Paper Trading Nifty Straddles

[munde_77]

Going to hit stop loss on Monday morning

 

[munde_77]

Stop Loss triggered.........................................

 

[myvineet]

Stop Loss triggered.........................................

but did you get your exit ?

vineet

 

[munde_77]

Nahi Yaar..................................................

 

[AW10]

Stop Loss triggered.........................................

Yes. You are right. What a relief (atleast for me). As human being, it is always difficult to take loss but as a trader, it is just another trade. It had equal chances of going against us as it had chances of going in our favour.. So, move on.. and lets wait for next trade.

Happy trading.

 

[myvineet]

but AW sir ,what should we done if this trade is for real ...

means we stuck in sold calls & puts & market hitting circuit after circuits..

what should be our plan in today morning if we really struck in sold 3700 calls?

thanx

vineet

 

[linkon7]

but AW sir ,what should we done if this trade is for real ...

means we stuck in sold calls & puts & market hitting circuit after circuits..

what should be our plan in today morning if we really struck in sold 3700 calls?

thanx

vineet

Getting down on the knees and praying to God might help.... Other than that there is very little that you can do other than book losses and look ahead....

 

[AW10]

Vineet,
I have learnt the lessons in this 20% move that was historic. No amount of statistical analysis could have covered it.

My learning is
1) Buy few far OTM options to protect against such a catastrophic move against our naked short option positions. And be prepared to let these options expire worthless.
eg - had a we bought 4200 call and 3400 put on friday, we might have paid 20/30 Rs for it. And when our 3700 call lost 300%, the 4200 call would have gained 1000%.

2) Use position size to create a position small/big enough that max 20% limit move can be tolerated by account. This doesn't happen often (and probably will not happen for next few years), but even 1 such event is sufficient to throw us out of the business.
Infact, election was predictable event, so we could have managed it.. But we can never foresee natural disaster, terrorist attack etc. which can still throw us out of business.

3) In condition like today, we can use futures to manage the delta of short call position, because they have better liquidity.

4) Close the position and accept the fact that this trade has gone against us. We might have to take it with big slippage.

Looking forward for more suggestions from others.

Happy Trading.

 

[munde_77]

my 4 months profit washed away in just 60 seconds on Monday

 

[Smart_trade]

Vineet,
I have learnt the lessons in this 20% move that was historic. No amount of statistical analysis could have covered it.

My learning is
1) Buy few far OTM options to protect against such a catastrophic move against our naked short option positions. And be prepared to let these options expire worthless.
eg - had a we bought 4200 call and 3400 put on friday, we might have paid 20/30 Rs for it. And when our 3700 call lost 300%, the 4200 call would have gained 1000%.

2) Use position size to create a position small/big enough that max 20% limit move can be tolerated by account. This doesn't happen often (and probably will not happen for next few years), but even 1 such event is sufficient to throw us out of the business.
Infact, election was predictable event, so we could have managed it.. But we can never foresee natural disaster, terrorist attack etc. which can still throw us out of business.

3) In condition like today, we can use futures to manage the delta of short call position, because they have better liquidity.

4) Close the position and accept the fact that this trade has gone against us. We might have to take it with big slippage.

Looking forward for more suggestions from others.

Happy Trading.

Hi AW10,

Have gone through the problems mentioned by you number of times with lot of unpleasant memories......
I am not disagreeing with your views as they are very valid but just putting forward my views so that I would like to learn from you.....

1) We have a 20 % circuit once in 5 years so if we are earning 8-10 % of our capital per month...we should be prepared to take such nasty blows if we are in the business of writing options.....These are the price shocks....one has to be positioned properly that such shocks dont put you out of business.

2) Out of the money options are also not very cheap...and buying them everytime means compromising on profitability....and if you are selling straddles or strangles.....the insurance expences are twice as much( 2 OTM contracts buying)

3) Sir I am the worst sufferer of selling straddle and trying to manage it with futures....in violent mkts you get roasted....

4) Best I found is if you have sold straddle, if the premium on one leg becomes equal to total premiums you have received....just liquidate both the legs with the premium on other leg as your loss and accept it.

5) Position yourself conservatively......

6) Go to temple,church or gurudwara depending on your faith, every day.....if you have sold a straddle.....:lol:

Sir looking forward to remove my trading visual gaps with discussions with you and many others experienced traders here......

Best wishes,

Smart_trade