only. I assume you agree to the disclaimer if you continue reading this article. 

Banknifty Double calendar spread

So what is a double calendar spread? In short, you buy options in far expiry, 26th NOV in this case, and sell options in current expiry. Unique feature of this strategy is that you get positive theta, and positive vega. Meaning, you gain from theta decay AND you gain from rise in volatility. I think this strategy deserves a post of its own. So I will discuss the details separately.


Maruti Bull Put spread

This was a relatively simple strategy. Maruti has a good support around 7000. So when the stock came around that level, I initiated this spread. Since this strategy was initiated just a week before the expiry and 200 points out of the money, the premium was very low. But that also meant that theta decay would be rapid. For about 30 thousand rupees of margin, and about 6-7 days of holding period, this was a decent trade.


Wipro Bull Call Spread

This was one of trades that went horribly wrong both in this portfolio as well as my real money trading account. Results of Wipro were declared after market. A potential buyback was announced at 400rs. So without studying other numbers thoroughly, I took a bullish position in Wipro. Not only did it open gap down, it ended the series about 10 percent down from the results day. I did try to reduce the loss a little by booking profit in 370 CE and selling 360 CE making it into a Bear call spread.


Reliance call condor

This was another one of those experimental strategies I tried out this month. I did the same strategy in Cipla in my real account. I had initiated this strategy at the beginning of the month hoping that 2200 is the lowest RIL would go. It went much lower than that. Just like double calendars, call condors have some unique properties. I will write about it in a separate article. One thing I would like to point out that I booked out on 23rd of October when reliance was at 2100. Despite that the loss I incurred in this strategy was negligible. No it is not a bug or a manipulation, that is a feature of call condors.


Infosys call condor

This was a results day trade. Results trades are designed to take advantage of volatility crash after the results are announced. Traditional results trades are designed around short straddle strategy. I decided to give it a try with a call condor. About a week before expiry I decided to cover 1200 CE short call and short 1150 CE since it didn’t look like IT pack was in the mood to give a rally. This was one of the good trade, not just because of the profit but because the system worked.


Coal India bear call spread

Coal India looked very bearish after breaking and retesting 120. I initiated a bear call spread since I didn’t expect a further sharp down move neither did I expect Coal India to reclaim 120 levels. Those with a keen eye would recognize this trade as similar to the one taken in Eicher motors in the previous month. Entry was decent. But looking back at it, I do not remember why I exited out of this trade. The trade would have ended at maximum profit had I held on to it. This trade was worse than Wipro because I broke my system though the loss is smaller than that in Wipro.


Reliance box spread

Box spread is an arbitrage strategy. You enter into a vertical call spread and a vertical put spread or vice versa. Either one of the call spread or put spread will be a credit spread and the other will be the debit spread. Since the strike prices are same, the difference between credit and debit will be your profit. And theoretically, no matter what happens to the stock your profit will remain constant at expiry. I just wanted to check MTM fluctuation in this strategy. This is another one of those things about trading that looks easy but isn’t. I will write about this separately too.

In total the portfolio made about 17 thousand profit. Applying our deductions of about a thousand rupees per strategy, we still made about 10 thousand rupees on this. Though in this portfolio the capital used would be a lot less than previous month, we would still consider 10L as our investment. That makes the ROI for this month at 1%. This is significantly less than last month’s returns. It is also less than Nifty returns for the month which are around 3%. But we must keep in mind that after continuous reduction for 6 months since April, India VIX rose by almost 27%. That is a crazy increase in volatility. So despite the rise in volatility we managed to make some profit. That is what portfolio approach is all about.

Happy Trading.

P.S. – I had said in my previous monthly portfolio update article that I will post my trades on twitter. But it turned out to be a lot more tedious task than I thought it would be. So I don’t think I will be live tweeting all of my trades from now on. I may post some of the trades some of the times.

Monthly options portfolio (September – 2020)

Unless it wasn’t clear from my earlier posts, I like trading. I particularly enjoy how well options help you translate your market view into a trading strategy. So I figured why not share some of them here.

BIG DISCLAIMER - I may not have position in the strategies I post here due to margin reasons. Derivatives are the most risky instruments available to retail traders. Please do your own studies before taking any trades in the stock market. I will not be responsible for outcomes of these trades. I do not own any charts or data I share here. Everything is for educational purposes only. I assume you agree to the disclaimer if you continue reading this article. 

There will be some trading jargon in the discussion that follows. So here’s a short key for that:

  • Position – A position in a stock would consist of multiple option trades.
  • Trade – Entry or exit from an options contract.
  • ROI – Return On Investment
  • PoP – Probability of Profit

So there are some rules that I will follow while making these strategies:

  1. Maximum margin used will be 10 lacs.
    After SEBI’s new margin rules, required margins have reduced greatly risk defined strategies. Some of my strategies will be risk defined.
  2. Adjustments, i.e. additional trades, will be taken if any position has the potential to give losses.
    It might take additional margin and hence we will leave some margin unused at all times.
  3. Margin calculation will be done in the ‘India’s Best Trader’ tab of Zerodha Sensibul.
  4. PoP will take priority over ROI.
  5. Strategies will only be in the options which are liquid.
  6. Strategies on stock options will be in current month.
  7. Strategies can be initiated anytime except in the week monthly of expiry.
  8. Strategies targeted at events such as results, court hearings etc, will only be taken if at least twice as much free margin is available to manage any unexpected movements in stock.
  9. 5% of capital (i.e. 50,000) in the MTM loss on a closing basis will be the hard stop to exit any strategy.
  10. After 40-50% of the max profit is achieved, we will look to exit out of strategy depending upon stock movements.

I know these are a lot of rules. But trading without any is just asking for your account to be blown up. Another disclaimer would be that I have constructed this on a weekend so option premiums are according to the closing price on the Friday 4th September. When you track these tomorrow the premiums will be different. Idea isn’t to get the exact entry price but to have positions which will require minimum maintenance through the expiry. If the market moves against any of the positions I might add the adjustments done here. But don’t hold me to it. I will also do weekly expiry trading in BNF in my trading account which I may update separately.

Not all strategies will have explanations as some of them are pretty textbook.





This is part of the positions which will be added as the expiry comes near. All the positions will be converted to MIS on the day of expiry and I will do the expiry day trade.




This is a little complicated one and relies on volatility of the NIFTY remaining high through this weekend. So the next week long options will not lose too much premium to time decay and I will get to keep the premium from this weeks sold options.

So far we have used a little over 6 lacs for these 9 positions. I will update changes, if any, in the captions of those images. Also I will try to find a better way of putting such trades on the blog. Suggestions are welcome.

This is the first time I am putting some of my trades in public. Please do not blindly follow anything you see on the internet including this blog.

Happy trading…