Journey from Stock Options to Nifty Options trading !!
whatever you do keep a threshold of that strategy you cannot firefight and win all the time, strategy is still good, I am still reading on the same strategy it is the same strategy, but I have kept a threshold, anytime if any day of the week if I see 2 1/2% loss in my strategy so I will take out a trade for that week, this week you rest and from the next week you get back to work because you can take a risk of one month gain you cannot take the risk of 3 month or 4 month gain welcome to another episode of face2face friends, I am Vivek Bajaj and I am recording face2face series I have recorded 175 videos, approximately and the only target is to let you all know how to participate well in the market so our guest for today is from Gujarat there were many speakers from Gujarat and they have given you so much knowledge you will get a lot of knowledge here as well, so before I invite him I will tell you a framework I have always said that trading itself is a business and if you see a business man's life, then there are observations, experiments, learnings and finally that business man makes a strategy this strategy works for me and I will work on this but remember, a business man's strategy is never fixed It is dynamic, meaning with time the business strategy keeps evolving I am not saying they change but they keep evolving according to their business Trading is also similar, we start with something but then it keeps changing with time similarly our strategy also keeps changing or we make ourselves a better trader and investor so my guest for today who has come from Gujarat, he has a good career all this life first he was an employee in an IT Company and then he started his work from his saved capital then he started becoming big and then he did make big money he started with a different strategy, then he changed it later on, he made money then he lost it and then again he changed his strategy because I think that everyone goes through this phase, even you must have so you have to watch till the end to understand how can you function in a changing and evolving market so let's start with the interview and try to learn as much as possible and a disclaimer that whenever I do interviews there are high chances I have no commercial gain this interview is just for you, I have no ulterior motive, so if you join in with anyone so I have no role there, so this is just a learning exercise and nothing else so think before doing anything, let's get into it and welcome Mr. Pathik Patel So how are you Pathik Patel? I am great, thank you for calling Vivek sir it is my pleasure, you people say thank you when you come here but you people do not realize what you are giving purpose is to share whatever knowledge we have to the community there is no agenda behind this face2face as well as you are giving a disclaimer even I am giving a disclaimer that I have no agenda there is no webinar, seminar, trading program behind this so that is my disclaimer from my side you are from Gujarat so let me tell something about Gujarat to everyone, yes sir you can say when people say they are from Gujarat I get very excited that I will get to learn a lot, so tell me what is special about Gujarat so there is this risk taking ability that is in Gujarat, I don't know if this is found in other communities yes Gujaratis take risk, if you tell them to take risk then they will not back out if we will take risk then only we will get the reward if you don't take the risk in your life then that is your biggest risk people say that Gujaratis are business man by default but I don't think so, it is all up to an individual so it is not about Gujarati blood, north indian, south indian blood, it is about an individual's risk appetite point taken, so tell me I always say that Gujarat is a very good state to live in it is very quite, you can roam around at any point of time at night business men can be produced from anywhere, you are from Kolkata and you are a business man and entrepreneur and we all admire that this skill is an admirable skill so it is not that Gujarat only has business men, bigger business men like Narendra Modi and Amit Shah Ambani, Adani, these are the popular ones, but there are also other business men from South India Like Narayan Murty, Azim Premji there is Kolkata, Jamshedpur, Tata now because we have started this topic there are business men from South, but there are every region has a DNA and a cultural setup I have seen that people from south have a strong data driven decision they analyze the data a lot, in Gujarat they have a strong gut they have a strong conviction, even if they don't see the data the price can tell them it is all clear North people have a different mindset, I think India has this peculiarity that everyone has a different mindset this is an important question, should a trader introspect their DNA which region I belong to, what is my background and they should make a strategy related to that I am not sure about DNA but the actual psychology can influence the strategy not necessarily it is matching the DNA, I am from Gujarat but I don't have the gut wrenching risk appetite you have seen there are many good traders in Gujarat there is Mitesh Patel, Unnad, many less people who can punch quantity trade but I am a very conservative trader, it depends on what is your risk apetite if you don't match your risk appetite, you will not punch the trade so it is not about the DNA, it is about how much risk you can take if it matches your risk, then only do that trade if you don't have the risk appetite, then be it Gujarat or South your DNA won't matter point taken, let's finish this argument here, I am accepting this fact after a matter of time, it doesn't matter, ultimately it is you you will have to decide what you have to do so you know the face2face format, first we will know about you, your career you look very young, how you got into trading and how it all started I got into trading in 2015-2016 I was working at Infosys at that time, I was in software, I worked for 2-2 1/2 years, one was CNG, a Canadian Company and the other was Infosys In 2015, I joined Infosys that time I had some spare time as well so one of my room mate was watching some video on YouTube that was Market Gurukul if you remember so he was watching that video, so I realized this is an interesting subject then I don't remember the name of the person who was giving the tip on CNBC how they say take this stock it will increase, or take this one it will increase then I started following that, it must be about 2016-2017 when the market is high then all the stocks are running then I felt like we should also try in 2016, I started investing in Infosys, I was working in that company so I knew it is working fine so I invested a small amount like 15-20k in infosys I remember the price as well, I purchased the stock at 942 before the bonus, when the bonus was split and in the 1st month, I sold it in some 1% in 1032 I gained exactly around 90 rupees I took another stock that was Hindustan Unilever Hindustan Unilever I purchased at 860 rupees It takes brokerage so the cost will be 870 after 870, it is not working for 2-3 months if it goes down it is 40, and if it is down then 30 rupees then once it was 870, then I took it out after that 900 I never saw that rate again it became really boring, that you are not able to get any trade then in money control platform I saw it somewhere one stock I remember the name, diamond power some company in Baroda said that the money can increase by 50x when I saw that tip, it was already 10 days and that stock performed really well I thought 25% is still left so we took some stock, it was some 3000 stocks and it was 42 rupees then it increased, 43, 44, 45 in 3 days, 49, it was said that it will go by 25x and more so from 49 to 46 it entered, I thought it is a good opportunity to add then I took 3000 and averaged those stocks, then it never came to 51 rate how much it is now? 5 rupees? it must have got delisted now I took it out around 42, so you took it out? you got saved but that was a lesson that I should not work on dips then from investing I got into trading, then I learnt from market gurukul then you learn a bit of technical analysis you think you have learnt a lot so like that only I started trading seeing the candles then I met someone from Kerala and he taught me about open interest but he was not trading on the tax at that time he was trading on the stock futures by seeing the open interest in the options for example if the Infosys result is coming out then I did options chain analysis I had no idea about open interest at that time suppose this has the highest open interest, 1500 call if the stock is trading there, we will sort there future and many times it was working well if you look back 4 years back then open interest was working really well even if you used to sell blindly, it used to work very smoothly, in the morning you sell two strikes then I did data analysis of the whole open interest then the concept of IV crust, in IV crust the result get shoot up so the result of Infosys is going to come so at that time, the general IV range of Infosys will be around 30 so in general the IV spike is for 30 it is 40, then 10% so I used to sell the IV just before the result not even end of the day, like around 3-3:30 when we give the trade in 3:15 you put the trade and then the IV crust and there you get the immediate gain but in the evening if the result comes and it gaps up or gaps down it started with IV crust trading, half the time I used to trade and half the time I used to take rest because that time it is the result season 10-12% is generated, which is enough quarterly then that 1 1/2 month I used to take vacation then sometimes I get an opportunity for IV crust till 2020 I have also trained the students I have faced the worst scenario in IV crust trades if you remember Wipro, when the market had already crashed Wipro was trading around 225 so we sold a 225 straddle just before the result and I remember we sold the straddle in 17 rupees and on the second day it opened in a 5% gap up 5% gap up is normal, it can be handled but immediately after opening it went to 10% and 10% I have never seen wipro growing up so I thought after stopping at 10% it will come back I was not even cutting the trade there because it was not seen 2020 July, can we see this in the chart ones, this is a very interesting discussion let's see this in a chart, and wipro let's go to 2020 July, I remember the date as well, it must be 13 July you also remember this! Yes this came to me two days constantly this is 21, this must be the gap you have such a great memory this is 14 July, I traded on 13 and the circuit was on 14 so the drawdown was of 6-6 1/2% if you immediately check the result then after Wipro it was Infosys I used to handle the gap down that happened so that trade of wipro was on I sold the puts and cut down the call, the wipro trade was on and on the same day I punched Infosys trade the same info regarding IT stock was about infosys the last available call of Infosys that was 920 so that I sold, and the put for equal balance so you always do strangles? generally I do the straddles before the result, but the wipro experience of 15% gapdown in Infosys I sold the strangle and then I selected the right strike I understood, even Infosys on that day it was 10%-15% but luckily on the Infosys, I didn't wait for that so it was always volatile, so wipro was a silent stock so Infosys always had a volatile behavior I was always aware of that, so I got it cut in 2.5% in overall loss, so it was 8.5% then I realized the pre result needs to stop if the position sizing is not right then it can even take 60-70% I was selling 2 lots in 10 lacs, even if it needs 10% circuit it will require 6-7% but if you put all the capital together and if you trade it in one lot above 10 lacs, so after that it can take a rise as well after that I stopped IV crust trades, so you never diversified after that this is all diversified business, you never take one stock you trade 30-40 stocks during result season if you are wrong in 5-6 then you will be right in others, no it is not like that you will be wrong 10-20%, in 40 stocks you will have 4-5 wrong this was an over sold situation already in 2020, then there were no problem in the results so it got shoot up but in general you will have to see the circuit and the stock can move other than that your 80-75% stock will move in the range of 2-3% and there you will get a good profit and some stocks will just keep moving, you will not get any profit or loss if you can catch up in 1-2 incidents you can still make a big difference in the same company, if you have IV crust scaling here is not possible if you want to trade in 30-40 lac then you can trade in this but if you want to trade in this business then that is not possible because when it has volatility then it will have many slippages and you won't be able to afford those slippages in high quantity generally, debt in stock options is poor even Reliance needs 1.5 rupees slippage if it is a big quantity, so in small capital you can do these things but with big capital, you can't do point taken, then I was trading a directional I traded a breakout I will show you here here is the breakout, I sold a put here it is low, all time breakout is high the moment it broke out and it took a close above, I sold a put around its low like that I was trading the directional this was a smooth trade that it went up sometimes it is like it will breakout and then it will reverse as well then you have to change from directional to non directional and sometimes it reverses and turns into an ATM, I will show you the example I will show you what I traded so this is the breakout suppose you have sold a put here, if it had a breakout this is the support zone so if it sells it will be reverse and then it will also even out so there are cases where the breakout fails so you don't put stoploss here, you have to see if the call is at the money you don't have to handle it after at the money there you have to give up so you remove it easily, in result it can be 4-5% but without result if it is giving 1 1/2 to 2% then it is an abnormal situation that something big is happening, ATM can always be a strike you can leave when the candle broke, it went down below the breakout, so we can leave, but I used to leave before the firefight, what I will do here is when the low breaks this has also become a resistance as the hammer is high, even if you see the volume it is very high, whoever has sold it then he is also a powerful person I will sell the call also and the put because it had a breakout, but if the sold strike if it becomes an ATM, then I will cut the whole first we will firefight with the strangle when we don't have the ATM, when there is an ATM then firefight is not possible, so you have cut all the put but you have not left the call? so you have done this from how long? I started trading from July 2020, breakout trades it is not only directional, it is very much flexible because I have done it like that I have traded this from 2020 July to 2022 March around 2.15 years I have done that, and I was generating good money, the problem was the huge slippage cost I was paying here stock options, even Reliance had high liquidity
liquidity you cannot roll to the other strike, option of 5 rupees is 1 rupees now but if you to roll one rupees then you will have to think about the slippage, that I will require half the cost in both places it again comes to 2 rupees, so stock option from July is like that, so in your trading career you have used different strategies to check what works for you that strategy was good enough, but your capital is not comfortable with that strategy, you cannot scale with that capital with time when you are getting old you start changing things, and that is nothing wrong just like how there are stairs you climb up, that's how we will get up in life I was talking to him about his profitability and tracking his profile, he also shared his leisure and he told me that he trades in his family member's account for some reason just for people who are curious about the profit, so if you see his leisure that he used to do in stocks in the initial years, now you have fully moved to index? totally completely index, so you don't do Nifty at all, what I can see here is that plays direction and then obviously converts into straddle or strangle, the track record is interesting and I must say you have made your base very strong, from here you only have growth, any pro trader's one mistake in life to lose his career, it is not that if you are a pro you will not make any mistake in the market some traders become over confident, and I wanted to talk about this what they should do if that happens, yes I wanted to discuss this about what happens when they become overconfident I did a face2face with a trader who lost crores and to understand his psychology during that phase, I also want to talk about you where you had 2 days like that one I have told you about wipro and infosys when I used to trade in stock options, then in the second phase you can say that the drawdown in my career, which was around 13%, it was the overall capital deployed if your deployed capital is 1 cr and your total capital is 20 cr it doesn't mean that your ROI is different, so that 13% drawdown was in overall capital, in nifty? let me also you this chart, we will stretch this discussion yes it is this one this is the daily chart, this one was on Friday, this one was on Monday and then Friday, so let's focus on this, here I generated it, in the morning I deploy iron fly and the risk is defined in this, let's just conceptually revise iron fly the nifty was 1750 that time, no that is the closing rate, I am seeing the OTP, I used to take that trade, so how is the iron fly here, iron fly here is 17600, I am selling this call X has taken a formula here, doing minus one will work, then 17600, so is this at the money? so you have sold the straddle, then it will be plus one, then 17400 iron fly I initiate on Fridays, this is very much risk defined that it will not go and that to on thursday if it stays behind the range, but the main thing is that you cannot sit after deploy, suppose I have 17600 iron fly it closed 200 points behind the range, so it almost closed outside so I initiated broken fly on the downside, this is the last swing low, it went down so I thought it is a bearish breakdown, even if it was a green candle it was closing below the level so there I added a new broken fly, I added 1733 with the downside leg at 150, you have to actually tell me how to do this, just show me the trade, you have kept this in defineedge opstra right this is the 29th August trade, I will show you when I initially started, it has 650 iron fly, it has 450 put buy and 850 call buy, I sold a 350 put in this gapdown, and here you can see all the adjustments so it will be difficult to explain when and where, this is cumulative, you will understand how to do in the end, here I opened a straddle of 300, I sold it in -1 it doesn't matter much and that is not so problematic, I have only taken down hedge, you can call this broken fly I got this straggle down, 17600 was 17500, 17800 17400 is already there, I thought that it is a breakdown but it was actually not, it had 2 flies, 1 was 17600 and 17500 Thursday used to be positive or my flight used to leave, so I was up around 18-20%, what was your average up in weekly? 0.85 or 0.75 after all cost like April, May, June, July, August, almost 5 series and then I was up by 90% it remains in a range, here I am not only taking a non-directional trade, people in directional trade have made the money, this week was exceptional because it was down on a Friday, Monday it was 400 points down I was saying that pro traders can also make a mistake, 2.5% loss I saw on this day only, on Tuesday only I was down by 2.5%, it was maximum 1 month loss, in one month I can earn it through hard work after Tuesday I take a full bullish position, Wednesday was a holiday, and in US market it was corrected in this point, it was some 300 point gap down strategy is still good, it is not that I am trading on some other strategy, but I kept a threshold anytime on any day of the week if I see 2.5% loss on my strategy, so I will take out trade for that week
this is a 3 week work, I can't do this in 1 day that is a big learning for me and that was a good week, what you learn from your mistake is better than from a good trade after this week I decided that I don't have to do anything by Monday, in two days I have to see the market to move range, you have to make a rule that end of the day only you will punch the trade by implementing the iron fly, the rule is not to do anything till Monday, Monday end of the day nothing I will do, if after that my defined rule is broken, then I will do something then I was able to learn , you have to define rules like sitting patiently whatever is convenient for you, some people take the risk of 30% 40% 50%, it bounces from there as well but for me 10% is maximum and that to over the time, I cannot risk in short time you play iron fly but broken iron fly, yes broken iron fly, initially I stopped broken fly, if you are good at catching the direction then you will be good at iron fly, iron fly is a non-directional strategy, but above that you have to take a risk you take that hedge, at least the risk will be defined, give some points to the market as a premium, give the hedge costing so that you are at least able to sleep I will show you this week here only this video will be released a little late but we will at least get some learning, this is in December, which was deployed yesterday, on 2 December you have deployed it, we can see the old one as well, you have so many trades, you have to do so much adjustment? some people take hedges, see the iron fly here of 600, if you see the chart then it was started last week, 24th November was a thursday, which was a bullish close maybe the market was around 450-500, I was deployed this much capital, the hedge was 18400 and then it was bullish, and the above hedge was 750 which was on 150 points, it means it is a little biased, second day when the market was sustaining on a higher side the initial risk I have taken it was in 2 weeks, that I closed in 32 and then it was 2200, it was a 600 straddle, and the top was my bullish view so I took the hedge of 750, which is only 150 points closer, so this is a little biased towards bull market, second day when the market was sustaining on the higher side here I closed it at 32 and then got it at 500, hedge is 100 and other is all about sustenance, shifted the hedge and got it at 750, so both my sides are risk free , it was free and it was not going anywhere it is not that I am only a discretionary trader, it is not that I don't trade the directional, delta happens but I take some directional view because I have also traded in stock options, so price action reading is good after that I took a ratio upstairs, I placed it on Tuesday when the market sustained, it was sustaining after 600 if you see it constantly put sell, above that I put another ratio, above ration is 750-850, which had a breakout of mostly 18-19-20, although you are taking directional view, the intention is to eat theta but with an increased range in the end it was a spike it you remember this wednesday, last wednesday, in one hour you have to get a nifty point hedge, in 550 it was protected in the bottom, 1.2% got fixed in the bottom, then I sold the 150 put, I rolled it in 1860 it is deployed from before, but gap up and gap down will need more ratio right, in iron fly it is defined and fixed, in ratio there is a risk, ratio is only deployed only with price action, then you should do futures, no we want to eat theta it is monthly settlement, if we see the quarterly, let's go to vix and see this, and then later you will add it, so you also have to do this, it means it has no settlement , no option so this is theta, due to theta you are getting 3675 if you see this tab then I have sold 5 lots here, one iron fly has been deployed, I have sold 4 near this call, let's go to Greeks and see this, 4.76, which is almost neutral, it means you are 4 nifty plus, and it is a simple conceptual thing, the gama is negative, which means that only 18300 is almost put, others are also hedge, delta is already looking after it, delta is looking after hedge, my problem is vix, no vix strategy has more risk because the impact of vega is very heavy, if you deploy iron fly anywhere and if we set this up it has a slow vix so the market has not given much movement, main problem for a seller is if it goes from low vix to high vix, if low vix is stable then that is not a problem, you have to see from the transition of low vix to high vix was it a regime when the money was invested in September? the IV was better than this, even high IV is for traders, but it is actually not true, due to high IV the traders will suffer, it is smoother to make money in low vix than in high vix, in high vix the adjustment has to be done quickly it went above 15 here, you can see the candle it is better, it is resisting from 15-16, so if it goes up, then you have to be conscious about the resistance, it can come up to 20-21, so should I reduce the position sizing, or you can hedge it completely it is better to see nifty's chart , bullish regime is going on, if this level breaks, 10 EMA will constantly sustain here, it means the breakout has come from here, so what is the logic? 5 trading session, the breakout from here has been retested if it comes below this then you can take a bearish stand, if it comes down below this, it will be caught in between, it took your money, but no. My money was used here when it was confused
it was a 750 close, if it was within my range, if I had those rules defined that I don't have to do anything on Monday, don't have to come on onscreen, generally I go to sleep, if I have the iron fly, if you see now then I have naked position I don't think like I have 10 cr, 50 cr or 100 cr, I will see how much I deploy in 10 lacs, iron fly generally don't require much margin, so in 50k also people used to deploy iron fly that cannot be done, so initially in 10 lots I deploy 4 lacs, what is the iron fly margin? this is 4 lots, so our margin requirement is 2 lacs, which is 50 lacs, 10 lacs we are deploying 20%, size I added according to 1 lacs, generally I do not do anything on Monday, margin is closing 100% by range, and it is a buy of 400 if it closes behind this then I place a broken fly or a ratio spread in that direction, every time the position sizing is different, 4 lots will go in every trade and not 10 or others, 4 is fixed this means it has 24-25% range it will stay in the market and when you will see with time it will change, similarly the probability will change if it stays in the same point, if it goes behind the range we will try to expand the range, that's why we place broken fly or ratio spread, our range will spread in that direction, probability of winning will also be 50 don't take much risk in 10 lacs, 1% is also a lot, I take the risk around 0.8%, so how much money will it require, here it is, maximum loss is this, 10-12k will be cut? If you will not do anything then you will see this 12 on Thursday, then you will not see above that if it will move then what range, in the morning if it is outside range in the evening it is in your range, you have to define rules per day that if something will happen on Monday then only I will do something suppose if you need a ppt I can send you I have made one, we will post the link in the description, I have also added the simulator, if you see then this is the options simulator, I have also made a video on that, If I remember then I did one with Telugu Brothers, they did the strategy simulation got such clarity from you, if someone listen to this video carefully and gets the pointers then you can learn a lot, I will add more points about flexibility, you need to evolve yourself even the strategies, then you have to also find your own age and the risk appetite that you will decide we can't do much on that, before we close this video we will give a disclaimer, everyone has their own style, what he does is up to him, my role was to just take the knowledge, if you do any work with him in future, you can make any relation it is up to him I have no role, I have taken some key pointers that I will definitely use in my life thank you for watching this video and if you have stayed till the last then tell yourself you are really serious for the market , so follow this practice, bye and take care
2022-12-18 01:17
