understanding options further

astonishing observation

this morning nifty opens 100 points gap up.

a 160rupee put becomes 80 approx (fall of 50%)

whereas a 160rupee call goes up by a meagre 35points (just 20% instead of 100% rise which is reverse equivalent of 50% fall of put)

shocking, at the surface of it.

but, what does it mean?

does it mean

- that the call was very costly (super premium) which has just come down to realistic levels?

- does it mean that operators are bullish and going to take the market higher.

- they will eat put premiums big way and give nothing to the call buyers? eventually eating their premiums also as they reach sufficiently high?

- does it mean that if a pro trader was to guess the direction of the market rise, than selling/writing puts and calls of the boundaries of the estimated range can be a safe and lucrative bet?

one of the ways to trade in uncertain waters

as i said, markets are not deterministic, they are probabilistic.

we know, to a reasonable accuracy, what the counting outcome if 4 state elections is going to be.

but only operators know what they plan to do on monday and thereafter.

in such a situation (and such situations keep coming often) tactics is what comes handy instead of guesswork (guesswork will be wrong for the majority howsoever brilliant they are).

e.g. in current scenario, take any position, long or short. but keep stop loss.

but since the movement can be so sharp and overnight that stop losses may not be allowed to touch.

the best solution to this is = options.

buy either call or option (you can also write / sell them but that shouldn't be attempted by amateur shallow pocket traders, though that is less risky)

e.g. if u buy a call of 40 points, a hundred point pro move will take it to 80

a hundred point adverse move will take it to 20.

you gain 40, you lose 20.

a 2oo point pro move will take 40 to 150

and a 200 point adverse move will take 40 to under 10.

here, u gain 90-100, you lose 30.

trading's second big lesson i have learnt is that there is nothing called "profits only" market.

markets will always be made uncertain/unpredictable by the operators.

so, almost 50% loss (u can try and bring it down) is assured, but how u profit from the rest 50% is all that matters.

in the above example, if u gain, great!!!

but what if u lose?

no problem.

play again. do it again.

by law of probability, you will make good money in the medium to long term.

why?

because ur wins will be 50% in terms of total trades but always much larger than losses in terms of amount.

but u can do it only if u have stomach of steel and have well managed finances.

there are many other such tactics which can be used.

but even this seemingly easy money will sweat and squeeze the guts out of you. any gain will be well earned!!!

hunting with the wolves!!!

let me share a very interesting observation with you.

today the market is essentially moving in 15-20 points very narrow band.

who is ensuring that?

traders like u or me?

don't even think that.....

if markets were allowed to move and drift at the will of we people, we would have taken it to 10000 nifty or in minus long ago a hundred times!!!

there are computer terminals run by powerful programs which do the needful for their masters.

the masters tell (program) their loyal brilliant machines in the morning or whenever to do this or that.

e.g. today they would have "told" them to maintain the band till closing so that they can do what they want to do on monday after the election results of 4 states are out.

this the machines will do by controlling the sell or buy "valves" as and when some "stupid" retailers try to get adventurous.

and all this while we and the channels keep shrieking that we the people today this and that!!!

interesting....very interesting!

this gives me the confidence that one day in his career any professional trader can learn and master the art of hunting with these wolves despite being a sheep, provided he learns to think like one!!!

cheers again!!!

u have to kill "i" even in the market

see, among me and market, only market has the ego. 

i am a strict follower. wherever market goes, 7000 or 700, i will be after her, very faithfully. 

this is one big lesson i have learnt over the years among others.

i may not know the reason why market is doing in a particular moment what it does. 

i might come to know the reason later, or too late. 

so i never bother.

as osho says, u have to kill "i" even in the market. 

what market does, just do it, whether or not u know the reason behind it.

very often, there is no reason except the traps and tricks of operators.

operators have to beat the majority ALL of the time!!!

having said that, it amuses to keep a small third eye open while the 2 are glued to the market.

cheers.

don't believe nifty can shoot that much up?

what if modi comes to power and does a gujarat for india? remember, there are genius like dr.subramanian in bjp team.

what if second generation reforms are carried out?

entire world is just stuck up in a groove since many years now.

it appears we are at the historic peak of dec 2007. i dont agree. 21000sensex of 2007 (@7% rise pa compounded should be near 31515 today. where are we? 10000 below that.

and if all shackles are loosened, we will not stop at 31000 but overshoot it due to momentum and pendulum effect.

what u can't believe or see or think, that is exactly what market does. surprise is the no.1 weapon of operators.

markets always do what they are expected to do albeit in the least expected way.

expecting nifty to touch 9000 by 2016dec?

rising triangle pattern almost complete on 10 year chart.

"mother of all bull runs" to start very soon???

back of the envelop calculations hint at 50% rise from here. 

that makes it around 9000.

excellent time to be an investor, or spot bull trades.

self talk

5dec2013

========

- when u r losing and losing genuine and right, reversing the trades is an option that must be taken (provided singals endorse that).

- markets are probabilistic and not deterministic

- traders can never know what the operators are going to do. and that is ok.

- being on the minority side pays. always practice and increase success percentage of anticipating the move of operators.

- operators are always on the side of the surprise. lack of surprise is also a surprise. in short, what majority expect, rarely happens, atleast till they remember that.

- don't bet more money at nasty turns. but do reverse the trade.

- if signals/technicals don't change, withstand the quake.

its all their game

when deep pocket operators stop supporting "buys", the prices start falling even if they don't sell.
when deep pocket operators stop supporting "sells", the prices start rising even if they don't buy.
but, when deep pocket operators start supporting "sells", the prices start crashing.
and, when deep pocket operators start supporting "buys", the prices start soaring.....
its all their game.
till you see this you can't make money big and consistently

and the beauty is, they don't do it themselves.....

their computers do this for them......

with amazing efficiency and ruthless effectiveness......

don't believe?

then check the rate of change of rates of bids / asking rates in your terminal.......

overwhelming bids are "theirs"
just look at the speed and consistency of change of bids.
just see how smoothly and accurately the bids are moved away from your rates.
just see the amazing accuracy of the gaps being maintained.

and while doing all this, they accumulate the diamonds or distribute the lemons.

you and me and we all are "trading" against the "playing" terminals with "super software" triggered by ordinary brains with extraordinary money chesters.

my market philosophies

- market doesn't know whether you are long or short. so, rest assured, the market is not after you. since it can't see you (the individual), it is not thirsty for your blood and money. you are yourself running scared and coming in the way of the speeding trolla like a street dog. remain cool and perch atop the moving beast.

- market will either go up or down, it has no third way. so, there is always 50% chance of winning. all we have to do thereafter is to try and improve that percent.

- we are playing on technical level and getting beaten on the tactical front.

turning radius of markets

when i see traders seek and ask for shorting opportunities in bull runs or buying opportunities in bear drops, i feel like jumping into the screen to his side of the pc and shrieking "Don't!!!"

reason?

every car has a turning radius. every car needs some circle, some width to turn.

only cars in cartoons can turn around like a 'V'.

same is with the markets.

if and when they have to turn, they need a "turning radius". they can't and don't turn in a 'V'

so, whenever, u see a bull run or bear slip (in any time frame), wait for that circle or curve to be
formed.

trading situations are like elephants (not just cars). they take some time and manoeuvring to turn, and they can't hide it.

never panic at sharp adverse sudden unforeseen unwarranted move. it always invariably retreats
(atleast and mostly) once.

then. ofcourse, it depends upon how much leveraged position you have in your mouth that may
threaten to choke you or how much buffer holding funds you have.

my trades

my recent trades 

(for updated list..........www.niftyshots.blogspot.com)

bought 6000ce lots  july series @ 23.35      (5 july)  @ 5792 nifty, squared @53.25 = plus 29.10

bought 6000ce lots  july series @ 41.20      (5 july)  @ 5862 nifty, squared @84.65 = plus 43.45

bought 6000ce lots  july series @ 49.00      (5 july)  @ 5882 nifty, open

bought 5900ce lots  july series @ 46.25      (3 july)  @ 5767 nifty, squared @64.90 = plus 18.65 

bought 6100ce lots  july series @ 26.25      (2 july)  @ 5890 nifty, open 

bought 5900ce lots  july series @ 52.60    (28 jun)  @ 5770 nifty, squared @93.30 = plus 40.70
bought 5600ce lots  july series @ 141.50  (27 jun)  @ 5641 nifty, squared @216.05 =  plus 74.55

-----------------------------------------------------------------------------------------------------------

this month net = plus 28

bought 5700pe lots  july series @ 152.95 (21 jun)  @ 5634 nifty, squared @140.70 = minus 12.25

bought 5700pe lots  june series @ 38.15  (17 jun)  @ 5800 nifty, squared @85.65 = plus 47.5

bought 5600pe lots  june series @ 30.15  (12 jun)  @ 5784 nifty, squared @ 39.55 = plus 9.40

bought 5900pe lots  june series @ 102      (11 jun)  @ 5890 nifty,  squared @156.20 = plus 54.20

bought 5800ce lots  june series @ 212.90 (4 jun)  @ 5958 nifty, squared @153.35 = minus 59.55

bought 6100ce lots  june series @ 37.95 (3 jun)  @ 5925 nifty, autosquared @ 0 = minus 37.95

bought 5900pe lots  june series @ 44.25 (29 may)  @ 6097 nifty, squred @ 72.25 = plus 28 

bought 5800pe lots  june series @ 55.75 (24 may)  @ 5987 nifty, squared @ 56.30 = plus 0.55

----------------------------------------------------------------------------------------------------------

this month net : plus 137

bought 6100pe lots  may series @ 33.80 (20 may)  @ 6186 nifty, squared @88.80 = plus 55 

bought 6200ce lots   may series @ 38.25 (13 may)  @ 6070 nifty, squared @ 63.65 = plus 25 

bought 6200ce lots   may series @ 20.95 (3 may)  @ 5967 nifty, squared @ 63.65 = plus 43

bought 5600pe lots  may series @ 12.20 (3 may)  @ 5967 nifty, autosquared @ 0 = minus 12.20

bought 6100ce lots   may series @ 23.20 (29 apr)  @ 5877 nifty, squared @ 59.90 = plus 36.70

bought 5600pe lots  may series @ 20.70 (25 apr)  @ 5887 nifty, autosquared @ 0 = minus 20.70

=================================================================================
this month net : plus 54
bought 5300pe lots       apr series @ 15.90 (10 apr)  @ 5498 nifty, autosquared @0 = minus 15.90

bought 5800ce lots"      apr series @ 12.18 (5 apr)  @ 5538 nifty, squared @ 94.80 = plus 82.62

bought 5900ce lots       apr series @ 24.35 (25mar)  @ 5641 nifty, autosquared @ 11.85, = minus 12.5

------------------------------------------------------------------------------------

this month net : minus 48

bought 6o00ce lots       apr series @ 29.95 (19mar)  @ 5749 nifty, open, autosquared @0 = minus 29.95

bought 5700pe lots march series @ 26.85 (14mar)  @ 5850 nifty, squared @11.40 = minus 15.45

bought 6200ce lots       apr series @ 18.45 (13mar)  @ 5850 nifty, open,autosquared @0 = minus 18.45

bought 5700pe lots march series @ 13.2   (8mar)  @ 5909 nifty, squared @22.45 = plus 9.25

bought 6000ce lots march series @ 44.10 (8mar) @ 5930 nifty,autosqaured @ 0 = minus 44.10

bought 5700pe lots march series @ 28.35 (7mar)  @ 5816 nifty, squared @11.40 = minus 16.95

bought 5900ce lots march series @ 27.90 (28feb) @ 5690 nifty, squared @94.55 = plus 66.65

------------------------------------------------------------------------------------------------------------------------

this month net : plus 7

bought 5800pe lots      feb series @ 33.50 (28feb) @5810 nifty, squared @112.15 = plus 78.65 points

bought 6100ce lots march series @ 19.05 (26feb) @5778 nifty, squared @ 15.75 = minus 3.3

bought 6100ce lots march series @ 37.65 (21feb) @5895 nifty, squared @ 15.75 = minus 21.90

bought 6100ce lots      feb series @14.80 (11feb) @5892 nifty, autosquared @ 0 =minus 14.80

bought 6100ce lots      feb series @ 31.60 (6feb) @5979 nifty, autosquared @0 = minus 31.60

trading lessons from Everest

day before yesterday, on 29th, was the 60th anniversary of the conquering of the Mt.Everest

summit by Edmund Hillary and Tenzin Norgay in 1953.

it was a sheer coincidence that i was reading a book by arjun bajpai (world's youngest non-

sherpa to climb everest) since last few weeks and ended it around midnight (00:03hours) on

29th may. i never knew that everest was conquered on 29th may till i read it in th elast pages

of arjun's book "on top of the world".

all these weeks i felt as if i too were climbing world's highest mountain alongwith arjun. so

excited was i that i just couldn't come off the submit once the book was out.

i wanted more of everest. i wanted to know more.....experience it more. i checked for books on

everest and found one "into thin air" by Jon Krakauer. i downloaded it, read it. then i

downloaded and watched the movie adaptation of this best seller book.

still thirsty, i downloaded and watched 2 BBC documentaries on everest.

by now, i knew the route to the summit by heart, the heights, the camps, the rules, the

tragedies, the risks, the weather.......and a lot more. though i may not be able to attempt a

climb everest for many reasons, i have somehow felt as if i have climbed top it a few times

already, on the back of those climbers.......and died a few times along with those who choked,

fell and got buried on the way up or down.....

i can go on and on but that some other day.

today i want to register / pen down (rather key down) certain lessons which i learnt while

virtually climbing mt.everest. having been climbing trading mountain (arguably higher than the

everest, and certainly no less treachorous) for so many years, it suddenly struct me that

many, if not all, rules of mountaineering on everest were astonishingly applicable to trading

as well. why not recognize them....and record them?

now here are those rules. there may be many more (which i will keep adding as and when i

receive them). one more thing, i have deliverately kept the rules short and terse, with

minimum explanation. mainly because of two reasons : one - to stimulate you to go climb or

read or watch about everest for yourself ( i want you to google and learn more), two - i am

plain lazy. all i am doing it writing the everest rule followed by trading adaptation comment.

so, here are the rules:

-------------

* acclimatize : go slow, adapt, acclimatize.....or get killed.
= every new trader wants to conquer the trading summit without acclimatizing to the altitude,

the oxygen, the body metabolism.....getting altitude sick and dying

* first learn the basic mountaineering, the rock climbing, the tools, the gear.....
= no alternative to this in trading as well.....basic technical skills and awareness is a must

* study, read, learn, hear, watch a lot about the mission before going there
= know what to expect. be mentally ready.

* try lower hills first.
= paper trade, mini-trades....

* climbing everest is not a passtime...not a picnic
= same about trading. trading is not an escape haven where you go and seek shelter from life's

other losses and rejections.

* fix the logistics
= and the computers, the internet connections, the demat accounts etc.

* fix your turn-around time before you start. better return alive to attempt the summit

another day (final summit push, beyond camp 4, is started by the climbers around midnight so

that they reach summit before noon and return before it turns hot, avalanche-prone, or before

the weather turns bad.....you have to return to the highest camp, below the "death zone" under

8000m before it turns dark. if you are not at the summit by 1 pm, it is time to turn back,

come what may.)
= if trade is not going your way, turn around.

* don't force the climb
= the market won't be tradeable just because you are there ready with your climbing gear.

* beware of the avalanches
= aplenty in the market. know how to get out of the way.....or take advantage

* beware of the crevasses
= pitfalls, traps of trading.....they are always there, often covered.learn to spot them.

* use ropes, and hooks....
= and stop losses

* don't move out without checking the weather report
= macros

* wait for the window of opportunity....stay put till then.
= 90% trading chance will come in 10% time.

* improvise when stuck
= once your sub-conscious is attuned, it can advise you when u r stuck/

* never mind the coughs
= fluctuations are normal....including a few ribs crackings.

* mind your self talk
= no negative talk.no fool hardy. "any sufficiently determined idiot can reach the

summit...the trick is to get down alive"

* every climb is a different one
= overconfidence kills. good traders avoid reputations.

* respect the mountain (god). (everest decides who climbs it)
= market decides who makes the money.

* love the mountain
= love the market

* never under-estimate the mountain forces
= just because you have been spared doesn't mean you can bet it all.

* pray
= pray

* be lucky
= be lucky

* remember
= be thankful

million dollar traders

pl find below links to the 3 part bbc series "million dollar traders"

i recently came across these and watched them. these are 1 hour each 3 parts of an "experiment" wherein 8 shorlisted novice traders are given 1 million dollars to trade (after ofcourse basic training and under watchful expert eyes)

what a series this is! what an experiment it turned out to be!

every novice, ambitious (& even others) must watch these. all tensions and emotions and dilemmas and triumphs etc are beautifully (and at times in raw ugly manner) exposed!

watching these and other videos will add to any trader's learning curve.

enjoy.

http://www.youtube.com/watch?v=v6ciY8u04Kk

http://www.youtube.com/watch?v=ML4ObTeYLhg

http://www.youtube.com/watch?v=pWkzAvE5aQQ

4 advanced rules for trading success post HMP

post HMP (Honey Moon Period)* only those traders can make it big in stock trading 

1. who can ruthlessly stick to a closed-ended system (with well defined & fixed entry and exit points which don't change at the dictats of markets or emotional states). constantly improving that system is, however, allowed.

2. who can play with "sufficiently" small amount (e.g. a billionaire can play with a million dollars)

3. who are in no hurry to come in the 'top ten wealthiest persons in the town' list

4. have the head and nerves for compounding principle without violating the above three rules. 

* unlike normal life, HMP in trading can last long.....real long.......sometimes forever!