Picking up nickels in front of steamroller!!

[MaxX]

It is achievable, but I would say that it is not easy. Big money has different psychological impact in decision making than small amount. Also trading gains/losses are non-linear in nature, it may impact once we see loss. For example, it is difficult to make 40K every month, in reality you may earn one month 20K loss and next month 1L profit.. though it is also 40K per month, but after having 20K loss, would you be able to keep your metal composure to earn 1L in the next month? Also, from this example you can understand, how targets go up once we take loss. because of 20K loss, it would force us to earn 1L in next month to keep our target. we have to earn 1L with 9.8L capital.

Thats why one should only use risk capital.. money that one can lose without affecting mental composure.. It helps a lot if trading is NOT a main source of income.. I treat my trading account as a high risk/high reward investment and allocate funds accordingly..

I agree if one is dependent on trading as main source of income would be stressful indeed (and not a good idea)!

 

[cool_kk]

Thats why one should only use risk capital.. money that one can lose without affecting mental composure.. It helps a lot if trading is NOT a main source of income.. I treat my trading account as a high risk/high reward investment and allocate funds accordingly..

I agree if one is dependent on trading as main source of income would be stressful indeed (and not a good idea)!

yes its my secondary source.
but i was thinking can i get fix kind of income using this strategy
Some losses here and there are OK.. But big thing is not loosing much thats why
options and this stop loss strategy

 

[cool_kk]

Hi JV,

What are you trading for Aug & Sep

I am setup for August---> 5600 CE
5200 PE
I entered late for August so premimun is less 40 total

SEP --> 5700CE @ 42

 

[jvblogger]

Holding open position presently :

CE 28-Oct 5900 100 24.85
CE 28-Oct 5800 100 39.2
PE 28-Oct 4900 100 39.8
PE 28-Oct 4800 100 32.4

CE 30-Sep 5900 100 22.9
CE 30-Sep 5800 100 33.25
PE 30-Sep 4800 100 38
PE 30-Sep 4700 100 29.3

CE 26-Aug 5700 200 16.65
PE 26-Aug 4900 100 25.2
PE 26-Aug 4700 100 25.45
PE 26-Aug 5000 100 19.4

 

[cool_kk]

Thanks JV,

I also picked a trade for October, getting clue from you.

I am little wary about selling put as I am more on bear side the bull... so someting entering late for put then call...
Market showing upward trends despite pressure from world economy so..trend is friend may reverse soon

Regrads
kaps:thumb:

 

[p81]

Hi JV what is the reason for low implied volatility even the market is at 30 month high?

 

[jvblogger]

Hi JV what is the reason for low implied volatility even the market is at 30 month high?

Thanks for the interesting question.

Implied volatility/VIX is not co-related with the peak or valley of the index.

VIX gauges the temperament of the market and more importantly the fear temperament. VIX is also known as "investor fear gauge".

Ordinarily when VIX is low , it indicates, market is confident and stable , and if the market sees any bump ahead which creates fear in the players and which would create spike in VIX and generally increase the premium of option and more particularly of put option. And more interestingly while VIX slides down is also related upward in NIFTY (However not significantly as during spikeup/downwords)

In the following graph of VIX plotted against NIFTY you will notice that spike in VIX is correlated with downside in NIFTY. I have pointed out just few big spikes, but if you observe closely most smaller spikes in vix is co-related in downside in NIFTY.

Therefore, generally low implied volatility is sign of bullishness in the market. However, considering the presently IV is at its lowest, there is now larger possibility that VIX may spike to its mean point anywhere above 20-25.


Few interesting articles on VIX
http://www.investopedia.com/articles/technical/02/081202.asp
http://www.investopedia.com/articles/optioninvestor/03/091003.asp

 

[p81]

Thanks JV for the answer.

Low IV is kind of a bad for option writers.If we short options at this IV we will get less premium for the risk undertaken. but i guess its part of the game, not all mangoes are sweet..........
It would be fun to see the VIX options in India within a year or so.
Thanks again.

 

[jvblogger]

Thanks JV for the answer.

Low IV is kind of a bad for option writers.If we short options at this IV we will get less premium for the risk undertaken. but i guess its part of the game, not all mangoes are sweet..........
It would be fun to see the VIX options in India within a year or so.
Thanks again.

I wouldnt say that it is 'bad' for option writers. Perhaps, just less favorable , but still you can sell option during low IV period and option price decays faster on time decays. Generally next/far month option premium decays faster..

I had sold following September option on 23/26 July and today total premium has decayed around 66% .

However, I do not recommended that during low IV next/far month options are to be sold, but this is my experience.

 

[MaxX]

Hows it going for you this month jv? After some very easy months facing some pressure on calls this month..