Sourabh Sisodiya,CFA

Thread:
How I managed my losing trade to end in profit ?

Today was a difficult day for most traders as market opened with a 3%gap up &amp; fell after that and again rallied in the 2nd half.

In this thread, I will be sharing my detailed trade management for today.

#trading 

1) I had carried overnight 20 lots sell of 8400 PE sell &amp; 9500 CE sell

-1500 8400 PE at 110
-1500 9500 CE at 114
Net Credit was 224 point

In the morn. it was around 265 points due to gap up

MTM - 60 K at 9:20 am 

2) Waited for 15 mins  &amp; plan was to go long abv 1st 15 min high to defend the position( Gap Strategy)
But market broke 15 min low &amp; losses started to narrow.
At around 11 am ,the trade was at breakeven :) 

3) At 11:15 am,
Markets were not going anywhere so as per my intraday theta eating strategy sold 8800 and 8900

-750 8800 PE at 147
-750 8900 PE at 159 in same qty as 9500 CE as view was neutral

And booked profit in overnight  8400 PE at 79 

4) 15 mins later at 11:30 am,
Market hit  new day  low so sold additional 9400 CE at 200 as I was  slight bearish as per my systems

Current position was :

-750 8800 PE 147
-750 8900 PE 159
-1500 9400 CE at 200
-1500 9500 CE (Overnight position) 

5) Market were falling and my 9400 CE was at 165.
I was in 20K profit :)

As I had short positions,

I Kept buy sl on 9400 CE at 196 ( Above 20 MA in 5 min chart )
The SL got  got triggered at 2:20 pm when markets rallied. 

6) As per my intraday system, my stance changed to bullish &amp; was expecting a short covering rally

I sold 9000 PE &amp; 9100 PE (kept pyramding)

Open position now :
-1500 9000 PE at 198
-1500 9100 PE at 194
-750 8800 PE at 147
-750 8900 PE 159
-1500 9500 CE (overnight) 

7) At 3 pm,

I was in 1 L + profit.
As rally seemed strong, I bought 9300 CE +3000 qty (pyramiding) 
with a 20 point SL as I had profit cushion of additional sold PE.

I take risk only when I have a profit cushion.

“ Be aggressive when on winning streak &amp; defensive if losing” 

8) 3:15 pm (Time to close intraday shop)
I don’t take any signals after 3:15 pm

Booked profits in
8800 PE at 106
8900 PE at 128
9000 PE at 167 

9) Rest Carried for monday
-1500 9100 PE 
+3000 9300 CE
-1500 9500 CE

That’s how I managed my trades without being emotional after morning loss and just doing what market is saying.

Just follow your systems &amp; manage your risk !!
That’s the only way to successful trading

End ! 

Getting many DM’s on how I can learn and trade like you.

To be a succesful trader one needs an edge
My edge:
1)focus on selected instruments (Banknifty majorly and few stocks) 
2) backtested my strategies historically (for past 10years)

(1)

3) Optimised it as per different market conditions.(bull/bear &amp; sideways)

4) Walk forward tested the strategy 

6) No strategy works all the time. I am aware about unfavourable cond for my strategy and know what to expect from the strategy when I actually trade it 

(2)

7) The major edge comes from theta decay and dynamic options adjustments which allows to benefit me even if my view goes wrong

8) Riding winners and keeping losers small is the only way to survive in the markets.

(3)

9) A trader has be a good risk manager.
We have seen black swan like surgical strike ,demonitisation, PSU recap, corporate tax rat cut etc but survived all due to a simple rule of cutting losses at 1% of capital.

(4)

How to learn :
 @ZerodhaVarsity is a pretty good resource to learn about
1) Technicals
2) Options 
3)Pyschology
Observe the markets, develop your sense ,test your strategy,generate conviction and deploy

It take yrs to be become a consistent trader. There’s no shortcut

(5)

Someone looking to shorten the curve can attend a training or find a mentor.
There are many on twitter.

But this will only give you a head start and won’t make you a profitable trader from day one.

Make sure the trader style and your style matches.

(6)

Just focus on the process and money will eventually follow.

Idea &gt;&gt; Backtest &gt;&gt; Optimise &gt;&gt; Deploy &gt;&gt;Feedback

Keeping following the above process and stick to 1 or 2 strategies that suits your pyscholgy.
You cannot money by copying someone else’s system

#options #quant #system

Can long term investments also be done using systems ? Yes !

I’ll share the process that we use to build long term systems (100% systematic in nature)

1) Trend should be up

We can objectively decide the trend using a moving averages

(1) 

2) Should be near support for better risk:reward

One can use MA for dynamic S&amp;R

Market reverts back to moving averages and they provide dynamic support.
See the stock in the image , for past decade the MA is providing good support 

(2) 

Important aspect in wealth creation is CAGR
How can we achieve high CAGR ?

**Check the attached image**

Credit to @InvesysCapital for his presentation in Decma.
Learnt the concept from him.
(3) 

For eg:  Reliance 
CMP -600 in 2009  &amp;
CMP -600 in 2017

So that’s 8 years of 0 return.

So we use a momentum filter to scan for stock which are in good momentum.
“Stocks are good only when they are going up”
Credit :@markminervini for sharing why not to buy familiar names 
(4) 

Finally, we analyse the stock using our fundamental systems which are inspired by @drvijaymalik and his book peaceful investing

Check our sample report on Metropolis by our inhouse investment team 
https://drive.google.com/file/d/1LtlJ8LsaVM0_nPlBmuCtm_Z8MTSdefYW/view?usp=drivesdk
(5) 

Finally we have a stock-
-Which is in uptrend
-Near a support for better risk to reward
-Is in momentum so that we can achieve high CAGR 
-And fits our fundamental criteria

Can you figure out such stocks in current condn’s ?

(end)

#quant #investing #systems #markets #finance 

How to do Trade Management

What defines your success as a trader is how you manage your losing trade.
I was bearish on Reliance as per view in previous tweet and shorted it at 1052 but RIL started going up

(1) 

I kept at Buy SL in 1100 CE at 89 to hedge the upside. As soon as 1100 buy got trigerred, I sold 1000 PE

The payoff looked like this

(2) 

But RIL kept going up so I sold additional 1000 PE to make it no loss strategy on the upside.

My view was bearish but due to trade management there was no loss on the upside now
(3) 

But RIL again started coming so I exited my future at cost and sold 1100 CE to convert into a slight negative skewed and brought downside protection at close to convert my postion to this.

See the breakeven 880 to 1220

That’s how I manage my trades
(End)
 #trade #management 

@sourabhsiso19 Nice moves man. But can this stuff be automated like the simple strategies?

Options Thread 

How options allows to change and adjust view dynamically. 
Let’s understand with a live example.

Example :  Nifty is at 11921 and you are bullish on Nifty.

1) Buy Naked 11900 CE(call) at 167 

Breakeven : 12068
Max Loss :  Rs  12555
Max Profit : Unlimited 

2) Now your view changes from bullish to slightly bullish so you can convert naked call into a bull call spread by selling 12100 CE at 72

Breakeven : 11996
Max Loss : Rs 7100
Max Profit : Rs 7800

#OptionsTrading #trading 

3) Now your changes from slightly bullish to slightly bearish. You can convert the bull call spread into a ratio spread by selling more 2 calls of 12100 CE

Breakeven : 12224
Max Loss : Unlimited above 12224 
Max Profit : Rs 18550

#OptionsTrading 

4) Now if your view changes to sideways then you can buy 2 lots of 12200 CE to convert the ratio spread in a butterfly spread.

Breakeven : 11936 to 12182
Max Loss : Rs 2600
Max Profit : Rs 12300

#OptionsTrading 

You can see that how you can change your view with the same strategy by doing adjustments.

To learn  more such insights on options and other market related strategies you can join our educational telegram channel.

https://t.me/finsense

Keep Kotak Bank in radar for tomorrow if sustains above 1900

Trend : It’s at New 52 week high

Options Data :

1900 strike has max call OI and it’s last week of expiry.
Price sustaining above 1900 will make call writers run for cover leading to a further short covering rally. 

In last week of expiry, always keep stocks in radar which are 1-2% away from max OI. If the max OI strike is breached and if there is unwinding. It can lead to a short covering rally. Also Gamma works in your benefit.

Thread
How to manage strangles dynamically incase of a violent move or IV spike ?

1) Yesterday and infact entire last week if you had created strangles you would have experienced that during upmove only call side were increasing but puts weren’t decaying.

#trading #Options

2)In morning I had created a short strangle
200 lots 25000 PE sell at 102
200 lots 27000 CE sell at 161

You can sell from below image that if I had waited in this strangle till day end I would have lost around -4.5 L

So lets see what all adjustments did I do logically. 

3)After creating strangles the premiums strarted increasing as puts were not decaying and calls were increasing. 
So I had kept 100 lots buy on 26500 CE at 400(day high)
My buy got executed at 400 around 12:15 pm &amp; I exited 25000 PE at 75 

4) I had kept more 100 lots buy at 435 (recent high made during upmove till now)

The buy got executed at 12:15 pm
So my current open postions now were

200 lots 26500 buy at average 420
200 lots 27000 CE sell at 161 

5) Logic:
As short strangles are basically short vol so if there is a movement on one side with no decay then one can start buying atm calls.
What this does is it converts your strangles into ratio spread and if move continues eventually into a debit spread 

6)So if there is an upmove or IV spike the long atm call controls the MTM and any spike helps you as now you have slowly converted from strangles to ratio spread and finally a debit spread.

7) And that’s how I managed on Friday as per market movements.
(Payoff is not exact as I exited my sold put earlier)

But without adjustment MTM would have been -4.5 L and I ended in slight green due to trade management inspite of a 100 point spike in sold strangles 

8) What if market reverse ?

As now you are into a debit spread max loss is capped and if market reverses you can sell additional calls to convert position into a ratio spread again 

So basically : 
26500 CE buy
27000 CE Sell
27500 CE Sell (extra) 

9) So that’s how you can convert a short strangle into a ratio spread and into a debit spread if market becomes trending and if market again reverse then again into a ratio spread

10) Options Trading is about managing your trades and keeping MTM under control

1) Have a plan before your trade &amp; Know the effect of your adjustments
2) Don’t let sold options become ITM
3) Adjust as per market movements

Hope you found the thread insightful !

#trading #data

Why do I trade BNF strangles ?

Sharing EOD backtest results of straddles.
SL 50 points or exit at close

Then we I tested on 1 min.option data to find

-Best time to enter
-Best time to exit
-Max possible decay for day
-Days to avoid strangles

#edge #systems #quant #banknifty 

After such rigorous backtesting.
I am more selective in my trading.
I know why the winners and winners and losers are losers.

I try to avoid days where I have low prob of winning.
Trading is all about having an edge and constantly exploiting it.

#backtest #OptionsTrading

How to manage straddles :

1) As bnf open was within yesterday range created a 29000 straddle at around 9:30 am

29000 PE sold at 528 and
29000 CE sold at 453

#trading #OptionsTrading 

2) Instead of keeping SL on sold legs. I keep SL on otm options in the system

SL was on 28000 PE at 220 (day high)
SL was on 30000 CE at 165 (day high) 

3) At 10:15 am, Bnf started to trend down and 28000 PE was bought at 220 and I immediately bought 30000 CE at 110 

4) If you look at the straddle chart, there were lot of intraday spikes and your SL would have been hit if you had kept SL on atm sold legs 

5) But after lot of intraday spikes the straddle from 980 closed at 880. A 100 point decay intraday.

But even if both your buy  option got triggered you would have made around 15-20 points inspite of such violent moves on both sides. 

6) So instead of keeping stops on sold legs ,keep stops on otm wings and once both wings are bought try to get credit extra credit on other side to reduce the breakeven. By this you will not be out during spikes and will save slippages too if trading huge qty.

7) So always remember

- Sell options as per view
- Keep protective buy stop on otm legs 
- Once buy is triggered , stay clam and try to get extra credit by creating put spread or call spread as market movement

Goodluck !!

@sourabhsiso19 In this case you mean after buy gets trig on one leg (PE), you buy the other leg also (CE) and sell more CE above the leg bought or slightly lower OTM CE?