Wow! The moral police seems to be out in full force today! We had a person who almost became PM justify rape by saying 'Ladkon se aisi chhoti galtiyan kabhi kabhi ho jaati hain.' It was a statement made in the heat of the moment in a political rally and was in terrible taste But after the initial uproar, people saw it as such and while I do not recall whether the Politician apologized, it didn't affect his following. The recent tweet that has raised such a storm is also in extremely poor taste but that does not make the person posting it a criminal

I was lucky to have been mentored by 2 great people early on in my Trading career- Dr Van Tharp and Seth Freudberg of SMB Capital. Thinking back, the bulk of the learning from them came from telling me what I was doing wrong and where my thinking process was sabotaging my results There is ample content available on the internet that will teach you the mechanics of Trading. But the greatest breakthrough will come when you find a Trading philosophy that aligns with your belief system.

There is an even bigger scam in the Training Industry than fake MTM's. Say I feel pretty creative when I wake up Sunday Morning. Over a few glasses of beer, I design a new Strategy, run a few backtests, tweak it a little to optimize the results. By lunch I'm good to go. Now I put on my Marketing hat. Think of a new catchy name for the Strategy and some setups I have used in it's creation, produce a snazzy video showing its the key to untold riches and launch it for a few thousand rupees. A pittance for the lifetime of earnings guaranteed

Theory says that a high Volatility environment is best for Option Selling while a low Volatility one is highly risky. A few years ago my mentor Seth Friedberg from SMB Capital published a video on the performance of their Prop trading desk and his findings were astounding He found that the best performances came in 2 low Volatility periods when the Vix was between 10-12! This was because in such environments, a majority of the Trades go thru smoothly even though premiums are low. Low Rewards but with very little Risk.

The Sialkot incident shows what can happen when Politicians begin catering to even the most ridiculous demands of vested interests who influence vote banks. In India we are under pressure from Economic Terrorists. Some Farmer groups have tasted blood. Not content with so many subsidies which eat up a disproportionate share of scarce sources, they now want MSP for all produce and free electricity. Politicians like Kejriwal and Mamta are offering freebies to win Elections. We must resist if we are to progress.

Why am I buying Stock and selling Straddles against them instead of selling 2xPE? There are many reasons that I have tried to explain in some of my previous threads but what it boils down to is the difference in thinking of these two Trades So while selling 2xPE is an opportunistic Trade for that month, my thinking with the Straddle is to invest my funds into building a portfolio of strong stocks and generate a monthly Return from them while they continue to appreciate.

UBL is an interesting stock. The penalty of Rs 750cr has acted as a bit of a dampener on the Stock price and may continue to act as a drag in the near future. But given the near monopoly it holds in the Indian Market, the long term prospects are good. The Stock is around 1575 and the Premiums are extremely good at around 140-160 for Straddles which I think more than adequately covers the expected range within which the price should move. I think it's a good bet at this price and this is how I plan to Trade it

Have invested in many companies which are a play on the growth in the real estate industry. Astral, APL Apollo, Polycab, KEI, Asian and Berger Paints etc. One area I seem to have missed out on is Home Finance. Canfin Homes is looking like a good candidate at around 670. Strong stock with sound balance sheet to exploit growth opportunities. Even better it enjoys excellent premiums in Options. Plan to jump in with small qty and sell an ATM Straddle at around 85-90.

Tried something new today. I feel IEX has run up too much and too fast. So did a CE Ratio (bought 1x620CE and sold 2x640CE) for a credit of 6312. No downside Risk and upper BE of 665. Hope to take off the 620CE at some stage which should result in a healthy Profit. RoC of 4% if Price remains below 620-at which stage I will adjust and a POP of 90%.

Many use Cash Covered PE to try and buy stocks at prices below spot or generate income if those prices are not hit. So, if you like Tata Consumer at around 740- it currently at 760- you could sell the ATM 760PE for 22. If target price is not made you can get to keep the entire 22 Personally I prefer doing this with an OTM Straddle. So I will sell a 780 or 790 Straddle for 50. That way, I have the possibility of making much more if Price remains above 760. It opens out some upside Risk but a Straddle is easy to defend when Risk is on only one direction

The Straddle is my favorite trade these days. But more often than not, one needs to adjust to make a good return from it. There are many ways to do this depending on your view, psychology and imagination. Will discuss a few that I use The Straddle is a delta neutral strategy and it is important to keep deltas in check during the course of the Trade and not let them run away from you. Of course Volatility is the elephant in the room- but not going there as that will require a separate discussion

Part of msg I got as a DM
Everyday I collect data fr nse eod files and try to extract meaning information. Like oi built up, delivery change on dly, wkly and monthly basis
From this I can conclude stock is going to be range bound or trend move. Basically he was asking how I decide whether a Stock will be range bound before selling a Straddle and telling me about the analysis he does before he reaches that conclusion. There was more that he does but let's stick to this.

There are basically 3 ways to Trade Options. Option Buying, Directional Option Selling and Non Directional Option Selling. Each requires a different set of skills and mindset. Option Buying is perhaps the most difficult. It requires some way of finding quick Directional moves. It also requires an extremely good knowledge of Option Theory to structure a Trade when the opportunity has been identified and a great understanding of the Greeks.

There is a definite relationship between Risk and Reward in Markets. There are several factors that go into determining Risk but one of the biggest ones is leverage. This becomes quite clear when we look at Company valuations on the NSE. So HDFC Bank has PE Ratio in the high 20's while Stocks like HUL, Nestlé, Pidilite etc are well past 80. So even though the quality of the Business may be equally good, the Market rate low or zero debt- read unleveraged- Companies as less risky and superior to highly leveled ones

Had the privilege of listening to Javed Akhtar several times at the Jashn-e-Rehta festival. He was asked to comment on why the standards of Hindi Film Music and Lyrics had been on the decline over so many years. His answer was both thought provoking and worrying. He said that it was not that the quality of music composers or writers had deteriorated. It was the standards and quality of the audiences that had declined and their inability to appreciate good music or good writing that was responsible for the poor fare that's being dished out

During a workshop organized by Dr Tharp which I attended, he split us up into 10 groups of 3 each and had us play his Marble Game which he uses to teach the importance of Position Sizing. Each participant had to put up $100 with the winning team taking the whole pot

https://twitter.com/vantharp/status/1405193456541048833

The game had a positive Expectancy so logically every team should have made money. Yet after some 15 draws in the 20 draw game, all but 3 of the teams were eliminated as they lost all their money. Just before the 20th draw, 2 teams were neck and neck and one way behind

My largest Portfolio investment is HDFC Life. For a year until March I was merrily making 20-25 a month selling Straddles even as it went from 550 to 740. Unfortunately it suffered a 10% DD to 660. Showing signs of life again. Hope to resume Straddle selling when it reaches 700 Ok. Decided to start early. Sold a July 700 Straddle for 50

I disagree with the view that hedges are used by Indian Traders to protect themselves. Actually a majority of Traders here use hedges just to reduce the Margin in a Trade so that they can take more Trades. This motive actually increases their Risk. So say you sell a BnF Straddle for 400 for which you utilize a Margin of Rs 1.5 lacs per lot. Say the Trader does 6 lots utilizing Rs 9 lacs. Now to cut down his Margin he buys the wings 400 points away for 100 resulting in the Margin coming down to Rs 1 lac per lot.

Samir Arora'a talk on How To Build an Equity Portfolio is one of the most fascinating and profound things I have heard on the Markets. We are conditioned to believe that Money is made in Markets thru our ability to pick the very best performers in the Market. He turns the proposition on it's head and shows that if we had a Portfolio of 30 Stocks and average Stock in Portfolio was only the 90th best in the Nifty-combination of say some being 50th best and others 150th best- then we would be up 56x times over 15 years vs 7x for Nifty!

Sachin Vaze was suspended only when the NIA was allowed to investigate. ATS suddenly started finding evidence against him. Today the new CP has come out with reports casting serious aspersions on the functioning of the whole Dept. Can we really trust the Mumbai Police or the Maha Govt to get to the bottom of this sordid affair? It is so much beyond the 'federal structure' being threatened as the Maha Govt would have us believe. The very faith of citizens in law and order has been shaken to the core

The more I trade, the more convinced I get that the most improvements in performance come not from discovering some brilliant strategy or even in it's execution but from cutting down common mistakes- most of which are common too and well documented for most Traders Despite being aware of it and working on it for ages, my biggest flaw remains letting the losses in a few of my Trades run too far. These mistakes are not many but they still end up dragging my Performance by a few percentage points.