The new margin rules for hedged future and options trades coming into effect from 01-June-20 reduced the margin required. It is very good for retail traders, as it reduces the unlimited risk of naked trading.

Here is a detailed very technical explanation by NSE – National Stock Exchange of India Ltd., on the reduced margin framework from 01-June-20:
https://www.theoptioncourse.com/NSE-New-Margin-Framework-01-June-20.pdf

Well, the above file will be a bit complicated to understand. I will try to explain in simple language.

Before I explain here is a fact. Up to 31-May-20, India was the only country in the world where a hedged trade margin was at least 500% more than any other stock market in the world.

This was highlighted by many stockbrokers in various meetings to The Securities and Exchange Board of India (SEBI), NSE (National Stock Exchange) and BSE (formerly known as the Bombay Stock Exchange Ltd), since many years but it all fell on deaf ears.

Finally, Mr Ajay Tyagi (appointed chairman on 10 February 2017, replacing U K Sinha), who took charge of the chairman office on 1 March 2017, finally approved to allow the new margin rules as it is followed in the western countries.

So finally to the relief of retail traders and brokers the new margin framework rules, went live on Monday, June 1st, 2020, for future and options trades.

Please note that there is one more margin rule change that went into effect from Monday, June 1st, 2020. From this day margin block will increase for un-hedged or naked option selling and future trades. The rules on reduction on the margin swayed away from this news as brokers want more safety for their clients and in-turn for themselves. Every broker advertised the reduced margin rules.

This is what happened on margin rules for naked derivative trading:

Price Scan Range is used to determine the future and options margin. The price scan range is the probable price change over a one-day period and is referred to as standard deviation sigma. The standard deviation (volatility estimate) shall be computed using the Exponentially Weighted Moving Average Method (EWMA). Since the Price Scan Range is directly related to the volatility estimate, it will change as per the volatility index (India VIX).

What amount of margin will increase for un-hedged/naked derivative trading:

From Monday, June 1st, 2020 Price Scan Range will be changed to 6 sigma from 3.5 sigma. Thus when the markets are volatile and if India VIX increases – which it does – then the Price Scan Range will also increase leading to higher margin for naked trades (option short/future buy/sell). This can go up to 20% increase in margin compared to what it used to be till 31-May-20, in volatile market conditions and up to 5% increase on normal market conditions. Which means margin will reduce significantly as the volatility in the market drops. Higher Price Scan Range also means that there will not be a sudden spike in increase or decrease of margin going forward, it will be gradual, still, it will be higher than compared to what it was before June 1st, 2020.

Why Price Scan Range was increased to 6 sigma from 3.5 sigma when brokers up to May-20, were able to manage naked trades?

This was done deliberately to discourage naked option sellers and naked future traders. I support this move. I was and am and will be in future, totally against naked option selling and naked future trading as this can bankrupt a trader in a single trade. 99% of derivative traders lose a lot of money in a single trade, is for this reason alone – naked trading.

Right from the start of this website since 2014, I have been telling via my newsletters and posts to always hedge your trades for either small profits or small loss. Hedging the trades keeps you comfortable, stress-free and mentally fit. Naked trading keeps you stressed – and a stressed trader cannot take correct decision when a trade is live in the market. 80% of the times they will make the wrong decision.

I Will Now Discuss The Reduced Margin For Hedged Trades

Note: The given below margins are for my research account held in ZERODHA. If you also want to open an account in ZERODHA, you can click here are start the process to register online.

I waited for a few days for INDIA VIX to come to the normal band, but I could not wait any longer to complete my research on reduced margins for hedged trades. I was waiting since 2011-12 for this. This was the year I studied somewhere, that in the US they block only the max loss possible, plus some more for brokerages and taxes for a hedged trade. In India, they treated a hedged trade and shorted option as two different trades and therefore blocked the entire margin to sell an option. I had no idea why, but since beggars can’t be choosers, I had to trade what was offered to me. Thankfully even with higher-margin, things went well. 🙂

Since I couldn’t wait any longer, on 08-Jun-20 I took a Bear Call Credit Spread trade on one lot. Please note that volatility on this day was higher than normal. INDIA VIX (India’s Volatility Index) was 29.28. As per my experience if India VIX is above 25 – its high. 15-20 is considered normal, 20-25 is considered above average, 25-30 is considered high and above 30 is considered very high.

What is Bear Call Credit Spread?

A Bear Call Spread, or Bear Call Credit Spread, is a type of option hedged strategy used when an options trader expects a decline in the price of the underlying asset. The maximum profit to be gained using this strategy is equal to the credit received when initiating the trade. However, the bought option will reduce the profit but will keep the naked option unlimited losses capped – thus its called a hedge.

Here is INDIA VIX on 08-Jun-20 – see that it’s high:

India VIX on 08-Jun-20

Here is the bear call credit spread trade:

Bear Call Credit Spread Trade 08-Jun-20

This is the trade:

BUY Nifty JUL 11200 CE One Lot
SELL Nifty JUL 10900 CE One Lot

On 08-Jun-20 Nifty was hovering around 10230, and I took this trade with a view that Nifty may not be able to break 10900 levels in the next 50 days. Well, I may be right or wrong – I do not know – but here my risk management is allowing me to trade as the risk is very low. So I went ahead with the trade.

Good news 🙂 after I took the trade Nifty started to fall:

NSE 08-Jun-20

Important Note:

I knew that if I shorted the option first the broker’s software may ask the full margin of 80k for the trade as there was no hedge existing. So what I did was, I bought the call option first then went on to sell the sold option. To my happiness and as I guessed – the trade went through with the new margin rules of hedged trades.

Here is the margin blocked in the bear call credit spread trade – Rs. 27,182.63:

Margin used on bear call credit spread 08-Jun-20

What used to be margin used before June 20?

Its the same, actually more now (please read above) for a sold option if you do not hedge the trade. So what you can do is just sell an option and see how much margin your broker is blocking. For Nifty option sold it will be nearly 1 lakh. Before June 20 it used to be 80,000.

Another Important Note on New Margin Rules

80% of the times, historically, India VIX is in the normal range of below 20. But what you are seeing above is the margin blocked when India VIX is in the higher zone. So I cannot give you an exact figure of what margin will be needed for a bear call credit spread when markets will go back to the normal zone after this COVID-19 pandemic (also known as the coronavirus pandemic). But I can give you an idea.

29 is approx 30% higher than 20. Of course, margin block may not reduce by 30% as it depends on other factors as well, but it may fall by 10% more when India VIX will be below 20. This comes to around 24,500.

Now let’s do some calculation. Earlier, to sell one lot nifty option, 80k used to be blocked. So in the same money, a trade can now sell 80000/25000 = 3.2 or approx three lots.

Isn’t the reduced margin blocked a piece of good news for trades as low-income traders will also be able to trade?

Well, the news is good and bad too. Why? When I take a trade I look at both sides of the coin.

Here is the calculation of max profit of the trade taken with premiums:

BUY Nifty JUL 11200 CE One Lot at 76.75
SELL Nifty JUL 10900 CE One Lot at 134.80

Max profit:

134.80 – 76.75 = 58.05 * 75 (lot size) = 4353.75

ROI (Return on Investment) = (4353.75/27,182.63)*100 = 16.01% – That’s an amazing return isn’t it?

Here is the calculation of max loss of the trade taken:

134.80-76.75 (I sold an option and bought so the final credit needs to be calculated) = 58.05

300 (distance between sold and buy strikes) – 58.05 = 241.95 points is my max loss in this trade.

241.95 * 75 = 18,146.25 is my max loss

ROI (Return on Investment) is negative if there is a loss:

(18,146.25/27,182.63)*100 = 66.75%

Now let me go back and calculate the negative ROI on one lot of the old margin blocked prior to June 20 for the same trade I have taken.

(18,146.25/80,000)*100 = 22.68%

Did you notice if there was a loss in percentage terms loss is more? In one lot frankly, it does not matter because either way, the trader will lose 18,146.25. But what if I trade 3 lots, as it’s possible in the reduced margin in 80,000. If I have the money I can right? In fact, greed will come into effect and most traders will do this. Instead of going for proper risk management, they will fall for greed and start trading more lots as they already have the money in their trading account.

Here is the max loss if a trader trades with 3 lots: 18,146.25*3 = 54,438.75

That’s a huge loss in a single trade. Now compare this with the loss when the reduced margin did not come into effect. It will be limited to 18,146.25.

So due to reduced margin, the profit potential of the option sellers have increased (for those who hedge), but on the other side, the risk to lose more money has also increased.

Update on 09-Jun-20 (Tuesday), Day 2 of the trade:

Remember the trade I took yesterday? If not you can see here:

Bear Call Credit Spread 09-June-20

And here was the margin blocked yesterday:

Margin used on bear call credit spread 08-Jun-20

I was surprised to see an INCREASE in margin blocked the next day 09-Jun-20:

Bear Call Credit Spread Margin as on 09-Jun-20

Calculation of increase in margin:

34,391 (on 9th Jun, 20) – 27,182 (on 8th Jun, 20) = 7209

While writing this I am scratching my head. Like you, I also do not understand why they increased the margin in just one day. What is the reason behind it?

So I looked at India VIX on 9th Jun, 20 – the day margin increased:

India VIX 09-Jun-20

As you can see there is not much increase. So what I can conclude is you need to have at least 10,000 extra cash in buffer zone if you have done hedged trades and are taking the benefit of reduced margin. I really do not know what would have happened if I did not had that extra cash they blocked on the next day. Had the risk management team closed my trades? I do not have an answer to this.

There is another question in my mind. What if I exit the Call Buy option? That I am using to get the margin benefit – what will my broker do if I close the buy option and leave the sold option naked?

I feel the risk management team will automatically close the remaining naked sold option at 3.15 pm for lack of margin required. I will try to experiment that as well but when I get a good profit in the bought option, I will exit that – take a risk and leave the sold option naked by not closing it. I will then check what they do and update here.

Update on 11-June-20

I got an answer to what will my broker do if I close the buy option and leave the sold option naked?

After I sent the email to my subscribers about this, one of my subscribers DEBADYUTI did that to find out what happens when the bought option is closed and sold option is kept naked, and emailed me. Here is the reply:

Sir, I have tested.

When I exit position of the Bought option, immediately I got an SMS in my registered mobile no, “xxxxxx – your EQ margin utilization has reached 275.01% of your available balance. Add funds on kite.zerodha.com/funds immediately to avoid square off.”
(xxxxxx is my trading id)

So my guess was right. He squared off the sold option immediately to restrict the loses, however, I am sure if he did not do so, the broker would have closed the sold option automatically at 3.30 pm.

Thank you DEBADYUTI.

Update on 10-Jun-20 (Wednesday), Day 3 of the trade:

Margin blocked on Day 3 (T+3) reduced by approx 3000 (please note that in between the day it was swinging so I took the screenshot at End of Day EOD)

Bear Call Credit Spread Margin Blocked on 10-Jun-20

INDIA VIX on 10-Jun-20 did not change much:

INDIA VIX on 10-Jun-20

Update on 11-Jun-20 (Thursday), Day 4 of the trade:

Margin blocked on Day 4 (T+4) reduced again by approx 2000:

Bear Call Credit Spread Margin Blocked on 11-Jun-20

INDIA VIX on 11-Jun-20 also did not change much:

INDIA VIX on 11-Jun-20

But I noticed something which I want to share:

NSE on 08-Jun-20 (the day of the trade when the least margin was blocked – 27,182 – as per the new guidelines issued by SEBI):

NSE 8-Jun-20

NSE on 09-Jun-20 increased (the day of the trade when the margin increased by 7209 – in tune with NSE increase):

NSE 09-Jun-20

NSE on 11-Jun-20 decreased (this day the margin also decreased):

NSE 11-Jun-20

The trade as on 11-Jun-20 is in profit going with the tune as the margin decreases:

Trade as on 11-Jun-20

I hope you have guessed by now why the margin is increasing and decreasing. Since the broker’s risk is selling of the call option – they have managed the software such that if Nifty increases they will increase the margin and if Nifty decreases they will decrease the margin because their risk is also reducing.

Here is a graph that explains with 10% accuracy the difference in margin blocked before and after Jun-20 is FnO hedged strategies:

Future and Options change in margin from June 20

Conclusion

So to conclude I can say that my research is over. I can say with confidence that the margin on hedged sold options and futures have reduced from June 20, but please keep at least 10,000 extra cash in your trading account for each lot traded. Because in case the trade goes against you, your broker will increase the margin and if they do not find the margin you may get a margin call or they will close the trade.

Hope this article has helped you in understanding margin requirements on hedged trades from June 20.

If you do not know on Monday, 20-Apr-20, in the US, Crude Oil FUTURES fell below $0 a barrel to -$40. Yes MINUS $40. So basically the sellers of Crude Oil futures had to become buyers (closing the trades), to get delivery of Crude Oil. So the buyers were actually paying the sellers, to get their hands off the stock they have to keep in their stores, in the US. 

What do ‘negative prices’ mean?

You see, oil is produced and kept in stores. This involves cost. Oil producers and sellers make a profit only when it is sold at a higher level than all costs, including such as producing, transporting, storing and labour. Unfortunately, there are no buyers in such a market when the US went on a complete lock-down. So even storing was getting difficult and costly.

If they were making a profit, even very small, the price would have not gone below ZERO, but even storing oil is a loss – so the price of futures went below zero. In other words – negative returns for future traders and HUGE LOSS for buyers (both futures and crude oil buyers).

Oil producers in the US were paying buyers to take the barrels of oil off their hands because storage facilities were full. They could not keep the oil anymore.

At the market’s lowest point on Monday, 20-Apr-20, an oil company might have paid about $40 for every barrel of oil someone was willing to take.

Understanding the Last Trading Day in the US

The last trading day is the day before a derivative expires. On the expiry date, the derivative is no longer trade-able (in cash) and the settlement process begins.

What is the Settlement Process

A future seller will have to take physical delivery of the stock/commodity equal to the lot size traded. If he sold a future for 100 and bought it at 60, then he gets the physical delivery of the stock/commodity at 60 which he will have to pay to the seller to close the contract. But he sold for 100, so once the prices rise he can always sell that at a higher price and not close the contract – he then profits if the settlement price is more than the buy price.

90% of the future contacts are speculative trades and so are settled in cash one day before the expiry. 

Assume the expiration date on an options contract is Friday, March 22. The last trading is Thursday, March 21.

Unlike in India, in the US Futures can be cash-settled only one day prior to the expiry day. If the contract is taken to the expiry day, then are NO cash-settlements in the US. A seller of the future, to close the trade, will have to buy the product equal to the lot size traded. Similarly, a buyer of the Future will have to give away the stock from their Demat account to the buyer of the future to close the trade.

What is the Solution to Overcome This Issue?

To overcome this issue, traders in the US cancel out their trades by purchasing a covering position. This is what they will do. They will buy next month contract to cancel out an earlier sale (covering current month future short), or selling a next month future contract to liquidate an earlier purchase (covering long future).

The last trading day is the final day that a futures contract can be traded or closed out. Any contracts outstanding at the end of the last day trading day must be settled by delivery of the underlying physical asset, exchange of financial instruments, or by agreeing to a monetary settlement. The specific agreements covering these potential outcomes are contained in the futures contract specifications and vary between securities.

When the Sellers of Crude Oil were in Huge Profit so What is the Problem?

Remember that on expiry day a seller becomes a buyer. As a buyer, he/she would need to factor in the cost of transporting oil from the well to a shipping port, or a storage facility, where it may need to be held for up to six months, at significant cost. Or, if they are delivered oil already lying in a storage facility then they will have to pay the rent for the storage facility to the owners until the market for crude oil picks up so that they can sell and make a profit.

On top of that, they would also need to bet that oil prices will rise later this year to make a return on the “investment”. No oil company wants to “sell” their crude at a loss, so many producers are likely to shut their wells until the market recovers.

If the crude oil owner did not enter a future trade his loss is the production and storage of the oil until the demand for crude oil picks up. Add to this the interest rate loss equivalent to liquid funds in the US. When they finally start selling crude oil, to make a profit they will have to keep all these expenses in mind before finalizing the price.

More information on Crude Oil Future Trading in US

Before reading let me tell you, do not look stock markets for minute to minute or hour to hour for any analysis. This article has a view for the short term – which means anywhere from 2 to 6 months.

I hope you must have heard the news of Rs. 20 Lakh Crore Special Economic Package in Indian economy by our PM Mr.Modi on 12-May-20.

If you do not know read this:
https://economictimes.indiatimes.com/news/politics-and-nation/pm-narendra-modi-address-live-centre-announces-an-economic-package-of-rs-20-lakh-crore/articleshow/75699154.cms

This is not a small amount. This is almost 10% of our current GDP.

What is Gross Domestic Product (GDP)?

Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a scorecard of the country’s economic health. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well.

What is India’s GDP?

India Nominal GDP in 2020 (as in Apr 2020) )is USD $3.202 trillion which in terms of Rupees is 24,13,42,74,50,00,000.00 (approx).
Source: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

Well, that is Rs. 241 Lakh crores. Which is 5th rank in the world as per the International Monetary Fund (2019 estimates).

India is the fastest-growing trillion-dollar economy in the world. India has become the fifth-largest economy in 2019, overtaking the United Kingdom and France. The country ranks third when GDP is compared in terms of purchasing power parity at $11.33 trillion.

What is Purchasing Power Parity (PPP)?

Purchasing power parity is an economic term for measuring prices at different locations. It is based on the law of one price, which says that, if there are no transaction costs and no trade barriers for a particular good, then the price for that good should be the same at every location. So a computer in New York and in Hong Kong should have the same price. If its price is 500 US Dollars in New York and the same computer costs 2000 HK Dollars in Hong Kong, PPP theory says the exchange rate should be 4 HK Dollars for every 1 US Dollar.

Though in the real world that does not happen, still, PPP is a very important data to know the purchasing power of people in that country.

PPP gives and an indication of real money movement inside a country compared to other countries (for same price of goods) for a given time period. PPP also gives a real indication of the economic health of the country. For an economist, PPP is more important data than GDP itself.

Due to this 20 Lakh Crore Special Economic Package Investment, Stock Markets will go up in the near future. We can see that today itself:

NSE on 13-May-20 – After 20 Lakh Crore Special Economic Package

So be happy if you are an investor – your stocks may give good profits in some months especially if you bought them during this lock-down.

If you are equity mutual fund investor – do not stop investing – continue the Systematic Investment Plan (SIP). Just keep investing, these SIPs will give great return over the long term just like the economic recession of 2008-09.

Today May 04, 2020 India VIX has surged 26.42% with a huge fall in NSE.

And here is graph of NSE today (May 04, 2020 at 11.06 am):

Why have I written this article? Just to tell time and again that India VIX is inversely proportional to Indian Stock Markets.

I have written a detailed post here that Nifty and India VIX are inversely proportional.

Why you should see India VIX before taking a trade?

You can gauge the fear factor in the markets. If India VIX has risen anything over 10% then that day is a dangerous day to trade. You have to trade with caution.

In such times trade with reduced lot size and always keep an eye on the trades. Need I say again that you must hedge your trades even if it’s just a single lot?

I have said this time and again in my site that trades who do not hedge are the biggest losers in the markets.

They are the ones who are overconfident and destroy their wealth.

I will also repeat again now that I have been telling since years – that it is impossible to make 10% a month consistently for even one year, which most traders in the world are trying to make. But its unfortunate that trades just cannot control their greed and are destroying wealth since ages and will keep doing so in future as well.

However 2-3% a month is possible, but for trades, this is way too small.

Just imagine if a bank gives a guaranteed return of 36% a year? Now the same return looks extraordinary big. I fail to understand why the same return does not look big when you trade options and futures.

You just need to change your psychology of thinking, then even 24% return a year from stock trading will look big.

If you want to learn to trade stock markets and are happy with a 36% return a year – you can do my conservative option course.

Date of post: 06-Apr-20

Since last few days, India VIX is dropping. See this image:

India VIX 03-Apr-20

From a high of 86.63 to 55.30 in less than 30 days.

What does it mean?

It means that traders are assuming that the worst has happened and some kind of normalcy may resume in a few days so fear factor is decreasing.

Does this guarantee that normal trading will resume soon and that Nifty will now start to go up?

Well, nothing is guaranteed in stock markets else everyone would put 100% of what they earn in stock markets. But this gives some indication that in the near future (30 to 60 days) normalcy will resume.

So what can you do?

Right now you still have to trade with caution and if possible intraday only with a single lot. Positional trading is a big no.

Just trade with strict stop loss and target. Do not change the target or stop loss whatever happens.

Hope this helps.

Other articles on India VIX by me:

India VIX over 17 What It Means

How India VIX Is Calculated and What to Expect After Seeing High or Low India VIX

India VIX Futures – Trading The Volatility

What Is INDIA VIX And Why It Changes

Volatility is Average But India VIX Still High

Nifty And India VIX Are Inversely Proportional

Why INDIA VIX Is Increasing and Markets Falling

india vix

7.86% Increase in India VIX

Impact on Nifty Bank Nifty India VIX due to General Elections 2019

India VIX is Not Increasing Despite Budget On 05-Jul-2019

EOD End of Day 22-Jan-2018 India VIX up by 10.09%

How To Trade When Volatility VIX is High

When VIX Drops Nifty Rises

Date of article: 23-Mar-2020

Let me first show you last 6 months graph of NSE:

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

On 14-Jan-20, NSE closed at 12362.30, and on 23-Mar-2020 at 12.30 pm it was trading at 7713.80. During this period it has hit two lower circuits. So basically in just last 70 days it has gown down by -37.60%. That is almost 40% of wealth eroded from stock markets in just 70 days.

Where has this money gone? Back to investors bank account. Next time when you hear from media that thousands of crores of investors wealth is lost then do not think that everyone lost money. Fact is even during normal times someone makes and someone loses. Here the story is slightly different.

During normal circumstances investors are not forced to do anything but during bad times especially during markets hitting lower circuits frequently investors panic and take their money out from the stock markets.

Here is the India VIX figures as on 23-Mar-20:

71.81 is rarely seen. This kind of India VIX comes once in many years. India VIX is basically panic indicator in the markets. Right now there is huge panic in the markets.

India VIX is inversely proportional to stock markets.

When stock markets will rebound, India VIX will drop.

So, What To Do In This Lower Circuit Hitting Market

Shop for blue chip stocks available at a discount. Just do some research and buy them. Its good to buy stocks whose fundamental is strong yet it has gone down just because the markets have gone down. You will get approx 30% return in less than a year.

Which Stocks To Buy?

Nifty has already done a great job for investors. Why take more risk when Nifty 50 comprises of top 50 companies in India.

Here is the list of stocks you can buy who have lost most is last 30 days:

https://money.rediff.com/losers/nse/monthly/nifty

Here is the screenshot of Nifty 50 top losers in last 30 days as on 23-Mar-20, 12.55 pm:

Select 4-5 good stocks and keep accumulating them every few days. Do not buy huge quantity in one go. Markets are falling – you may get a better price in a few days. The idea is to average it out over a few days and wait.

Once NSE bounces back, these stocks will also zoom. You can then book profits when you get over 15% return.

Then you can reinvest this money in another stock that looks attractive to you at that time.

You should not trade future and options during these high volatile times. Future and options should be traded with hedge and only when stock markets are normal and India VIX is below 20.

If you are an investor and looking to learn investing in stock markets and Ocean Wave Profit booking system not thought anywhere you can contact me.

More useful articles:

What to do in a huge stock market fall

Date of Article: Friday, 28-February-2020

Do not worry over this huge fall in Indian stock markets:

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

India VIX has also shot up by 30.73% – above 20 is dangerous for derivative trading:

Source: https://www.moneycontrol.com/indian-indices/india-vix-36.html

Why This Happened?

It is due to the fear of coronavirus, the markets world over are going through a bad phase.

You can track real-time reported cases of coronavirus all over the world here:
https://infographics.channelnewsasia.com/covid-19/map.html

It is still NOT a crash. A crash is declared official if the markets fall at least 25% from its recent peak.

On 14-Jan-20, Nifty closed at 12362.30.

12362.30 – 25% = 9270.00 (Approx)

So if Nifty falls and closes below 9270.00 – it will officially be declared as CRASH.

This is NOT going to happen unless more than 10,000 deaths are reported from coronavirus. That may not happen.

What the world is going through is a mini-crash which should not be taken seriously.

What you can do?

Investors: If you are an investor just hold your stocks – do not exit in panic unless you need money now – today.

Future & Option traders:

If you were on Put Buy/Call Sell/Future Short – You have made enough. Close the trade and exit in profits.
If you were on Call Buy/Put Sell/Future Long – Take a Stop Loss and exit. Do not wait for reversal – there can be more pain on Monday.

After that don’t trade. I think in 15 days things will be normal and Nifty will start moving up.

Hope that helps.

I have been teaching non-directional strategies since 2015 and all of my students are pretty happy as they do not have to see the charts yet they make money. In a situation like this is max loss is limited as the positions are hedged – so even a black swan event DOES NOT bother them.

I suggest starting with my most conservative course – Nifty Options Monthly Income Conservative Course. Right from Mar 20, you will start making a monthly income. Strike selection, entry-exit – everything will be taught.

What you will learn:

– Conservative Options hedging
– Conservative Futures hedging
– Conservative Equities hedging
– Bonus strategy for reversal benefit

Here is the complete process of my course:

Once you pay I will send you the course materials for studying to your email. They are well explained in step by step manner with examples in PDF files. There is a total of 6 pdf files in Nifty and bank nifty courses.
Whenever free you read these files strategy by strategy and ask me questions via phone/WhatsApp/email to clear doubts.

This will take about 2 days. Then you start paper trading and still can ask me questions. This will take about 10 days. After this, you can start trading. You can still ask me doubts in live real trading for one year from the date of payment.

Course Content:

Strategy 1:

Is pure options only non-directional strategy where a trader makes money irrespective of direction or the trend of the market. I will teach how to enter and exit strikes to buy/sell when to do it, how long to hold etc. It’s properly hedged so there is NEVER a HUGE LOSS. Your loss if any will be 1500 only which is recoverable by strategy 2.

Strategy 2:

Is again options only strategy which is very hard to beat. For this to be beaten Nifty has to travel 1500 points continually in one direction – which is only once in a year. So even 1500 lost is recoverable in the money lost in Strategy 1.

The success rate of the above-combined strategy is 80%

1.6 lakh required to trade the above strategies as in Feb, 2020. It may reduce in May 2020.

Strategy 3:

Is for High Net Worth traders. This is again a monthly income where a trader learns to hedge equity stocks with options and make money every month. If you are a high net worth trader you can make up to 5% every month using the above strategies.

Strategy 4&5:

Are futures properly hedged with options. Where a trader learns how to trade futures and hedge it with options in the correct way so that there is never a huge loss trading futures. In fact, you may make money even if wrong in the future direction.

Bonus trade is how to take the benefit of the reversal of Nifty.

Click here to know the fees and pay for the course.

From 1st of May 2020, the margin required to trade will change as per SEBI Circular SEBI/HO/MRD2/DCAP/CIR/P/2020/27, Dated: February 24, 2020.

Link here: https://www.sebi.gov.in/legal/circulars/feb-2020/review-of-margin-framework-for-cash-and-derivatives-segments-except-for-commodity-derivatives-segment-_46058.html

Here is a snapshot:

Cash market (intraday) – NO CHANGE in margins.

Option Buy (Naked or Hedged) – NO CHANGE in margins.

Option Sell (Naked) – NOT MUCH CHANGE in margins for Index, but for stocks, the margin will increase.

Future Buy/Sell (Naked) – NOT MUCH CHANGE in margins for Index, but for stocks, the margin will increase.

Option Sell (Hedged) – MARGIN CHANGE – Margins will REDUCE by a whopping 60-70%.

Future Buy/Sell (Hedged) – MARGIN CHANGE- Margins will REDUCE form 60 to 21% in BOTH Index & Stocks.

All my strategies of Option & Future are hedged – so in a strategy where 1.6 Lakh is required, the margin required will be reduced to 48,000 only.

This will effectively INCREASE the ROI by a HUGE percentage.

I cannot tell for sure unless I take a trade on reduced margins but here is a guess:

3,500 (approx profit right now on 1.6 Lakh margin per month) / 48,000 (1.6 Lakh margin reduced to 48k for the same trade) * 100 = 7.29%

Which means the ROI (Return On Investment) may increase by 4.29% to 7.29% per month

The picture will be more clear when the new rules come into effect and I start getting feedback from my old clients and I take a couple of trades myself.

Too excited. 🙂

This is copy of email sent to my newsletter subscribers on Feb 26, 2020:

There are many reasons why nifty has become so volatile now-a-days:

1. Too much confusion on CoronaVirus – lots of myth that China is hiding total death count is believed by many people.

2. US-India trade – United States did not announce a trade deal during US President Trump India visit in Feb 2020, not even a mini-deal. Basically, Trump came to just see India – kind of travel with family nothing else.

3. Indian Economics, especially the mid and small scale industries are in tatters and hope is very far. I do not see Nifty crossing 12500 soon. On 26-Feb-2020 Nifty closed at near 11,678.

Online Courses:

Nifty Conservative Course – 3-5% average return per month. Good for beginner options traders – so easy that you will regret doing this course if you delay after you do – very less monitoring required.

Bank Nifty Weekly Options Course – 5% average return per month. Intraday possible. Good for advanced options traders as the strategies are aggressive.

Both are stress-free trading. Course fees can be paid here.