Thread: Risk hai toh ishq hai ?
1) A lot of people talking about today’s freak trade in 37100 PE in BNF
We as traders are always exposed to various types of risk and it’s a part of our business.
Let me highlight certain risk faced in past years & also ways to manage it
1) A lot of people talking about today’s freak trade in 37100 PE in BNF
We as traders are always exposed to various types of risk and it’s a part of our business.
Let me highlight certain risk faced in past years & also ways to manage it
2) Gap Risk
18th may 2009
Markets opened at 9:55 AM as this was the market opening time at that time
Nifty immediately hit an 20 % upper circuit at 10.01 am and the markets froze.
So markets were open only for 6 minutes.
There are many such instances of overnight gaps
18th may 2009
Markets opened at 9:55 AM as this was the market opening time at that time
Nifty immediately hit an 20 % upper circuit at 10.01 am and the markets froze.
So markets were open only for 6 minutes.
There are many such instances of overnight gaps
3) Vega Risk
On 24th August 2015, the Indian markets declined close to 5.92%.
Nifty around 490 points but something unusual happened on that day.
Far otm Call options shot up inspite of such a huge fall😲
Vix shot up 64%
On 24th August 2015, the Indian markets declined close to 5.92%.
Nifty around 490 points but something unusual happened on that day.
Far otm Call options shot up inspite of such a huge fall😲
Vix shot up 64%
4)Gamma Risk
26th sept 2019
It was an expiry day and 30000 CE went from 50 to 1000+ in minutes and eventually closed at 0
This move caused lot of leveraged traders to lose a significant amount of their capital
Many such instances of gamma risk on expiry day
26th sept 2019
It was an expiry day and 30000 CE went from 50 to 1000+ in minutes and eventually closed at 0
This move caused lot of leveraged traders to lose a significant amount of their capital
Many such instances of gamma risk on expiry day
5) Flash Crash
31st may 2019
Flash crash in Banknifty of 1000+ points.
Friday’s high of the Bank Nifty was 31,783 and the low point of the index was 30,623
Such flash crash has been seen in many stocks as well on other instances
31st may 2019
Flash crash in Banknifty of 1000+ points.
Friday’s high of the Bank Nifty was 31,783 and the low point of the index was 30,623
Such flash crash has been seen in many stocks as well on other instances
6) Black swan risk
13th march 2020
Nifty hit 10% lower circuit and trading was halted for 45 mins and when the circuit opened markets rallied and close around 4% in the green.
Sensex which was 3300 points down in the morning, at day end closed at 1300 points in the positive😲
13th march 2020
Nifty hit 10% lower circuit and trading was halted for 45 mins and when the circuit opened markets rallied and close around 4% in the green.
Sensex which was 3300 points down in the morning, at day end closed at 1300 points in the positive😲
7) Algo/Execution Risk
August 1, 2012
Due to algo issue Knight capital did 397 million shares and assumed a net long position in 80 stocks of approximately $3.5 billion as well as a net short position in 74 stocks of approximately $3.15 billion. Knight lost over $460 million
August 1, 2012
Due to algo issue Knight capital did 397 million shares and assumed a net long position in 80 stocks of approximately $3.5 billion as well as a net short position in 74 stocks of approximately $3.15 billion. Knight lost over $460 million
8) Price can below 0 as well
21st april 2020
A historic drop occurred on April 20, when the price of West Texas Intermediate crude dropped by almost 300%, trading at around negative $37 per barrel.
21st april 2020
A historic drop occurred on April 20, when the price of West Texas Intermediate crude dropped by almost 300%, trading at around negative $37 per barrel.
9) Exchange issue(Technical Glitch)
On 24th Feb 2021, NSE faced a technical glitch for the entire day and trading was halted.
This caused a lot of issue and completely out of a hands of a trader
On 24th Feb 2021, NSE faced a technical glitch for the entire day and trading was halted.
This caused a lot of issue and completely out of a hands of a trader
10) Liquidity Risk
This happened with me
I had sold justdial 500 CE on MIS when spot was at 485. I had sold 2.68 L qty and was in profit of 1.5 L at 3.19
But at 3:20, my mtm was -18.3 L
Lost 20 L in a minute due to liquity risk (see response from @zerodhaonline to understand)
This happened with me
I had sold justdial 500 CE on MIS when spot was at 485. I had sold 2.68 L qty and was in profit of 1.5 L at 3.19
But at 3:20, my mtm was -18.3 L
Lost 20 L in a minute due to liquity risk (see response from @zerodhaonline to understand)
11) Risk and ways to manage !
I have highlighted some common risk and ways to manage it
See the image below
I have highlighted some common risk and ways to manage it
See the image below
12) As a trader, we have signed up for these risks and we cannot complain about it. All we can do is be prepared & manage them
-Never take the markets lightly
-Anything can happen anytime in the markets
-Be aware of the risk you are exposed to
-Manage risk at all times
End
-Never take the markets lightly
-Anything can happen anytime in the markets
-Be aware of the risk you are exposed to
-Manage risk at all times
End
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