Staring At Massive MTM Losses - What Should I do Now?

[krishere]

couldnt be more right... see if you would buy this options @ d current market rate.... if the answer is yes-hold them.... if the answer is no-dump them....

from what you have written you are not too keen in TA... atleast not learned much presently.... so no point attempting your hands @ it.... limited knowledge is more dangerous than no knowledge....

I would suggest you put faith in some one person and follow their advice....

If you ask me I would suggest you to follow either SG or ST.... and there are a lot of people here who have offered help.....

Just like in the move 'Once Upon a Time in Mumbai'..... mushkil ke samay main ek bhagwan chun lo......

Long story short, and slightly too direct because I am traveling with only phone Internet.

Your trade is over !!

It hit its stop loss. Meditate for 10 minutes and get this in your head. All other advice is new trades. The challenge is that this trade is still open, exchange wise. Based on what your sense is about the markets, elections, horoscope and what not ... decide on Monday whether you will buy this option at the market price ... as a fresh order ... If yes keep the options, if not ... dump them. Rest of the discussions is stock tips which is as relevant for you as it is for others seeking to increase their portfolio. Options is not the only way to increase your account, be open to all ideas. Just because you are in the joke because of the options, does not mean you have to use options ... Strangle, straddle, condor or xyz to get out of this hole.

#1. Decide whether you will keep or dump the options
#2. Make your highest probability trades to recover money ... Without the baggage of this trade on your head
#3. Learn more

#2 and #3 are probably out of sequence. Depending in your comfort, you can run them in any order or in parallel.

 

[timepass]

Most of the replies.... so far failed to understand SmCt's personality.... & offered to mould him in their own Trading style.... perhaps it is not exactly what he is looking for.....he likes to walk sometimes on the wild side... No harm....at all in that...!!!

Let's see what unfolds...in the next 7-10 pages.....

SG

Yup. But he has had his moment of ride on the wild side, the adrenaline rush is over and the flaccidity has set in, he is all spent. Now all that he wants is a large dose of peace to rejuvenate himself for the next round. What he needs to learn is that while riding the dragon is fun, attaining peace is work - a lot of it - and there isn't any short cut.

So, to recoup his position, another bit of wildness in the form of splurging in the other direction is not the best solution. There is no esoteric way, it's going to be pure slog.

 

[SavantGarde]

By The way...Who has given You, Me or Anybody for that matter the Right to judge whether a person has had enough or not.......!!!

It is quite possible he may even get a bigger sense of achievement even if he manages Breakeven.....!!!

Let's not try and lose the plot here....!!!

SG

Yup. But he has had his moment of ride on the wild side, the adrenaline rush is over and the flaccidity has set in, he is all spent. Now all that he wants is a large dose of peace to rejuvenate himself for the next round. What he needs to learn is that while riding the dragon is fun, attaining peace is work - a lot of it - and there isn't any short cut.

So, to recoup his position, another bit of wildness in the form of splurging in the other direction is not the best solution. There is no esoteric way, it's going to be pure slog.

 

[smartcat]

OK let's see if you all can understand my trading psychology. I started trading options in December 2011. The score since then -

Dec'11 - Rs. 3,763 LOSS
Jan'12 - Rs. 21,182 LOSS
Feb'12 - Rs. 83,294 PROFIT

If I book my losses in March and start from a clean slate, I will only be in Rs. 15,000 LOSS since December. But my thinking is - if there is a slightest possibility of the trade breaking even (or even making profits), why give away everything I've earned so far?

Yes - there is a risk of losing Rs. 1.34 Lacs this month. That messes up my overall score. That's why I'd prefer "slogging" on the puts side - not intraday - but for every 50 point move on the Nifty. My way of thinking is - even I book losses after 2 weeks on the 400 calls and if I manage to scrape out Rs. 30,000 profit on the puts side, I'm better off than just throwing the towel and running away from the "fight".

And if the markets go up in the intended direction, my *FEAR* might even be replaced by *GREED* - and I might hold something like 100 calls even after breakeven . I don't want to give up the opportunity of actually turning March into a profitable month.

If March doesn't turn out very well, I can always start from a clean slate in April.

see if you would buy this options @ d current market rate.... if the answer is yes-hold them.... if the answer is no-dump them....

I would definitely buy call options at the current market rate, if I had not entered this trade already. You can call it "gut feel" or "positive vibes" or whatever - I feel that the Nifty will have a positive month in March.


What Went Wrong In This Particular Trade So Far, According To Me :

1) I was under the impression that In The Money options have a higher chances of success. That's why when the index was at 5600 levels on Feb 22nd (I think), I bought 5400 March calls. If I had bought 5600 March call option, my initial outlay would have been a lot lower.

2) I didn't know that 5400 March call bought in Feb would lose 50% of its value with just 4.5% movement of the Nifty (5600 to 5350).

3) I had made up my mind that I would trade 8 lots of Nifty every month. After looking at these MTM losses, I think I would be comfortable with maximum 4 lots at a time - and that too, when I buy at-the-money options.

 

[sanjosedesi]

If you will definitely buy call options at cmp, the debate is over, isn't it?

 

[timepass]

Ok Cat, do it your way, who knows you may be right. On Saturday, the index ended a few points lower, while 5400CE ended a few points higher. The markets have been known to move in irrational directions.

PS : Thursday is a trading holiday.

 

[TraderRavi]

Alexander Elder in "Sell and sell short "

I have never in my life met a person who built equity buying options.
Oh, every option buyer can tell you about a successful trade or even
a few trades in the options market. But those are merely flashes in the
pantotally different from having a long-term positive equity curve.
Those occasional wins are like payouts from a slot machineenough
to keep losers motivated to throw more money away.
Options tend to attract poor beginners because the game is cheaper
than stocks. Many buy options as a substitute for stocks, and I always
tell such folks that they are chasing a deadly illusion. The key difference
between options and stocks is that options are wasting assets.
When you buy an option, you have to be right on the stock, right
on the extent of its move, and right on your timing. This would be like
trying to toss a ball through three moving rings at an amusement
park.
A beginner can be bullish on a stock, buy its calls, watch that stock
go up, and still lose money. He might be right on the trend, but if the
stock takes longer than expected to hit his target, the option will expire
worthless. After taking his lumps a beginner may decide to shop for a
longer-term option next time. Then he discovers that longer-term
options are ruinously expensive.
A woman who was a market maker on the floor of the American
Exchange once said to me: Options are a hope business. You can buy
hope or sell hope. I am a professionalI sell hope. I come to the floor
in the morning, find out what people hope for, price that hope, and
sell it to them.
Profits in the options business are in the writing, not in buying.

 

[sanjosedesi]

Profits in the options business are in the writing, not in buying.

Great stuff. However I think one should not write options until you have hone through one year of buying options ... It need not be ruinous amounts but I think real life monitoring of options is as useful a learning as the Greeks, and nothing like learning with some skin in the game.

 

[smartcat]

If you will definitely buy call options at cmp, the debate is over, isn't it?

In my mind, yes. I now have a battle plan for almost all possibilities before expiry -

- What to do if Nifty goes up, one way.
- What to do if Nifty goes down for a short time, and then goes up.
- What to do if Nifty goes down, one way
- What to do if Nifty goes up for a short time, and then goes down.

I'm reading up some technical analysis reports from Sharekhan and Edelweiss. According to Sharekhan, 5150 is the major support - if it breaks, markets will go down further. Will check the Nifty thread on Traderji too over the next week.

 

[timepass]

Here's your Calendar.

PS : Watched a movie on TV today "Bet Your Life". Here's life imitating art