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Time: 1.15 pm
Mid Market Report:
- Markets are trading as per expectation.
- Axis Bank block deal happened at Rs 1322, but now trading around 1390.
- So it is due to short covering.
- China markets are up by more than 3%.
- So metal stocks here shining.
- Energy, pharma and FMCG stocks are not doing well.
- Europe is likely to open flat with positive bias.
- VIX is down by more than 2.5%.
- So premiums of options are falling.
- Friday afternoon trade is always difficult to predict.
- By judging the shorts and FII buying, Nifty future may rally by 20 to 30 points towards the end of the day.
- If Nifty future closes between 6560 and 6580, then it will very good for the markets and Nifty will breakout next week.
Comments
Since there is spl trading session to be held tomorrow, weekly close is scheduled tomorrow. Nifty should close above 6500 on Saturday.
ReplyDeleteThanks. It is true that today is not the last day of the week. But usually on Saturdays short trading time, Institutions will be absent. So the real short covering chances are less.
ReplyDeleteThe expected short covering might happen next week it seems. Anyways, I'm banking on ur put option selling recommendation so that I can find a bottom :-)
ReplyDeleteMy gut feel is that, since we have breached multi-year trading range 2008-2010 top should be the bottom for our market. If be broke 6300 on Wkly closing basis then markets could crash. This is my personal view. Interesting to know your views
As I have been telling many times, I am not a technical person. Even technicals can give the levels but not the time frame. For example you said Auro Pharma rose vertically, it can go down below 400. I do not care whether it goes below 400 or above 700, I am taking a view that it will trading between 470 and 570 for the next two weeks. One week gone, what I sold for Rs 5.50, now trading at Rs 2.50. In fact I made more money as I have further sold 480, 490 and 500 Puts. If Auro Pharma reverses, the same way I will keep selling call options. Those who do not have money power, can just hold and can keep a stop loss at Rs 4, still earning a profit of Rs 1.50. But only money can make money. In the last 5 trading sessions, Nifty did not go anywhere, but I made Rs 25 lakhs. Yesterday Nifty was up only by 7 points, my folio has made more than 8 lakhs. This is the power of option selling. The profit is mainly because VIX has fallen by more than 4%. Hence premiums fell.
ReplyDeleteWow, that's great. You must be one of the best option writer in Tamilnadu. Hope people approach you instead of wasting their money by investing in MF's which give lesser returns than FD.
DeleteMost Mutual funds do not even give a return of FD interest rate of 9% per annum. I just got 4% per annum for my own investment in Sundaram Mutual Fund 4 years before. The best thing we do is that in addition to the profits from option writing, we also pay interest @9% for the margin money given.
DeleteI completely buy your theory of options writing. No second opinion.
ReplyDeleteOnly weak hearts should refrain from selling/writing Auro puts, selling options is a professional job. People like you can do it with ease.
It was just a cautious view from technicals perspective (Josiyam), since the rise was too vertical just like Wockhardt Pharma. One bad news can have big impact, also there's no circuit filter for F&O stocks.
When a non-professional sells 470 put, he should have a backup by buying 430-450 puts (if incase some thing unexpected happens). Unexpected things doesn't happen too often, it's just a shield.
LIC gives insurance policy to common people. Some people may die, LIC may have to pay in Lakhs, though they get few thousands from those people. Still they do not care because they have not collected premium only form those few people, they collected from a large number of people. The same way, a person with large investible funds, do not sell options only in Auro Pharma, he will sell in many stocks and indices. I have mentioned in my earlier reply that I have positions in Nifty, Bank Nifty, Auro Pharma, Axis Bank, Bank Baroda, LIC Housing, Arvind, etc. So even if there is a bad news in any stock, you may loose, I am not saying that whatever we do, we always end up in profit. But the basic priciple is that LIC do not insure only few people who die or not all people who insured with LIC die. This is how LIC makes money. Same thing goes for option selling. One advantage for option seller is that even when the shares react in panic, he can cut down his loss by selling additional calls and puts. But those people who die, LIC can not cut down the losses. So option selling is for big people with deep pockets, if it has to be done efficiently. That is why I said "Money makes money". Most retail investors buy the options either on their own or based on advisory companies recommendation. In all those cases, "Money makes money" is not correct, it is "Greed looses money". I have a client who bought 6300 Put option and L&T 1100 Put option and still sitting for some miracle to happen in the next four days to make money. He may make money if some miracle happens, but the probability is very less. He might end up loosing all the money.
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