never book profit by squaring off
book profit by taking reverse at-the-money option.
whether your decision turns right or wrong, you will profit.
let me give an example which is the reason behind my coming out with this rule
i bought 9000call of bank nifty.
bank nifty came to 9330 and as indicated my my trading method, i booked profit by squaring off the call.
had i waited i would have profited as the bank nifty went to 9500.
but instead of squaring off the call had i taken an at-the-money put option (9300 put) and held on to 9000call, i would have lost 50 points in 9300put and got 140+ points more in 9000call - a clean profit of 90+ points.
i have figured out the reverse scenario as well.
i am thrilled with this rule, this rule is my take-away for the day. it has costed my just 1250 per lot.
this rule has many applications with profound practical implications.
let me give an example which is the reason behind my coming out with this rule
i bought 9000call of bank nifty.
bank nifty came to 9330 and as indicated my my trading method, i booked profit by squaring off the call.
had i waited i would have profited as the bank nifty went to 9500.
but instead of squaring off the call had i taken an at-the-money put option (9300 put) and held on to 9000call, i would have lost 50 points in 9300put and got 140+ points more in 9000call - a clean profit of 90+ points.
i have figured out the reverse scenario as well.
i am thrilled with this rule, this rule is my take-away for the day. it has costed my just 1250 per lot.
this rule has many applications with profound practical implications.
5 comments:
Dear Sir,
How would this be carried out in case of futures as purchasing the reverse future effectively means squaring off the position unless the reverse future position is held for the next month's expiry.
Am I correct in thinking along these lines or have I missed out on something?
Awaiting your guidance.
Kind Regards,
Xyresia Zenzi
Your silent admirer.
Jagmohan
if you remember my mail... i was trying to convey somthing similar!!
Not excatly the same because my trading TF is different... anyways yes i would agree to what you have written... its one of the most intelligent things to do
profit booking in futures have also to be with reverse option not by futures.
Sir , i did not understand how it works in reverse direction ........ please explain ...
The method needs price movement..... now imagine your positions like a balance scale and the probability of moving price either direction....the question to ask is are you sure of booking profits at a particular point. if not then why not part book and then some reverse positions that may help you to hedge incase profit booking happens in market.... price movement in trend if continues to go in direction of your bulk positions will more than cover your losses in hedge and keep you in the trade.... ofcourse at some time will have to exit the trade...
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