January 1, 2019

Trade logs by Keshav

* Exited in the opening candle from all longs and went short.

* Exited from the short and went long at the candle next to arrow candle.

* Brought Put option of 10750 at 3.15 ( At Rs. 105).

Here i want to explain the logic behind buying option along with futures instead of directly buying a relevant option.

Once i take a position i dont use trailing stop loss. Instead i just trail it to breakeven point and let the trade run for long period. Here it may even take 2 months or 3 months.

Lets suppose this particular trade moves 700 points and it takes 2 months to achieve it. 300 points in first month and 400 in next month.

ATM option worth 225 at the end of first month will be 300. Gain of 75 points.

If i wish to continue with the trend for the next month again i have to buy it at around 225 itself ( Imagining same IV etc ). At the end of the month when nifty moves 400 points it will gain only 175. Total of 250 point gain only. Just 35 % of total gain.

But with Fut+Option plan, the futures will capture the whole 700 points gain. The option i have taken today is of worth 105 and valid for whole month.This put option has been taken when i have  already made significant gain in future and not rite from the starting of the trade.

In this month if nifty fut moves 300 then i will have that gain in fut. Put option worth 105 will be worthless hence loss of 105. In next month i will be buying put option of same strike price as before and its preimium cost will be very less. Lets say 70. So total of 105+70 of loss and 700 gain , Total 525. Captures 75% of gain.


But if market gets range-bounded i will be making loss. That loss will be valid also with just buying a plain ATM option.


















Trade details: Total in loss of 3.5%  since last week. Could have been less if market didnt gap through my stop loss.


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