This post was written on 01-Feb-21 at 11.46 am.

Today, Monday, 01-Feb-21, is Union Budget 2021 day. Its live now in the Indian Parliament. Finance minister Nirmala Sitharaman is announcing the budget in the parliament now.

Whenever there is a major financial event, as a trader you should keep a track on India VIX:
https://www.moneycontrol.com/indian-indices/india-vix-36.html

As on 11.46 am it has already crashed more than 3.9% because the announced has started – the fall will be much swift from tomorrow. With time and very fast it will keep crashing irrespective of the movement of Nifty/stock markets.

India VIX 01-Feb-2021

What Will Happen?

Options buyers will suffer as the premiums will erode like ice melting, today and tomorrow especially.

If you have bought options and if in loss in such times, I suggest take a stop loss save as much as possible.

Option sellers have luck on their side on these melting India VIX days after the major event ends. Even if wrong up to some extent option sellers will benefit.

Update on 03-Feb-21 – see this graph of India VIX:

Note: India VIX was the highest one day before the budget 21 which was Friday, 29-Jan-21. It started to fall from the Budget day – 01-Feb-21. It will keep falling in future too.

Update on 04-Feb-2021 – India VIX dropped to 23.02 which is 3.07% less than previous closing:

India VIX 04-Feb-21

Conclusion:

For option traders India VIX is a very important factor to decide the future action. Its always good to buy options when India VIX is low and increasing. Which means you can buy options 3 to 4 days before a major financial event like union budget, RBI policy, state or general elections etc. And sell them just before the event day.

Once the event day is over you can start selling options.

Hope this article will help you to take a decision on when to buy and when to sell an option.

If you do my course you will be able to trade whenever you want and without too much risk as all trades are hedged. And most importantly you will not have to continuously watch the markets.

In this post, I will discuss why holding a few good stocks forever is good. What is forever? 10 years or more.
What is the likelihood of holding a share for 10 years? Well very likely. But how many investors hold even a single share for 10 years? Very few.

Well, I do have a course on how to select stocks to hold for the long term. I do not have a page on that because of the reason given above – not many investors hold a share for 10 years. If interested you can WhatsApp me.

We all know Warren Buffett is one of those who have made billions out of stock investing. I do not think anyone else will beat his returns in future. Why because we have become short-sighted as far as returns are concerned.

Here is some important information and quotes by Berkshire Hathaway CEO Warren Buffett:

• Berkshire Hathaway CEO Warren Buffett is continuously ranked as one of the richest people in the world. Berkshire Hathaway’s CEO and the sixth richest person in the world with a net worth of $78.4 billion as of August 23, 2020, on Bloomberg Billionaires Index, Buffett owns no mega-mansions, supercars, and yachts. He is among the very few super-rich who neither believes in living life king size nor engage in a splendid display of wealth. Source: https://www.financialexpress.com/industry/warren-buffett-breakfast-at-mcdonalds-flip-phone-for-calls-how-6th-richest-person-spends-his-fortune/2063096/ (recommended read)
• He is seen by some as being the best stock picker in the world, with his investment philosophies and guidelines influencing numerous investors.
• One of his most famous sayings is “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.”
• Another one is “If the business does well, the stock eventually follows.”
• The third is “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
• And the BEST one is “Our Favourite Holding Period Is Forever.”

In this post I will discuss his best quote till date “Our Favourite Holding Period Is Forever.”

To start with let me give you an example of Reliance Industries Limited stock (NSE: RELIANCE, BSE stock: 500325, Group (A) RELIANCE, INE002A01018)

This is the most popular stock in India, and of course a fundamentally strong stock. Now let me show you the return this stock has generated from 2002 to 2020 or 18 years.

See this image on 05-Jul-2002 Reliance was trading at 53.01:

Reliance 05-Jul-2002

And on 18-Sep-2020 it was trading at 2305.70:

Reliance 18-Sep-2020

ROI: 2305 is 4349.05% of 53.

Had someone invested Rs. 2,50,000/- (Two lakh 50 thousand only) he would have now Rs. 1,08,72,625/- (One Crore Eight Lakh 72 Thousand). That’s a profit of Rs. 1,06,22,625/- (One Crore Six Lakh 22 Thousand).

This is what long term investment can do. Wait there is more. Read this post on how to make crores from the stock markets to see how our parents could have made 800+ crores on an investment of just Rs. 10,000 in ITC.

Article written on: Monday, 25-Jan-2021

All stock traders small, big and HNIs even FIIs will keep an eye on on the Budget that will be presented by Finance Minister Nirmala Sitharaman on February 1, 2021. The Budget is being presented at a difficult juncture for the economy. According to the first advance estimates, India’s economy is projected to contract by 7.7 per cent in 2020-21.
This budget will be presented in a very interesting situation as far as stock markets are concerned.

Why?

First, read the above paragraph. I repeat – This Budget 2021, is being presented at a difficult juncture for the economy. According to the first advance estimates, India’s economy is projected to contract by 7.7 per cent in 2020-21.

Now see this – Indian stock markets are trading at the all-time high range:

Nifty EOD 25-Jan-2021

See the above image of stock markets and now see this graphical representation of GDP of India since Jan 2018.

India GDP Growth Annual

I am sure you must have read on other websites that markets may see a crash.

What is a Stock Market Crash?

A crash is official if the stock markets fall 10% since its recent high within 2 monthly expiry or 60 days.

Recent high for Nifty was 14600 approx. So 14600 – 10% = 13,140. It means if Nifty reaches 13,140 by end Feb 2021 – it will be an official crash.

Will that happen?

Well, this is tricky – so-called experts tell you and confuse with a lot of jargon and then say yes or no.

My suggestion – if you are unable to take the risk – please wait for now and do not trade. Waiting for a few days to trade, will not make you a bankrupt. But one mistake may make you lose a few thousand rupees. Of course if you hedge and trade then fine you can because the risk is limited anyway. When the risk-reward favours risk more and reward less, like 10 days before and after the budget or any major event, it’s better to halt trading. Sit and watch the markets. Read as much as possible about the budget impact and related news, then make a decision once the weather clears.

Here is what may happen after the budget is announced and is in public domain

If the budget favours the middle class and rich (unfortunately markets do not care for the poor), it may cross 15,000 and if it’s bad for them 13,500 will be breached on the downside.

On top of that India VIX will now rise till the budget day – February 1, 2021, and will start falling from the next day.

Here is India VIX EOD 25-Jan-2021:

India VIX 25-Jan-21

So what will happen?

February 21 month’s option premiums will not decrease fast like normal days until the budget day 1-February-2021. If you are an option buyer you MAY benefit – if you are a seller please wait till the budget day, and then sell.

I keep sending investment ideas, not tips, to my customers who have done my course.

Here is what they get as my paid members which is not sent to free newsletter subscribers.

On Jan 18, 2021 at 1:28 PM, I sent a mail to my mailing list that has email of people who have done my Nifty or BN course.

Here is the screenshot of the email sent date as proof (a copy of the email goes to me as well):

Here is the screenshot of the email sent:

Copy of the email in text (only after the stock already rallied):
=======================
Hi,

This email is sent to paid customers only. It will not be published in my site or anywhere else.

Bajaj Finance Ltd. currently trading at 4,743.95 (18-Jan-21), is a good stock to buy. You can invest some and keep some money for another 4-5% fall and then exit at 10% profit at wherever levels is your average.

If you do not want to invest more you can exit at 5200.

Please note that I may or may not give an exit call. Do not take a stop loss. Bajaj Finance Ltd. is a fundamentally strong stock. Hope you understand why people like us make money from stock markets.

For example, ZEEMEDIA a Group (B) stock is also a good investment currently – but I advise not to even buy one stock as its Group (B) stock.

Just invest with kings and you will always be happy and a proud investor.

=======================
Today is 21-Jan-21 (3 days after the email was sent). See where is Bajaj Finance Ltd. It’s almost 10% up from 4743 levels:

Like this people who have not done my course are not in my paid email list so they miss investment opportunity for life plus a lot of extra advice that I sent to them on stock markets, which is never sent to them.

For this, I do not charge anything.

So apart from learning the strategies, you will also get ideas on investment.

If you want to do the Nifty and Bank Nifty course you can pay the fees.

Click here to see the fees and pay online for my course.

After payment I will send you the strategies.

You can ask me questions on the strategies on WhatsApp or email or phone.

Once payment is done I will manually add your email in my paid list for life.

Then you will start getting my paid emails as well.

I kept telling via my emails, that Nifty is due for a fall. If you have not subscribed to receive my emails please register here:
https://www.theoptioncourse.com/beginners-get-option-beginners-course-free/

Recently it fell from 14600 levels to now 14300.

NSE on 18-Jan-21

Source: https://money.rediff.com/index.html

What will happen next?

Two major events are coming:

1. 20-Jan-21 – Biden taking over as President of USA. (I think if he takes the oath and become President of USA he will be the oldest man to become the President of USA.

2. Covaxin (The Bharat Biotech vaccine is a vaccine that aims to protect against COVID-19) vaccination results will be out by end of Feb 2021.

If Biden takes decisions that may affect Indian businesses in a negative way, markets may fall further. If its positive markets will rise.

Right now we do not know the results of either 1 or 2. That’s the reason why India VIX is falling:
https://www.moneycontrol.com/indian-indices/india-vix-36.html

At the time of writing this email, it was 24.79. Quite high for trading derivatives. Please note it changes during trading hours and will be different when you see it.

Please note that India VIX does not have much impact on equity investments except during election times or major economical events. So those who do not trade derivatives like options and futures, need not worry.

But high India VIX is a worry for you if you trade derivatives. High India VIX means huge moves will happen, like it has happened today and happening intraday.

So please trade carefully.

P.S: If you want to trade peacefully without stress and without bothering about markets ups and downs, you can do my Nifty monthly income and Bank Nifty weekly income course. You will learn properly hedged strategies to make approx 36% a year. Minimum required to trade is 45000 (as in Jan 2021).

You can pay the enrollment fees in the course page here.

Option theta is very important indicator for traders whether you want to buy or sell options. It helps to predict how over time the price of the option will change.

Theta is time value of options, means options expire on a certain date so their life is limited. Time value is built in the premium of the option, of course it ends when the option expires on the expiry date. If you want to read Option Greeks in details you can read here.

Time decay accelerates as an option nears its expiration date. It is the fasted on the last day of its life. Option cannot be traded once the market closes on its expiry date. All the traded contracts are settled for profit and losses on this date.

See this image to understand the graph of time premium expiration w.r.t time. Time decay is fastest near the expiry day. This is one reason why traders sell options near its expiry.

The rate of return on investment will be faster if it expires fast. Therefore many traders prefer to sell weekly options rather than monthly options. I have a course on weekly options that will teach how to sell weekly options near expiry with hedge so that the risk is highly reduced in a black swan event.

Should you sell index or stock options?

Stocks are very volatile in nature. Selling options near the expiry may get very risky as the premium you get will not be sufficient to overcome the trading costs. Therefore if you want to sell stock options they should be expiring in more than 15 days else you will not get enough premiums to take the risk of selling options.

In my Conservative Option Course there is a stock option selling strategy that gives minimum 15000 per month without taking too much risk.

In the US leap options are very popular. Leap options are options expiring very far of months like 6 months. However in India there is hardly any volume in stock options in the next month. Even if you are able to sell next month’s option you will find it difficult to get a buyer when you want to book profits. Therefore you can sell stock options for the current month with hedge.

Here is a list of things you can prepare before the year ends so that you trade stocks well in the year 2021.

1. Check you past trades of 2020. See what mistakes you did. Write them down and try not to repeat those mistakes.

2. In the trades that you were right and book profit – write what happened that you made profits and what you could have done to get better results. You can do these corrections in the trade taken in the year 2021.

3. If there was more than 10,000 loss in a single trade – write down why you did not take a stop loss. Even if your reasoning is correct, it is 100% WRONG not to take a stop loss at minimum 2 and maximum 5% of the margin blocked in a trade.

4. If you took a profit of more than 10,000 in a single trade write the reason. If it was a fluke then you learned nothing from the trade. But if the reasoning is logical, follow such trades in 2021.

5. Most Important: Write down the total ROI in the year 2020. If it’s negative, you have to tell/promise to yourself that this will not be repeated in 2021. If it’s positive, promise to yourself that you will repeat this performance in the year 2021.

6. If you lost more than 5 lakhs in the year 2020 while trading or till today, you are not serious about your money and you do not want to learn. If you do not want to pay and learn, then follow one good strategy, paper trade for 6 months, become master of that strategy and keep trading for your life.

Tip for traders: Whether you are intraday or positional trader remember this advice – keep your profit targets double that of stop loss. Means if you took 10 points profit in a trade, then the next trade you take, should have a stop loss of 5 points or less. In this way, even if you are right 50% of the times you will end up making good money.

Tip for investors: Allocate 5% of your salary for investing in stocks. Do not invest in ay stock because you think so, or your friends think so or someone in some website/tip provider/broker said so. Do proper research before investing in a stock. You can also open a Demat account in Zerodha mapped to me to learn how to choose stocks for investing for the long term, as well as the short term.

Click here to open an account in ZERODHA mapped to me.

If you already have an account in ZERODHA you can open an account in UPSTOX mapped to me.

Click here to open an account in UPSTOX mapped to me.

Zerodha & Upstox are both discount brokers and DO NOT charge any fees for stock buying and selling.

Once the account is opened you can contact me and let me know I will teach you the strategy personally on WhatsApp.

Nifty intraday movement has become very volatile now. For intraday traders, this is a problem.

Check this intraday movement of NSE on Friday, 18-Dec-20. Intraday movement is more than 100 points:

Source: https://money.rediff.com/index.html

What you can do if you are an intraday trader?

Keep your profit target more than stop-loss every day. For example, if your profit target is 50 points a day then your stop loss should be 25 points.

Personally, I do not like intraday trading. I was caught doing it while in a job in 2007 and was sacked.

If you have a job you just cannot do intraday trading and also do your job. The fear of getting caught. The fear of losing and of course loss of focus.

Read the above sentence again. Do you think with so many problems one can actually trade intraday and make some money that too consistent and also at least 20,000 a month?

With positional trading it is possible. To make approx 20,000 a month you need a capital of 5 lakhs.

This comes to about 4% a month.

If you trade with 5 lakhs do you make 20k a month?

If not you can do my nifty and bank nifty course and start doing it without stress from next onward.

Some people ask me which course they should do first. Nifty or Bank Nifty?

The answer is – its better to do both as you will save some money.

If you do nifty course first, there is a high chance that you will do bank nifty also later. So you end up paying more. It’s better that you pay less and learn both. Become a good trader in both nifty and bank nifty options trading. The nifty course will teach you how to trade options for monthly income, and bank nifty course will teach you how to make money trading the weekly options.

So both the courses are important.

Click Here to check the course fee and enroll in both the courses.

Do not forget that you will just not get well documented and explained PDF files, you also get my support for one year to understand the strategies. Plus you become my paid subscriber and get paid emails for life that does not go to the free newsletter subscribers.

This email can be investment advice, a trade etc.

This post was written & posted on Monday, 30-Nov-20, therefore you may read some words as Today/Tomorrow etc. Please keep this date in mind while reading.

Some help was taken from these sources to write the article:
1) ZERODHA – India’s No. 1 discount broker, &
2) UPSTOX – India’s No. 2 discount broker.

If you click on the above link and open an account mapped to me I will teach you a good equity investment strategy where you will learn how to choose stocks for short term investment and how to choose stocks for long term investment. You will feel good choosing and investing yourself rather than depending on advisory services.

From tomorrow (01-Dec-20), the margin for Intraday trade will increase. Please note that exact margin may differ up to 10% from broker to broker – but in short, by Sep 2021, the margin will increase by three times for all intraday trades. Please read for more details.

Clearing Corporations (CC – https://www.nscclindia.com/ ) – will now take 4 snapshots of client positions at random times during the day and see if there was sufficient margin available with the broker at that time. If not, brokers will charge a penalty to the client at the end of the trading day.

A word on Clearing Corporation – NSE CLEARING, Website: https://www.nscclindia.com:

NSE Clearing Limited (NSE Clearing) (formerly known as National Securities Clearing Corporation Limited, NSCCL), a wholly-owned subsidiary of NSE is responsible for clearing and settlement of all trades executed on NSE and deposit and collateral management and risk management functions. NSE CLEARING was the first clearing corporation to be established in India and they introduced settlement guarantee before it became a regulatory requirement.

In other words, nscclindia.com will now have access to your trading account and will know what trades you are taking.

In this post, I will try to explain the margin changes coming into effect from Tuesday, 01-Dec-20.

Who will not be affected?

Options buyers will not be affected. The risk to buy options is blocked fully right from the day options trading started. It cannot increase from here, neither it will decrease in future.

But option buyers rarely make money.

Who will be affected?

Everyone other than option buyers. Intraday option sellers, intraday future buyers, intraday future sellers, intraday equity buyers and sellers. This will happen across the board, means the commodity traders will also be affected.

Here is some more bad news.

This margin increase is not final. They will keep increasing the margin with time. By Sept 2021 Intraday margin will match that of positional margin blocked. Please note that because there is just one day gap (not even 24 hours) for brokers to make changes to their software, there may be such that a client trade will go through without following the rules of the new margins. If that happens the brokers will charge a penalty to the client at the end of the trading day.

Here is how with time margin will increase and penalty that a client will face:

Dec 2020 to Feb 2021 — penalty, if margin blocked, is less than 25% of the minimum 20% of trade value (VAR+ELM) for stocks or SPAN+Exposure for F&O. The minimum margin the broker has to collect while entering a position is 25% of the prescribed limit.

March 2021 to May 2021 — penalty if margin blocked less than 50% of the minimum margin required. The minimum margin the broker has to collect while entering a position is 50% of the prescribed limit.

June 2021 to Aug 2021 — penalty if margin blocked less than 75% of the minimum margin required. The minimum margin the broker has to collect while entering a position is 75% of the prescribed limit.

From Sept 2021 onwards (final change) — penalty if margin blocked less than 100% of the minimum margin required. The minimum margin the broker has to collect while entering a position is 100% of the prescribed limit.

Advice: Try to take just one intraday trade from 01-Dec-20. Since the calculation is not easy it is better to avoid a penalty. With time I am sure software will be upgraded.

One more change – only 80% credit from selling holdings can be used on the same day for intraday. Till today (30-Nov-20) clients were allowed to use 100% of the credit from selling the holdings.

Here is an example:

If you had 100 shares of Infosys and sold them at a profit. Then imagine that, after you sold, price of Infosys dropped by 5% the same day. You want to book that 5% profit. Now, till today (30-Nov-20), you were able to buy back 100% of the shares – means you can buy back all 100 shares sold few minutes/hours ago, but from tomorrow (01-Dec-20), you can only buy back 80 shares as 20% money of the sold holdings will be blocked and released only after the trading day is over.

Frankly, I do not understand why they have done this. I sold my shares, so I should be allowed to buy it back. Not sure of the reason why SEBI has done this. There are absolutely ZERO risks for both the client and brokers in selling a holding and buying it back intraday. This can easily be treated as a Margin Intraday Square-up (MIS) trade. If you understand the risk please do let me know in the comments section.

Of course, had they blocked this for other intraday trades I can understand, but buying the same shares back the same day has no risk at all. Of course, you can buy back all of them if you have money in your Demat account for those 20% shares.

Here is another important change that you should keep in mind: Always first exit the high risk (margin) leg of a portfolio of your F&O positions.

Example:

Suppose you bought a Call Option (CE) at strike 10 and sold a Call Option (CE) at a strike 9. Now the sold option at strike 9 is completely hedged by the bought option at strike 10. The margin for this trade will be Rs. 30,000/- approx. in Nifty (as on Nov 20). Now suppose Nifty is rising extremely fast, and the sold option at strike 9 is losing money and is at huge risk. You want to liquidate the position due to losing money fast.

Earlier a trader could have exited the position by getting out of any one position first, and then the remaining position later. Now if you exit the bought Call Option at strike 10 first and then the sold Call Option, there can be a penalty. Why? Because once you exit the bought position – the sold option is a naked trade – completely unhedged – so even for 2 minutes if you keep that and by chance in that 2 minutes Clearing Corporations take a snapshot – you will have to pay a penalty.

Not sure how the real world will work out as there are no details on if the snapshot of the wrong margin used trades will be penalized, or brokers will see and snap a penalty. And for every second how will the brokers keep a tab? This change in brokers software in less than 24 hours is next to impossible. So some traders who do not know about the margin rules or do not read emails sent by brokers may end up paying a penalty for a trade written above or may not if they are not caught. But this will be for a limited time. I think within 15 days all top brokers would have changed their software and I feel they will not allow these kinds of trades to go through.

But who knows, greed is such a bad thing that some brokers may just love to eat money of their clients in the name of penalty where the poor clients will not have the power to fight. Honest brokers will not do this and make sure their clients are not able to trade trades that are supposed to fall under the penalty path.

The true picture will come out from tomorrow onwards.

So remember two things especially if you are an intraday trader from 01-Dec-20 onwards:

2. Exit the sold option or future first then the bought option or future to avoid a penalty. Exit the sold F&O position first even if it’s making a profit to avoid the penalty.

Hope this will help you to save a penalty.