Escape's Options Trading Diary - Phase 2

[aditya14]

Unless your account size is equal or above 10L; if you continue this way, one day you are going to blow up your account.

For more details, google the risk management concept called "risk of ruin".

It doesn`t even matter what size of account one has even if Ambani started trading like this he would become beggar no stop loss no greek analysis counter trend trading.Might as well start gambling in IPL.

 

[manojborle]

Dear Escape today sgx nifty is showing a gap up of 100 points at present, if it happens how will you adjust your position ?
It looks completely one sided, so it means you are extremely bearish but How can we buy 3 different strikes on the same side ?
means what is the benefit of it ?

 

[aditya14]

I`m sure he will average again

 

[timepass]

I`m sure he will average again

Nifty is rangebound so far 5500-6000. It's ok to maintain a fixed view (whether bearish or bullish) till the range is broken decisively.

 

[escape]

No trade today. Position remains as it is.

 

[escape]

U had 6000 5400 @ 20.2 and by adding 2000 u got average price 15?Are u paper trading like a lot of the diaries here?

Yes, bought 2k @ 6.30 and average reduced.

 

[aditya14]

Nifty is rangebound so far 5500-6000. It's ok to maintain a fixed view (whether bearish or bullish) till the range is broken decisively.

Not with a instrument like options it isn`t.The greeks (Theta and IV) are wonderful words.One should read them before jumping in.

 

[aditya14]

An advice for you, always have a stop loss escape bro.Money should be protected like there`s no tomorrow.And read how to trade options, this is not the way,I`m amazed at this thread having so many view.Tells about retail mindset.

 

[arcus]

It doesn`t even matter what size of account one has even if Ambani started trading like this he would become beggar no stop loss no greek analysis counter trend trading.Might as well start gambling in IPL.

As per the risk of ruin tables, the percentage of the account size risked on each trade relative to the account size is what matters and not the absolute figures.

Lets assume escape has actually risked around Rs 3L as he said above on a unidirectional, huge vega positive, massive delta and theta negative positions.

If his account size were say 20L then the amount risked would be around 15% which is pretty normal.

Risking 10-15% per trade and keeping a 5% stop is an aggressive strategy but not unheard of among professional traders. The conservative trader however risks around 10% per trade and keeps a stop at around 2%. (I'm talking about options here).

PS - I have taken the maximum risk for the options written as 200 per lot for the above calculations.

 

[aditya14]

As per the risk of ruin tables, the percentage of the account size risked on each trade relative to the account size is what matters and not the absolute figures.

Lets assume escape has actually risked around Rs 3L as he said above on a unidirectional, huge vega positive, massive delta and theta negative positions.

If his account size were say 20L then the amount risked would be around 15% which is pretty normal.

Risking 10-15% per trade and keeping a 5% stop is an aggressive strategy but not unheard of among professional traders. The conservative trader however risks around 10% per trade and keeps a stop at around 2%. (I'm talking about options here).

PS - I have taken the maximum risk for the options written as 200 per lot for the above calculations.

Are u kidding me?
Risking 10-15% means if option is 100rs then u should risk or put stop loss at 85rs.What is 17 rs out of 20 rs (that`s 85%) thats the loss on his 5400 PE.Now going by your logic he should wait for a 3 lakh loss on a capital of 10 lakh by ur "ruined risk"(Pun intended with capital P) table.

Since you want a man to go ruined next month if he wants to break even he has to make 3 lakh on 7 lakh (10-3=7 lakhs as per ur reasonable table).That`s 42% in a single month.Ok what if he again risks 30% next month he will risk 2.1 lakhs of 7 lakhs.Ok great what if that gets hit.

In short by this ruined table a man will lose 5 lakhs of 10 lakhs in 2 months.

Here is what you have in absolute terms.You cannot twist facts 3L of 20L may be 15% and reasonable for you but I`ll show you now what the position really is in next post.