Due to the upcoming budget on Feb 1, 2020 and high expectations, Nifty may go up.

Another thing that will go up is – India VIX. From 20-Jan-20 it will start rising and will fall after the budget.

Well, I have written articles on India VIX which you can read here:

https://www.theoptioncourse.com/india-vix-over-17-what-it-means/
https://www.theoptioncourse.com/what-is-india-vix-and-why-it-changes/

What you can do now?

I would suggest reducing the lot size until the budget is over.

Results may be good or bad. If good, you made money – do not regret if you could have made more.
If your trading results are bad at least due to fewer lots traded you will not lose much.

If you really want to trade without stress and make consistent monthly income without leaving your job and without watching your trades you can do my monthly income course. It’s very easy to set up and very easy to trade – there is no stress involved. The success rate is 80% and even when you lose in trade you lose max 1500 which you can recover in strategy 2. It’s a great course for high net worth individuals who want to make a good monthly income of over 30k per month.

If you want a good income from stock markets the only way is to slowly accumulate money over the years and compound.

Fees for monthly income option course is written here.

For option traders, India VIX is a very important factor that helps to make a decision. It’s a Volatility Index based on the index option prices of NIFTY F&O segment only not any other index like BSE or MCX.

India VIX is a volatility index based on the index option prices of NIFTY. India VIX is computed using the best bid and ask quotes (the difference between quotation of sellers and buyers of options at different strikes) of the out-of-the-money of near and mid-month NIFTY option contracts which are traded on the F&O segment of NSE. India VIX indicates the investor’s perception of the market’s volatility in the near term. The index depicts the expected market volatility over the next 30 calendar days. i.e. higher the India VIX values, higher the expected volatility and vice-versa.

What does India VIX indicate?

India VIX indicates the investor’s perception of the market’s future volatility (not more than a month). The index depicts (or assumes not guarantees) the expected market volatility over the next 30 calendar days. If the computation generates higher India VIX it is assumed that the volatility in NSE F&O segment is going to be high and if the computation generates lower India VIX it is assumed that the volatility in near future is going to be low.

Which option strikes are most affected by increasing or decreasing VIX?

When a low/high VIX is generated the most effected option strikes are At-The-Money (ATM) options. Please note that ATM and OTM options are made of Theta (time) value and VIX factor only. Rest of then factors do not affect much. You can read more on Option Greeks here. The most affected options are At The Money (ATM) and Out Of the Money (OTM) calls and puts that are more than 23 days from expiration and less than 37 days from expiration for Nifty. Please note that these are most traded highly liquid options.

Since now nifty weekly options are traded, each week, the contracts and the calculations roll to the next maturity week. As one week expires, then the pricing of the options expiring next week is effected.

Reference Read: https://www1.nseindia.com/content/indices/India_VIX_comp_meth.pdf

Chicago Board Options Exchange has written an in-depth white paper on how VIX is calculated – please note that NSE calculates India VIX on the same lines so if you want to read you can get it here:

https://www.cboe.com/micro/vix/vixwhite.pdf

And if you are in a hurry here is the formula of how VIX is calculated (warning – very complicated):

https://www.investopedia.com/articles/active-trading/070213/tracking-volatility-how-vix-calculated.asp

Why deep Out-Of-Money (OTM) and In-The-Money (ITM) options are not much affected by increasing or decreasing India VIX?

Because after 5% distance from near the money options there is not much left in them to increase or decrease. If their value is increased too much option sellers will be at a benefit. This is not good for option buyers so there are not many significant changes done to deep out of the money options calls or puts when India VIX increases or decreases.

How can a trader take a decision based on high or low India VIX?

Since high India VIX indicates volatility in the markets a Future Traders can keep their stop loss levels less than normal days. Or if they are not comfortable to bring the stop loss levels near then they should increase the levels where they book profits. You will not find this in any book please note this down in your trading diary.

Well, it’s important to study what went wrong with every trade you take. And also what went correct with every trade irrespective of the trade made profit or loss. This will give you an idea of what must be done and what must not be done in the next trade. That way with time you become a better trader.

However if you see closely at least 10% of the trades you take must be ignored. Why? Because they were pure speculative trades. Speculative trades are trades that you took just like that because “you thought so”.

NOTE: I am totally ignoring the trades you take in your account given by tip providers, brokers or your friends/relatives. They do not qualify for anything.

Ignoring such trades that are pure speculative will save a lot of time.

Just do not ignore the market risk and position sizing – risk management is paramount and it should be the first consideration in any trade. So if you took a big trade with a lot of money – then you must not ignore this.

Here are the reasons why you must ignore speculative trading:

1. They were speculative – this equals buying a lottery. Like its foolish to study whether you will get the winning prize as per numbers in the lottery similarly its foolish to study speculative trades whether they made money or not.

2. You took them out of gut feeling. You cannot and should not study gut feeling. There was no plan and you did a mistake, or, you made money which was a fluke. This does not need a study.

3. The process was bad. You took market orders. Professional traders never take market orders. They take limit orders. This gives them an edge over other traders and they get better results.

NOTE: If you are the one who takes speculative trades – you are throwing your money in the drain. If speculative trades made money 99% of the traders would have made a lot of money in stock markets. However, the story is exactly the opposite. 99% of traders lose money.

Its recommended to keep a plan in place and then trade according to that plan. Take at least 10 trades according to that plan and study them. These 10 trades taken with a plan will give you a good idea of what went wrong and right and what can be done in future to improve. However, if you study trades taken in gut feeling you are wasting your time and energy and money too.

You must have a system in place. You should know what strategy you are going to use. You must know your position sizing and you must know how much you will lose in the trade if something goes wrong or the trade does not go according to your plan.

You should be focusing more on the process of the trade and not the individual outcomes as they can be a fluke.

I have seen this with many traders who call me and tell their story. Most of the start with I have made huge losses. My first question to them is this – did you ever plan your trade like why are you taking this trade, how much you are willing to lose in this trade, why you took the biggest loss-making trade with multiple lots etc?

The answer I get is – Sir it was my Bad Luck.

Bad Luck is a good answer if you bought a lottery not if you traded and made a loss.

You should focus on the process, not in the outcome. It’s the process that you should study. The process will eventually lead you into making profits. If you focus on the outcome of any one particular trade then you will be getting into a zone where you will not understand anything. Its the process that makes you a good trader not the outcome.

If you improve the process of trading – your outcome will improve automatically.

If you’re using the right tactics to enter positions, risk management, position-sizing, trade plan – most of the times you will see positive results.

You can do my monthly income course to learn trade plan and make a monthly income without stress.

These trades are equity and options intraday trades done by me in my research account and some are given by my clients. You can get started with as little as Rs.10,000/- but later you may need more to get such results. Just to help you get started in stock markets I can give you this strategy for free.

Learning this strategy is important but what is more important is to become a disciplined trader. Probably you will make approx 500 a day, but the rules given in the strategy have to be followed by you, and when you start following it, you will become a disciplined trader. It is very important to be a disciplined trader if you want to succeed in trading equities, options or futures. 99% of traders lose money because they cannot control greed and break the laws of trading. If you can learn to be a disciplined trader I can assure you that you will become a much better trader than what you are today. The strategy is just 10% for the reason of successful traders, discipline takes away 90% of the credit.

On top of that, by doing this course you will learn how to find the direction of a stock or index for intraday trading. That’s added benefit of this intraday course. So you must do this course.

You can get this strategy for free, for that you have to register your email for the 5 days free course on options. Just fill the form on top of this page to register your email.

Results may vary for users

Date: 07-Jan-20 – Results may vary for users

NSE on 07-Jan-20 EOD

Results may vary for users

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Took another trade same strike that also resulted in profits 🙂 – Results may vary for users

Date: 19-Dec-19. Two trades taken both in profit – Results may vary for users

Date: 16-12-19 Bank Nifty Options Intraday Profit – Results may vary for users

Date: 10-Jan-20 BN Options Intraday

23-12-19: Results may vary for users

Date: 17-12-19 Results may vary for users

Date: 12-12-19 Results may vary for users

Date: 03-12-19 Margin Req: 49k, Profit 925 ROI = (925/49000)*100 = 1.88% Equity Intraday – Results may vary for users

Date: 11-12-19 Equity Intraday Profit – Results may vary for users

Date: 26-11-19 Margin Blocked 9600. Return On Investment (ROI) = (532.50/9600)*100 = 5.54% Intraday – Results may vary for users

Date: 25-Nov-19 Results may vary for users

Results may vary for users

Date: 25-11-19 Intraday profit in Nifty Options. Time taken 5 minutes. Margin blocked Rs.6750. Return on Investment (ROI) = 6.77%. Results may vary for users.

Date: 29-11-19 Return on Investment (ROI) = 1.02%. Results may vary for users

Intraday profit in Nifty Options. With practice you can trade 10 lots and make more than 3k a day while paying only 20+20 as brokerage – Results may vary for users

Results may vary for users

Results may vary for users

Results may vary for users

Results may vary for users

There are a lot of reasons why you should not take tips from your broker.

Recently I emailed my subscribers asking them the problems they faced while trading. At least 5 people said they were taking tips from their brokers.

When I asked them why the brokers – their reply was that since they know the stock markets better and that they have the ability to move markets.

Here is the the copy of email received:

Dear Sir,

The problems while trading faced by me are:

1) I am a beginner and my broker is not able to provide proper advice, hence losing money.

2) No knowledge of option and futures trading.

Please advise.

Thanks,
Kind Regards,
Homi

Now what happens is when a newbie opens a Demat account they are in touch with their brokers and the brokers have this habit of telling a lot of things about stock markets. This stock is hot that stock is a multimillionaire/multibagger etc. The newbie who is a novice stock trader starts dreaming making it big in a short time.

So after the account is opened the first person to look for tips is his broker.

Well, let me tell you that a broker is a broker – his job is to make sure your transaction goes through smoothly and he/she collects the margin, brokerage and taxes from you. His job is also to maintain your account, settle your account every quarter and makes sure your money is safe with him as they have to report to SEBI their balance sheet. Its not easy for them to take your money and run away.

Earlier rules were not very strict – so some brokers were risky to open account with. But today SEBI has ensured that all brokers maintain a safety measure to keep client’s account safe. In fact every quarter the brokers are obliged to return the money to their clients bank account which is not connected to a lien. A lien means any kind of obligation towards a trade. The free money has to be returned back to their client’s bank account.

So their job is to just maintain your trading account. Their job is not to study about stock markets or stocks. They give you advice so that you trade and they can make some brokerage money.

That is the reason you should not depend on anyone for stock markets tips advise. A course or study materials are ok but not tips.

Read this why I do not give tips and why you should also not take tips.

Today morning I got a call from someone who bought Reliance (RIL) Call option a few days back because one of the WhatsApp group he was gave a buy call on Reliance. He bought options worth 37k, and when he called me he was in loss of 20k.

I asked him a few questions which I think you should also ask yourself when you make a trade:

1. What is the logic behind this trade or Why are you taking this trade?

Ans – The answer here is because the WhatsApp admin whom he does not know gave a call to buy RIL. It’s like blind following. Is he Warren Budget that you believed him?

Answer to this question should have stopped him taking the trade.

There are many Telegram and WhatsApp channels nowadays giving free calls – please exit from such groups for your safety.

2. What profit target have you kept and what is your stop loss?

Ans – Again he was unable to answer. You take a trade and you do not know what profit or loss you will take, then better do not take a trade.

I asked him to exit the position with 20k loss. At least he saved 17k. I am sure had he not called me, he would have waited and all his 37k would have gone down the drain. I am sure you are doing the same.

20k gone in just one trade. Is it really that easy to make 20k in your job? With 20k you can easily buy 43″ 4k Smart TV.

When you lose money in trading – compare it to what you could have bought with it. This will give you an idea of what you lost.

It will be painful but you must punish yourself for losses, else you will keep making it.

My Ans – When you buy an option call or put, keep your profit target at 20% ROI on the margin blocked and 10% stop loss on the margin blocked.

Let me take an example:

Let’s take example of the person who called me.

His invested amount: 37,000
He should have kept his profit target at: 37,000 + 20% = 44400. This is a profit of 7400.
He should have kept his stop loss at: 37,000 – 10% = 33300. This is a loss of 3700.

If you look at the example above this trader is risking 3700 to make 7400. Does that make sense?
In the example above 37,000 is just the invested amount where risk is 3700.

Please remember that STOP LOSS is the best Adjustment to a trade. There is no better adjustment than taking a stop loss. If you will try to take a losing position to a winning one by adjusting like buying/selling more options – you will fall more into debt. Plain and simple adjustment – just get out and wait for a better opportunity.

Those who follow the above rule survive for long – those who do not perish!

3. And the best question – Maybe you will make a profit of 4-5k in this trade but will you then take a trade of 37k+5k = 42k in his next call?

Ans – No. Because after winning the first trade from an advisory service provider, if your inner sense says this was a fluke – you will not be able to take a bigger trade in the next call. Then why trade his calls?

In stock trading, if you cannot compound a strategy with more money at least up to 10 lakh then that strategy is not a good strategy.

So next time you take a trade – ask yourself the above questions before putting money on the line. This will save you from a lot of losing trades.

Hope that helps.

This is one reason I do not give calls. If you want to learn and trade do not ask for calls – you will never learn. Remember that 2 or 3 calls can be a fluke and hit the target, but not 10.

That’s the reason tip providers give only 2 days free calls knowing very well that out of 5 days, 2 days will be great and they can get clients on those days. They work in the logic of Coin flipping – some days they know their calls will work and they can get clients. And they do get. It was a pure fluke. After this the client account starts moving towards the zero figure.

Let me tell you clearly that whatever you may try – that 10% a month target will NEVER be achieved. it will be like +10, then -20 kind of a journey that you must understand.

But I am sure its quite late now and you have lost a lot. Hope no more.

Do my course if you are ok with average 30-36% return a year (that’s 3% a month – not very great but reasonable), and this year after year, and yes you can compound because you will learn to hedge. In case of a bad day the hedge will act fast to protect your wealth and limit your loss.

Conservative Options Course based on Nifty Options – This course will help you to make a monthly income for years up to 3% a month. Fees and how to pay is here. Chek it out, no other teacher can give such a long support for such low fees for such results – Testimonials.

Bank Nifty Weekly Options Strategies – Results slightly better than Nifty. Fees and how to pay is here.

Looking forward to helping you to become a good trader.

For beginners rule based trading is better for risk management. Experienced traders may change the rules depending on their experience and situation as per the market condition. But it’s better for all to stock to the rules.

In this post you will learn how you should trade options with rules. These rules will keep you safe.

1. Position Size Should be Small:

It has been told quite often and written many times in financial blogs that when you trade derivatives keep the position size small, but for some strange reason after a few profitable trades, traders start trading with 5-10 lots thinking they will make a lot of money in no time.

This is when they start losing it.

Post Date: 26-Sep-2019

One decision to lower corporate tax by Finance Minister Nirmala Sitharaman by a few percentage resulted in huge jump in stock markets.

The News: On Friday, September 20, 2019, Finance Minister Nirmala Sitharaman announced a reduction in the country’s effective corporate tax rate from around 35% to 25%. For companies that do not avail of any other incentive or commission, the effective tax rate would be just 22%.

This will save a lot of money of the companies doing business in India and of course will result in better profits, which in turn will result in business expansion and creation of jobs. Its a very good news for Indian economy.

Of course a news such as this results in a jump in stock markets. From Friday to Thursday, 26-Sep-19 NSE went up from 10700 levels to 11600. This is an increase of 8.5% approx.

Bank Nifty went from 26757 to 30400 levels. This is an increase of more than 13%.

See this one month graph of Bank Nifty:

Bank Nifty 25-Aug-19 to 25-Sep-19

In such a swing and volatile markets such profits are possible in 1 or 2 days in my Bank Nifty Course Strategy:

Sijo Testimonial – Results may vary for users

During these volatile times traders must be very careful. Especially if you are a future traders or an option seller you must maintain your stop loss levels.

There is no better adjustment than taking a STOP LOSS.

Traders keep asking me one question that what is the best adjustment strategy for a future or an option short trade gone wrong. They think that there is an adjustment strategy that can work wonders and bring a losing position to winning position after the adjustment is done.

Let me tell very clearly. The more you try to adjust a losing trade, the more you will go deep in losses.

After seeing an option shorting gone wrong, traders adjust the position by shorting another either the same option or a deep OTM option.

This is a very wrong way to adjust a trade.

The best adjustment in a losing trade is to get out of the trade.

There is nothing better than this.

So be careful when a major news has come out. This is the time to reduce your lot size, take a less risk and trade.

This site is educating traders and investors since 2014. You can read about me here.

I am sure you must have subscribed for my 5-Day Free course by signing up the form at the top of this page. If not please do so now. Thanks if you subscribed, please do read my 5 days course. It will tell you a lot about options and after signup you can download a PDF file explaining Option Greeks in simple language.

Here are a few important things about Stock Markets, Investments and Finances which you Must Read:

1. If you are looking for tips/advisory service or already taking one – I am sorry to say you will lose a lot of money. I have been there lost that. So advising you against taking tips from anyone including your broker. Its better to learn and trade yourself. There are many tips providing companies in Indore – stay away from them. I suggest install Truecaller App on your phone and never pick a phone call with color red. They are 100% accurate in identifying SPAM calls.

2. If you are planning to automate your trades be very cautious as there are many software out there to take your money every month but if they do one single mistake you may lose more than you made. Software do have bugs please remember that.

3. If you want to invest in a stock then keep a time frame of at least six months. Please note that investing is NOT trading. Keep them separate. If profit comes before 6 months you can exit, but do not take a stop loss before that time frame. But you may also keep a stop loss based on the money you are wiling to lose in an investment. So a stop loss in investment is different than stop loss in derivative trading. In investment it should be based on money and in trading it should be percentage of the margin blocked as you are taking a leverage.

4. If you found a strategy in a website or YouTube, paper trade first before trading with your hard earned money. Now days there are so many videos that you may have to spend a lifetime seeing each one and then researching them on paper. For this reason I have stopped seeing YouTube videos on stock trading. It’s hard to figure which is good and which one is uploaded by my neighbor (maybe) or an unknown person randomly on stock markets.

5. If not today, tomorrow you will understand that Technical Analysis is not worth the hype. Stocks are a non-living thing – they are not bound to move as per the charts order them. Warren Buffet by the way the biggest investor and profit maker from stock markets of our times does not know even A of Technical Analysis. So if you are trading based on Technical Analysis, please keep your stop loss in your system always. 50% of the times your stop loss will be hit.

6. If you are married please ensure that you share 100% of your investments with your spouse. Your spouse will make sure you are not blowing your account for greed or for whatever reason.

CCD founder VG Siddhartha did not inform his wife about the loans he started taking from his friends and other sources for reasons only known to him. Had he informed his wife about his plans she would have surly stopped him from doing anything wrong financially. Consequences of bad financial investments can be ugly. Siddhartha case is known to all.

So it’s very important to inform your wife of all the investments you have done in stocks markets and other places and also the profit and loss you are doing. Do this every month to ensure your finances are in place.

In most cases it’s the husband who does not inform his wife about the investments made. Wives on the other hand inform every investment they do to their husbands. As for as investments are concerned it’s your moral right and for safety of future of your family please do inform all your investments to your wife/husband.

7. At the end of every quarter write down in a dairy or in an excel sheet all the investments you have done in all the places including their current values and add them to know your financial condition. This way you will be able to control your greed in taking risky trades in derivative trading. Also your investments will be scattered across multiple sources which is good for your finances.

You can download an excel sheet here to keep a tab on your investments. I use the same excel sheet to manage my finances and keep them under control. Of course after every calculation I make sure to show the sheet to my wife to get any suggestion if any.