Escape's Options Trading Diary - Phase 2

[aditya14]

Here is how the Puts bought by Escape look like I don`t want to show the naked written call thats pure madness
Initial Val Current %Loss
5400 8000 15 2.95 120000 23600 80%
5500 4000 19 5.1 76000 20400 73%
5600 2000 26 7.95 52000 15900 69%
Total 248000 59900 76%


This reasonable loss table according to Arcus shows that 2.5L worth of puts were bought and 1.9L loss is currently incurred which is 76% of the current trade and this loss is reasonable!!!!!?????

Trying to justify this sort of trading is a SIN as a lot of people come to this forum and they see such logic being presented by members,It really boils my blood.So many people lose money in options this is exact reason why.

 

[soft_trader]

Somewhere earlier in the thread escaped mentioned that he has less than 10Lakh capital.

 

[arcus]

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.

I doubt if you have even read what I wrote.

I never said anywhere to put a stop loss at 15% of their account size.

I am neither defending nor criticizing escape trades.

I said the risk per trade can be 15% of the account size and the stop loss risk can be up to 5% of account size which is not unheard of.
If everything that can possibly go wrong, does go wrong then you should not lose more than 15% of your account size. However, for all practical purposes, your actual stop loss should be anywhere from 2% (conservative traders) to upto 5% (aggressive traders).
There is a difference between both of them and if you don't know the difference, then read it up or google it.


When I first wrote the post, I had no idea where escape put his stop loss risk.

And by the way, the purpose of my post was to demonstrate the fact that without knowing the account size of a trader, you have no right to even complain about his/her money management.

His account size may be 5L, 20L or 1Cr or whatever. I have no idea. The riskiness of his trades depends on that number and not on the fact that he risked 3L on this trade.

The fact that you jumped to conclusions just on the basis of the absolute risk per trade without knowing the relatives demonstrates your lack of knowledge on MM.

If you don't know what I am talking about, read a decent book on money management.

 

[aditya14]

I doubt if you have even read what I wrote.

I never said anywhere to put a stop loss at 15% of their account size.

I am neither defending nor criticizing escape trades.

I said the risk per trade can be 15% of the account size and the stop loss risk can be up to 5% of account size which is not unheard of.
If everything that can possibly go wrong, does go wrong then you should not lose more than 15% of your account size. However, for all practical purposes, your actual stop loss should be anywhere from 2% (conservative traders) to upto 5% (aggressive traders).
There is a difference between both of them and if you don't know the difference, then read it up or google it.


When I first wrote the post, I had no idea where escape put his stop loss risk.

And by the way, the purpose of my post was to demonstrate the fact that without knowing the account size of a trader, you have no right to even complain about his/her money management.

His account size may be 5L, 20L or 1Cr or whatever. I have no idea. The riskiness of his trades depends on that number and not on the fact that he risked 3L on this trade.

The fact that you jumped to conclusions just on the basis of the absolute risk per trade without knowing the relatives demonstrates your lack of knowledge on MM.

If you don't know what I am talking about, read a decent book on money management.

I don`t need a book to tell me that i should not lose 2L out of 3L by that logic if I put 21L I will lose 14L.This is ridiculous logic my friend not money management money damagement.People can judge for themselves by the numbers i have provided.

By your logic if I go into a trade say buy 6100CE at 100(5000 Rs cost) and I have 1 Lakh in my account I should just go and sleep since its only 5% of my account size.If it goes to 95000 I`ll just look at my ruin table and read my risk management book and I`ll say to myself ..... "Well Done lad u showed them Stop loss keeping idiots".

So if his account size is 50L he has done good money management according to you?

On a lighter note "The size does not matter its how you use it that matters".

 

[ganeshams]

And finally Escape might leave this board
He might be scared to participate in this discussion.
He is doing this since the beginning of this thread
he had good winning streak like 2.5 lacs in last month
that time if some one brought this point or at least in the begining that would have been grt. my thought though

 

[onlinegtrash]

And finally Escape might leave this board
He might be scared to participate in this discussion.
He is doing this since the beginning of this thread
he had good winning streak like 2.5 lacs in last month
that time if some one brought this point or at least in the begining that would have been grt. my thought though

I actually wrote a private mail to him on 21st May 2013, where he had to exit with a big loss...

Escape you broke all your rules...

Action wise:
a) took large overnight naked position
b) held a losing large overnight position
c) On top of it you doubled down a losing position
d) you keep the loser running

.... blah blah blah .....

sorry to see your emotional and trading equity draining away *temporarily*.
I wanted to warn you early but somehow thought you were doing something based on your edge (some times big wins come through being aggressive!) and anyways I don't want to take responsibility of talking you away from a winner if the trade turned out to be winner and I was wrong!
On a lighter note if you had won on this bet you will be losing even bigger amount someday in future to learn the same lesson...!

Its Deja-vu all over again, the lighter note is coming alive
This time its "House money effect" fully unleashed on him after his windfall profits.

History repeats itself and there is nothing new under sun!

 

[aditya14]

I actually wrote a private mail to him on 21st May 2013, where he had to exit with a big loss...



Its Deja-vu all over again, the lighter note is coming alive
This time its "House money effect" fully unleashed on him after his windfall profits.

History repeats itself and there is nothing new under sun!

This was good advice given by you but if this type of trading continues there will be bigger losses.This is as some would say is reasonable loss(not me).

 

[prakash2010]

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.

Just forget the account size and risk taken.

1. no stoploss,

2. Not a single hedge.

3. Deep otm options

4. No trade plan.Nifty was in a trading range for 2 weeks at 5760 to 5900. triangle formation was broken out at 5870 and its heading towards 6100 zone.

5. Bulls will not stop ,till the last bear is taken out of the system.

 

[escape]

No trade yesterday. All position remains as it is.

 

[escape]

Dear Aditya, Arcus, Soft_Trader, Ganeshams, Onlinegtrash and Prakash,

Thank you for your post, criticism, advise and healthy discussion.

Regarding account size, I cannot disclose. Already I'm putting lots of information online, which itself is not good. But for sure, I'm not Ambani or Tata or Birla and I don't have unlimited funds

Regarding trades, I don't have to give justification. It is confirmed bad trade. I have done mistake not exiting it earlier. It is my emotion that stopped me to exiting it, assuming that current level will be resistance.

About exposure, yes still it is under my limit. If I exit in loss in next few days, I'm fine with it.

About risk management, it is there. If you notice all my Options rates are under 45 except for Shorting ones (based on my method), that indirectly gives me less exposure. Some time because of averaging my quantity goes higher and increases exposure.

@Aditya,
Current loss is huge, I do agree. Still it is under my limit, else until now you might have seen quantity of each 2-3 times current size.

@Arcus,
Thank you for your advise. My current exposure is under limit. It is not based on individual trade, but overall.

@Ganeshams,
Ideally I should leave board or close this thread. But I'm not leaving board as of now. I have done mistake, I'm accepting it. I may repeat it again too. But I didn't repeat mistake knowingly. Every higher level, gave me false hope that it is resistance and market will turn around.

@Onlinegtrash,
Yes, I have repeated mistake. You are correct. It was false hope that current level is resistance, kept me in trade. May be as you said "House money effect" of last month's profit.

@Prakash,
I do agree with all your advise. Those are best practices, but when I'm on console, sometime, things goes completely wrong. Never ending learning.

@Everyone,
Thank you advise. As of now all my trades in current series went wrong. Seriously something is wrong, I need to rectify it.

Happy Trading to all

Regards,
Escape