This is a copy of my newsletter sent to my subscribers on 01-June-2024. This was when General Elections 2024 were being held and the counting of the results was done on Tuesday – 4^th of June 2024.

It is bizarre that India VIX ended at at 24.60 on Friday – 31st May 2024, and is likely to cross 25 on Monday – 3^rd of June 2024 – but still, it is strange that the kind of volatility Nifty/Sensex should show is missing.

Nevertheless, you should be careful.

Here are a few things I have been telling you for the last few days which I am writing again to remind you so that you take action and save yourself from big trouble:

• Book partial profits in the stocks that are in good profit. you can of course re-entre after the 10^th of June 2024.
• Reduce the lot size of your trading in options and futures.
• Put a stop loss in the system to manage the volatility. This broker allows for keeping a target or stopping loss in the trading system. Once one gets hit, the other gets cancelled automatically. Also, they do not charge any brokerage to buy or sell stocks.
• Do not over-trade the next week i.e. from the 3^rd to the 7^th of June 2024. Stock markets are known to be volatile for a few days after the results.
• Do not buy any stock if you see them going up – the lure of buying a stock when they are shooting up due to a speculative rally may backfire. They will soon come down when the people who bought early start selling and booking profits.

General Election Results will be declared on Tuesday, June-04-2024. On that day the markets will witness huge swings up and down. I have already given you a trick to trade on results day. It takes the benefit of huge swings up and down.

But that was for option traders. What about investors if they see their stock value plunging by 20% or more?

Here is what they should do:

Do not panic. Historically the stock markets have swung back to their original position in a few months after a crash. The Indian markets reacted negatively just after the 2004 election results, but as time passed, the negative returns turned positive. If a crash happens after the results, it will not be any different this time. So do not sell your holdings in a panic. But if you know that you may panic and your stocks are in good profit then book partial profits and keep the money safe.

If your motive was short-term profits then book profit, and wait to reenter.

General elections will happen every five years so there is no point in taking out a microscope and keep reading news related to your stocks – it won’t help.

The market is full of investors and traders who trade based on predictions and speculations and on the results day it will double. This means those who trade rarely will also jump into markets to make some money.

The best way to avoid all this is to ignore all the noise. Just like nature – after a few months/years a storm comes and destroys nature. We then reassemble ourselves and start living a normal life again.

Bottom line:

Invest in equities only for the long term. Long-term is more than 5 years. Stick with your investment plan and do not alter it because of short-term market movements, like the elections or any other event.

Do not try to time the market it will lead to losses.

Of late, I have been getting a lot of WhatsApp messages and emails on what to trade on the expiry day. I can understand the eagerness to make money, that’s good but no one is looking at the other side of the coin.

The Risk Involved!!!

One thing is certain you will not make 1 lakh profit on the election result day, not even 50k, even 25k looks impossible… probably 2k to 3k is what you will be able to make. Is that justified against a huge risk of all the margins blocked for the trade?

I mean on that day (General Election Results Day – 4th of June 2024) – the real joy is watching the Television News Channels showing the voting numbers, analysis, chat shows, winners and losers candidates etc, not trading to make or lose 2k.

I do not see any fun even for a man desperately needing money to trade on the results day. Some days the risk factor is so high that it’s better not to trade.

You can easily guess the risk factor by looking at INDIA VIX which is currently at 22.86, well above normal (17 or below).

The higher the INDIA VIX the higher the risk.

What to Trade on General Election Result Day 2024?

Here is one trade that can be done if you cannot stop the urge to trade on Tuesday, 4th of June 2024 – General Election Result Day 2024.

Make sure it is Intraday only as INDIA VIX will most probably fall more than 10% intraday which will in turn crush the theta (time value) of the options by more than 10%, however, the delta will still be there so a small risk can be taken.

Here is the trade:

Buy a 5% up Call Option and a 5% down Put Option of any volatile stock or Index not expiring in the same week. This means the options you buy should expire only after 4+7 = 11th of June 2024. Keeping a few days in hand will ensure that theta decay will not do too much damage if there is no movement.

For your information, theta (time) decay is most of the options that expire first from the day you are trading.

Do not sell options or trade futures on the result day. The movement will be hard to manage.

What to do next?

Book profit on the side that gives 20% return then wait for a bounce back or keep an SL (Stop-Loss Order) for that side of double the profit you made. For example, if you made 2k on the call side, then kept an SL of 4k on the put side or exit at cost to cost.

Do not try to make a profit on the side which is open. Just exit at the cost you bought the option.

Do it early in the day else you may miss the profit on one side which will make the trade difficult.

So with this trade, you either make 2000 or lose 2000. That’s it – no extraordinary effort is required. Let me guarantee you one thing if you try to be smart on that day using any technicals, you will end up losing money.

Some days are just not meant to be traded. Even the best technical analysis will not be able to give you any high-probability signal to trade. If you still want to trade on the results day then I have given you a good idea. Please do not mess with the idea given above. Just try it and be happy with the outcome.

Hope that helps.

Disclaimer: The above is not an advisory service. It’s just a trade idea with low risk. 

You can also read:
Should you stop investing when the stock markets are all-time high

I am sure a lot of investors must be thinking they should invest now or not since Nifty has already touched 23,000 – its all-time high.

The problem is not with reaching 23k but this was too fast too soon. From 18k lelevs to 23k. This is an increase of 23.70% in 12 months as of 25-May-24.

Will this sustain the next 12 months also? I feel no. Stock markets usually give a return of 12% a year on average in the long term.

So is a fall imminent? Yes, I can’t tell exactly when that will happen but one thing I can tell for sure is that Nifty will not sustain these kinds of returns in the long term.

So what will happen now? It may fall a bit or go up a bit (the win of BJP is already factored in the markets), but if they lose hell will break. At least a 15% fall is sure.

What’s the best thing to do when the stock markets are at an all-time high?

• Book partial profit in the stocks you hold.For example, if you hold XYZ 100 stocks bought at Rs.50 now at Rs.75 then sell 40 at Rs.75 and keep the 60 stocks in your demat. This is called profit management.If after the election results the stocks you hold go further up it is ok you can book partial profits again but if it comes down you can buy it back or buy some other stock of your choice.
• DO NOT stop your SIPs (Systematic Investment Plans) in either stocks or mutual funds.
• The stock markets will keep increasing forever because some or the other stocks will go up – they will influence investors to keep buying other stocks. This cycle is never-ending. Therefore if you feel like buying more stocks, do buy but make sure you have done due diligence before buying. However, I would still suggest booking partial profits when the stock markets are at an all-time high  – and letting your SIPs continue.
• Stop Derivating trading (Options and Future trading) at least till the General Election 2024 results are out and a few days have gone by. Let things settle down and then trade when INDIA VIX recedes below 17. Right now it is at 21.71.
  It is expected to go up till the 4^th of June 2024 – the day General Election 2024 Results will be out. Wait for a few more days – 5 trading days – then start trading. If you are an exceptional trader then trade with 50% of your normal capacity. The next 15-20 days of less profit will not make much difference to your life. However, increased volatility will be hard to manage if you trade with a higher number of lots. The psychological impact can do the damage, not your trading skills.

Lastly, All-Time-High is just a temporary phase. Stock markets are known to give returns of 12% on average over a decade. But it doesn’t work like a fixed deposit. Stock markets go up and then down. If they do not breach their All-Time-High they will never be able to generate 12% a year on average.

So the final answer to the question – Should You Stop Investing When The Stock Markets Are All-Time High? Do not stop investing. However, if you are scared book partial profits but do not stop your SIPs or the monthly investments to create wealth over the long run.

INDIA VIX has increased by 54.09% in the last month. It is up by nearly 70% from 10 to 17 in the last few days.

Finally, the election factor is playing out in the market in full swing. I expect more upswing in the coming days probably up to 25.

I have written this earlier too so why am I writing again?

It is because INDIA VIX has gone above 17. Below 17 is considered a normal zone. But over 17 is considered a very volatile market or indicates some huge volatility coming shortly. This is true – the General Elections are ongoing. The 4^th of June will be the D-Day when the results will be out.

Technically and even historically on this day, INDIA VIX should be the highest. This time however things are different.

Indian markets have already factored in BJP’s win in this election,  however, if they lose INDIA vix may shoot above 25 and markets will witness a huge fall.

In a fall usually, the retail investors suffer the most, not the HNIs. They have a cushion and sell only a part of their holdings. Retail investors sell their entire holdings.

If you are reading this please do not make this mistake. Be strong in a fall and have control of your patience. These times teach you more than the easy times we have seen last year.

Date of posting: Saturday, 04-May-2024

Should You Sell In May and Go Away?

The selloff on Friday, 03-May-24 was so broad-based that two of every three stocks on BSE were trading in the red and nearly 247 exchange-listed stocks had hit their respective lower circuits, with investors losing Rs 3.21 lakh crore.

Take a look at the fall. This is the screenshot of EOD – Fri, 03-May-24:

BSE – EOD – Friday, 03-May-24

Interestingly this is the month of May and the saying Sell in May and Go Away is trending for obvious reasons.

Just Google and you will see that market analysts have also started saying this – some for and some against:
https://www.google.com/search?q=sell+in+may+and+go+away

This is the screenshot of the Google search “sell in may and go away” on Saturday, 04-May-24:

Note: The results may differ if you search a few days from 04 May 2024 or in some other month.

Now, have a look at INDIA VIX EOD – Fri, 03-May-24 – it increased by 8.72%:

INDIA VIX EOD 04-May-24

The increase in INDIA VIX is not because of May but due to the ongoing General Elections. I have already told via my newsletters that whenever some important political event happens the VIX will increase till the event is over. This increase is the effect of the General Elections.

Did you notice that stock markets fell and INDIA VIX increased on the same day? This again proves that Stock Markets and INDIA VIX are inversely proportional.

My View:

I have had enough of so-called market analysts. I used to read their analysis a lot – and then realized that learning from your own experiences is better. They are sometimes correct and sometimes wrong. It is their job to say something on the market and therefore they say. So it is not a good idea to depend on their views and make investment decisions.

My suggestion below is based on how stock markets work (the reality of stock markets) and what investors and traders should do.

What Should You Do?

For investors: Ignore the analysts. If you have bought some stocks for the long term – do not sell. For the time being, think that Warren Buffet is your analyst and just copy him. Of course, if you bought the stocks for the short term then sell them only if they are in at least 10% profit. Yes even for the short term your target should be to take away at least 10% from a risky investment – else why should you invest in the first place?

For traders: On 03-May-2024 India’s VIX increased by 8.72%. This is a signal of an increase in volatility where markets become unpredictable. So reduce the lot size and trade until this political event (General Election 2024) is over.

Note: If you are reading this post after the General Elections 2024, the logic of how the stock markets work will remain the same. If any political event is coming the VIX will increase and you should reduce the lot size and trade. Once the political event is over the VIX will normalize and the markets will also normalize, and you can resume normal trading.

As of April 26, 2024, the National Stock Exchange (NSE) has reduced the lot size of Nifty futures and options contracts to 25 shares for all expiries, including weekly, monthly, quarterly, and half-yearly. This is a reduction from the previous lot size of 50. The NSE has also reduced the market lot of Nifty Financial Services from 50 to 25 and Nifty Midcap Select from 75 to 50, but these changes will take effect from July expiries. The lot size for Bank Nifty remains unchanged at 15.

Now the question is – do you need to change your trading strategy?

No. Do not change your trading strategy, if you win most of the time. If you lose more than 50% of the time – then you need to change your strategy anyway, or else you will keep losing. You can do my Nifty Conservative Options Course and start making consistent profits.

What about the margin?

Yes with the reduction in lot size, the margin has reduced. I see that if I create a Call Debit Spread on Nifty at 22,500 then the total margin blocked will be Rs. 11,250 – which is almost half of what was required when the Nifty lot size was 50.

For selling naked options and selling / buying naked futures – approx Rs. 64,000/- is required.  Earlier it was over 1 lakh.

What about profit and loss?

Of course, when you are risking less, the profit and loss will also reduce by the same percentage. Whatever profits you used to make earlier on one lot will now be reduced by 40-50%.

Suppose earlier when the lot size was 50 – and you made a profit of 20 points. Your profit would have been:
20 * 50 = 1000.

However now for the same 20 points profit your profit in terms of cash will be:
20 * 25 = 500 – that’s a 50% reduction.

What should you do if you are a good trader and want to make the same profits?

There is only one way out. Double the number of lots to trade. Suppose You traded with 5 lots when the nifty lot size was 50 – now to make the same profit you have to trade with 10 lots. In this case, everything will be the same. The margin blocked will be the same and the profit and loss will be the same as earlier.

However, as General Elections 2024 are going on, trading with fewer lots is recommended. Once the elections are over – you can trade with whatever number of lots you are comfortable in.

Article written on: 27-Apr-2024 (Data based on April 2024)

Some people start worrying about a small drop in the market.

This is insane.

The recent fall is from 22,753 to 21,995.

This is in percentage terms is 3.33%. Yes points wise the fall looks huge 22753 – 21995 = 758. But in reality, it is just a 3.33% fall. This kind of fall or rise is quite common.

Here is an essential stock trading advice: Do not look at the stock markets with a microscope. This is the nature of stock markets – up and down.

For investors, the exit plan should be after 10 years or more.
For traders, the exit plan should be the target or stop loss, whichever comes earlier.

There is nothing in between. Unfortunately for most traders especially those who lose money trading (they are over 90% according to a recent study by SEBI on derivating trading) – there is everything in between.

First, they will buy an option. Seeing loss they will buy another option to average it out. They end up losing more. In reality, they should have taken a stop loss.

The story is the same for the option sellers.

Decide to take the profit target or stop loss point BEFORE placing the trade, not after. And respect that decision once the trade goes live.

And now even the brokers are advocating to hedge the trades.

You can do my option hedging course, learn hedging with proper planning, and start making small but consistent profits from your trading.

The NIFTY Next 50 is a stock market index provided and maintained by NSE Indices. It represents the next rung of liquid securities after the NIFTY 50. It consists of 50 companies representing approximately 10% of the traded value of all stocks on the National Stock Exchange of India.

The NIFTY Next 50 index consists of stocks in the top 51-100 stocks listed in Nifty. The first 50 belongs to the Nifty 50 Index.

Trading of Nifty Next 50 derivatives will start on Wed, April 24, 2024.

Here are some important details:

Expiry cycle:

On April 24, 2024, the following expiry cycle will be available: