How can a thoroughly backtested option strategy go rogue when the strategy is taken live in the market?

Well, using Last Traded Price (LTP) to backtest can be the culprit 👇🏾 Most option backtesting strategies use LTP as a proxy for option price.

For LTP to be useful, the option you trade in should be an at-the-money (ATM) option with ample liquidity.

Options with strike prices away from the spot or farther from expiry are usually illiquid.

🧵Nestle India’s ₹27000 stock will split 1:10 t'row. Post split, the stock price drops to ₹2700. Lower stock price tends to improve liquidity and accessibility for retail investors. Long-term investors like liquidity.

So, why won’t MRF, with its ₹1.2 lakh stock, consider a split?👇🏾 Splits are usually announced in the ratio of 1:5, 1:10, or 1:20. Given the size of each share, MRF will need a big split. Could that be 1:10 or 1:20?

🧵 1/8- If you want to be an options trader, then forecasting volatility is absolutely essential.

Without a view of volatility, your trading strategy is incomplete. But how do you forecast volatility? Here is a quick hack 👇🏾 2/8 - Most trading strategies require you to have a view🔭 on Volatility. But how do you forecast volatility?

A simple Google search takes you down the GARCH rabbit hole.

What is GARCH?🤷

Starting January 2024, nominees get some relief and can expect a smoother transmission of assets.

All about it here 👇🏼 Sebi will introduce a centralized mechanism for the smooth transmission of assets.

Instead of a nominee reaching out, the AMCs, stockbrokers, or other financial entities may contact nominees to explain the transmission process for the deceased's investments.

How are the senior citizens scammed? 

In this part of our scam series, we discuss how the elder folks may be scammed in the markets and otherwise. Read on! Senior folks are an easy target owing to their general lack of tech-savviness. 

Scammers approach them by phone calls/SMSes/emails. They pretend to represent a bank, govt agency, or the cops.

The tone is urgent and rude to pressurize the senior folks and not give time to think.

(1/7) For most people, EPF is the popular retirement savings vehicle, and in some cases the only savings vehicle.

The Govt recently approved the EPF interest rate for FY23 at 8.15%, 5 basis points higher than FY22.

But how does the interest rate impact your EPF savings? (2/7) Interest on the accumulated EPF balance is credited at the end of the financial year.

The interest amount, irrespective of the date of credit/entry, will be added to the opening balance for next year’s interest calculation.

But what if you have no EPF contribution?

1/10 - FY 2022-23 - Here is your cheat sheet for filing taxes with the right ITR👇, and don't forget to join our Twitter Spaces on Friday! 2/10

🧵1/10 - Did you know an average investor rarely sees average returns?

NIFTY has generated ~13% CAGR between 2006-2022 and lost 60% within 9 months b/w Jan-Oct 2008. Actual returns every year did not equal 13%. Some years yielded more. Some yielded less. 2/10 - While, ‘on average,’ the returns look good, the return you will experience depends on the sequence of returns, which can make or break your financial goal, such as retirement.

A lot of investors use “bonus stripping” to reduce their capital gains tax on stocks. But after the recent budget amendments, bonus stripping won't be possible from this financial year.

But what is bonus stripping? A🧵👇 Bonus stripping can be used only when a company announces bonus shares.

https://twitter.com/ZerodhaVarsity/status/1468108620055265282?s=20&t=dVxEZEL6jvPQl3y5CyQjhA

If you want to reach somewhere, you need to have a destination in mind and make moves that will lead you to it. Similarly, you need to have an investment strategy if you want to fulfill your financial goals.

Coffee Can is one such long-term investment strategy.

🧵A thread Coffee Can is an investing strategy developed by Robert G. Kirby. He was an investment manager. One day, he was approached by a woman who was recently widowed and wanted Kirby’s firm to manage her husband’s investments.

Amalner is a small town in Maharashtra. What makes this place special is that the residents of this town own nearly 3 % of all Wipro shares!

Many townspeople are now millionaires thanks to Wipro. In 1947, Mohammad Premji set up a plant to make vanaspati, ghee and cooking oil in Amalner—this was the beginning of Wipro’s relationship with the town.

Many of the employees from the town very given the company’s shares.

A 🧵on the basics of block and bulk deals.

Block and bulk deals are large purchases of stocks by investment banks, mutual funds, hedge funds, pension funds, FIIs, and promoters. Tracking block and bulk deals can help give you a sense of what these large players are thinking. A single transaction where shares more than Rs 10 crores or the number of shares traded are more than 5 lakh is considered a block deal.

Yesterday was #MathematicsDay. One math formula we keep hearing when investing is compounding. No doubt you'd have heard this quote attributed to Albert Einstein:

"Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it.” A lot of people know about compounding but very few people take advantage of it.

Why?

Partly because of human nature. We are hardwired to seek the pleasure of living in the present than the pain of prioritizing the future. It physically hurts to even think about the future.

We keep getting queries from investors about what exactly is a bonus issue and what does it mean.

🧵A thread on what a bonus issue is and how it affects your investment👇 What are bonus shares?

Bonus shares are free shares issued to the existing shareholders. The bonus shares are issued out of the reserves of the company.

Bonus shares are typically allocated in a fixed ratio such as 1:1, 1:2, 2:1, 3:1, etc.

In 2021, there were 60 new mutual fund schemes (NFO) and they collected funds in excess of Rs.34000+ Cr and there are more NFOs coming up.
But does it make sense to invest in NFOs?

Here’s a thread🧵👇
1/11 When an AMC decides to launch a new scheme, they do so by launching a New Fund Offer (NFO). The investor's money is collected during the offer period and invested in underlying securities once the offer closes. The AMC issues units to the investors after the NFO. 2/11