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.

Union Budget 2020 will be presented in the Parliament on February 1, 2020, at 11 am. Till then there will be huge volatility in India markets.

Here are some pointers that can help you make a decision to trade:

1. INDIA VIX will keep increasing

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

Currently, INDIA VIX on Jan 17, 2020, is at 11:14 am is at 14.28, up by 0.10 points or 0.71% from the previous close.

It will keep increasing until February 1, 2020. After that it will start to drop. It will take about 10 days for India VIX to be back to normal. Which means by 10-Feb-20 it will be back to normal.

India VIX as on 31-Jan-20, 10.54 am is 17.26:

India VIX on 31-Jan-2020

So what you can do? Here are some helpful pointers:

Please do not be rigid and trade only Bank Nifty – one-point gain in Nifty is 75 whereas, for more risk one-point gain in Bank Nifty is just 20.

Note: If you are a beginner options trader I would suggest starting with my Nifty course. It’s very easy to learn and implement the strategies. Bank nifty is volatile – and that is the problem. It’s good for experienced traders, not beginners.

2. When INDIA VIX increases option premium will also increase, so if you buy options they will be costly compared to other days on the same day.

3. What is good for option buyers?

Option buyers need a volatile market to make a profit. If markets are too volatile it’s good to go for long straddle and make money, but with a strict stop loss.

Since volatile markets favour option buyers, to make it justified for option sellers – India VIX does the job – it increases the option premiums to attract the option sellers. Otherwise in a volatile market option sellers will stop trading out of fear.

Since theta (time) decay is enemy of option buyer it’s advisable to go for monthly options to buy options – weekly options can be a killer for the option buyer.

4. What is good for option sellers?

Option premiums will be attractive to sell but then volatility will be an issue. If you do not take a stop loss you may suffer huge loss – so its recommended for both option buyer and sellers that if you are trading during volatile times you must trade with strict stopples.

Option sellers can trade short straddle with strict stop loss.

Your stop loss must be HALF of your profit target. Unfortunately, if you keep it close you may see the stops being hit very often. So to be safe, trade positional not intraday and keep your profits to at least 100 points and stop-loss at 50.

That way if you are successful even 50% of the times you will trade profitably.

Update: Text of email sent to my subscribers on Feb 1, 2020, 11:47 AM (The Budget Day):

Just wanted to send you a reminder that today due to volatility please be careful with your trading.

Just trade options buy only for today intraday only.

Please do not trade futures.

Close your trade today itself.

Note that I do not get anything by sending you such emails but it’s for your benefit only. It will be good if you listen to me.

If you want to trade safely without bothering much too much about direction then do my course. Let people who want to make too much money from stock markets care about direction and lose – while you trade with hedge and never care about the direction yet make monthly income.

If you have lost a lot in markets – its time you get back your money from markets only. It will be small and slow, but consistent monthly income will come to your house every month. You can use that money to enjoy the small joys of life.

Update on 03-Feb-2020:

Please read above that I warned you you not to trade heavily on the budget day due to volatility. See what happened on that day – budget day 01-Feb-2020 (Saturday) to BSE and NSE:

NSE Fall on Budget Day – 1-Feb-2020

And see what happened to Bank Nifty:

Bank Nifty 01-Feb-20 Close

And see how India VIX rose till budget then started falling:

India VIX on 31-Jan-20:

India VIX on 31-Jan-2020

India VIX on 01-Feb-20 at 10.37 am – THE BUDGET DAY – Budget was being read by Finance Minister Nirmala Sitharaman at this time in the parliament:

India VIX on Budget Day 01-Feb-20 at 10.37am

India VIX on 01-Feb-20 after market closing:

India VIX 01-Feb-20 after market close

India VIX on 03-Feb-20 – first (next) day of trading after the union budget day 2020:

India VIX on 03-Feb-20

India VIX on 04-Feb-20 – just second (next to next) day of trading after the union budget day 2020:

India VIX 04-Feb-20

As you can see India VIX Dropped from 17.93 to 14.58 – a HUGE drop in just 3 days of trading.

What did you learn?

Next time when a big event comes keep this in mind that India VIX will increase till the time of the event, creating volatility in the markets, and then will drop after the event is over.

If you want to trade like a professional you can do my Nifty & Bank Nifty courses.

You will learn when to buy and when to sell or when to combine both buy and sell to be successful most of the times. You will also learn strike selection which is a vital part of trading.

Of course, if you do not understand something you can ask me.

It’s easy to understand the strategies.

Courses:

Nifty Conservative Course – 3-5% average return per month – Minimum 1.1 Lakh required (may change in future)

Bank Nifty Weekly Options Course – 5% average return per month – Minimum 40k required – (may change in future)

Please click here to know the course fees.

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

Results may vary for users

Results may vary for users

Results may vary

Results may vary for users

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.