Learn what hedge can do in this post. Mainly it reduces losses to a large extend and keeps the trader at peace without worrying much about the movement.

The benefits of hedging properly is immense if you are a trader, especially a future or option trader.
It kicks in when the traders is suppose to make a huge loss. See this how this traders loss was reduced by 50% when the trade went wrong.

Your Results May Vary

However sometimes even if wrong the directional trades makes a profit.

Your Results May Vary

This is how the conservative trading course will benefit you. You not only learn strategies but you learn some great hedging techniques to save your principal money. This will make you a better trader for life.

You can pay for the course here.

Learn how to make top rules of stock investing which great investors followed. These rules will help you to become good investor in the long term. Here I will discuss some important rules that the top investors like Warren Buffett followed to make huge income from stock markets. I offer a course on long term investing to retie rich, it is obvious nothing from the course is written here.

Make A Set Of Rules After Experience And Stick To Them

If you do research on successful investors you will find that they made a set of rules and followed them for the rest of their lives. They never deviated from the set of rules whatever happened to markets. These rules were made after a thorough research for years spending thousands of dollars not just sitting in an AC room and looking at charts.

People like Buffet never looked at charts but they looked at current valuations of the stock vs the probability of future valuations. If they were attractive he bought the stocks. Charts do not and cannot predict future valuations, therefore he never bothered about what the charts said.

How to make the rules?

Your initial blunder investing and mistakes you did in investing teaches you a lot. These mistakes thought a lot about setting rules of trading and investing to me too.

You jumped in stock markets trading as soon as your demat trading account was opened, dreaming big. It’s obvious you did a lot of mistakes initially. Make a set of rules on what worked and what did not work, when you traded.

Then do some more research on the set of rules before finalizing them.

Another way to define set of trading rules to ask people who are successful trading and follow them. Some of them give courses as well. Before doing any course you must see testimonials of real clients who have done their course and are doing well or not. If they have a website, their website itself is a good proof of the knowledge they have and their capabilities as a trader.

There is nothing wrong in paying a course provider to do a good course. It takes their time to help you that’s why there is a charge. But the course fee should be affordable and reasonable. Or you can do research yourself. A course saves your time and money to do research.

It took me more than 2 years and 3 lakhs to make this conservative strategies course. Since its your money I leave it to you if you want to do my course or not. You can see testimonials and decide yourself.

Patience Is Important

When I was a intraday day trader I was very impatient. As soon as the trade got completed, I used to keep looking at the trade to see whether it was making a profit or not. If it was not making a profit I used to take a stop loss within 5 minutes.
The above is not trading, its gambling. There is less than 1 percent chance that a gambler makes money. Obviously I too lost money.

If you are an impatient trader you will never make money.

Dennis Gartman, a very successful investor once said, “Be patient with winning trades, be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are ‘right’ only 30% of the time, as long as our losses are small and our profits are large“.

If you are impatient it is better to hedge your trades. Hedging makes sure your losses are capped, as a result over a period of time your profits exceed losses. My course has strategies which are fully hedged to cap losses.

Read what he said carefully, there is a high chance that you too do the same mistake in your trading career therefore you lose money. 95% investors make this mistake and lose money.

Let wining trades run. Do not sell as soon as you see profits coming. On the other hand br very strict with your stop loss.
Whatever stop loss you have set, be impatient as soon as the stop loss is hit and exit the trade.

Good traders are ok with losing some money but are not at all ok with losing a lot of money in a single trade.

The money you make in winning trader must far exceed the losing trade loses

Warren Buffett – The Legendry Investor of All Times Said This – “It’s Far Better to Buy a Wonderful Company at a Fair Price than a Fair Company at a Wonderful Price“.

I personally follow this since the day I read it. Another great thing he said was:

“Buy When Everyone is Selling and Sell When Everyone Is Buying“.

I follow this as well.

Mr. Buffett talks, world markets move based on his words. In fact governments appointed persons managing finances of a country leave everything aside to listen to what Warren Buffett says. His words are so powerful.

The letter to his investors are included in college finance classes in the largest and most prestigious universities in US and many other countries.

His basic principles of Investing is:

1. When evaluating a company, look at the quality of the company and the price. He mostly used to see the company’s balance sheets, listen to conference calls and the way management worked. After this he used to evaluate the price of the stock.

If the company looked good, he bought it. Price for him was secondary.
If the company looked bad, he never bought it even if the price of the stock was cheap.

Bill Gross a Fund Manager says, if you like a stock do not put more than 10% of your investment capital on it.

However here is where I differ slightly explain in my invest well course.

Diversification is Good, but too much diversification is not.

Some of your chosen stocks give great opportunities to buy. Always keep some money on hold to invest in these stocks as soon as you get the opportunity.

Prince Alwaleed Bin Talal – an investor from Saudi Arabia and founder of Kingdom Holding Company once said, “We’re getting hurt, but I’m a long-term investor“.

How true is that. Let us go back to 2008 when recession stuck stock markets all over the world and 99% people backed out of stock markets making huge losses. I was too one of them.

But just imagine people such as Prince Alwaleed Bin Talal, he am sure may not have taken out all his investments, in fact would have bought more especially those companies that were high in quality. Today he must be making millions of profits.

Most of the investors who lost a lost of money in that period must have still not received their money back. He has a lot of real estate investments in India as well. Not sure how his real estate business is doing.

Carl Icahn, a big investor in companies such as Time Warner, Yahoo never listens to his friends or brokers or tip providers. He once said, “You learn in this business, if you want a friend, get a dog.”

Indirectly he is saying do not listen to your friends as far as investing is concerned. Its is not a personal thing. It is good to have friends for social gatherings and fun but it is better to avoid their advice on investing.

Carlos Slim, also a great investor looked for investing in companies with a great growth potential in future. Like what Warren Buffett did with Coca Cola – his biggest investment till date.

No one was willing to buy Coca Cola, but Buffett bought and made millions.

Carlos Slim says that do not look what is happening now, instead try to figure out what may happen in the future to this company.

Basically he used to invest in mid-cap and small-cap companies.

Conclusion:

It is always good to follow legendary investors.

After a lot of research I have made a course on long term investing and financial management. You can read about the course here.

Date: 15-Mar-2017

Read problems of directional traders when a trend is over.

Nifty At All Time High What It Means?

Nifty is at all time high, and I am sure most directional traders must be divided in the issue of doing buy or sell.
Here is where psychology of directional traders gets confused.

1. Some directional traders are thinking this: Nifty will go even higher because BJP has won people mandate. Obviously they are buying Nifty or Stocks.

2. Some contradictory directional traders are thinking this: Nifty has hit all time high, I really do not think it can go even higher as a lot of traders will book profit. Let me take a contrarian bet, let me sell stocks or Nifty.

3. Technical Analyst: Oh all beautiful charts are signalling a buy, lets buy.

4. Speculators directional traders: I think most of them will be on a buy as they love to go with the trend.
Here is where they are not trading but gambling.

The UP election results has already been factored in, there is nothing more left now markets will do what most traders will do.
And what most traders are doing? Speculating – 50% on the buy, 50% on the sell. As you can see Nifty not moving at all.

Nifty at 2.29 pm on 15-Mar-2017

All Call buyers are getting a headache. INDIA VIX (volatility), has fallen taking down the premium they paid to buy calls, but Nifty is just not going up.

All Put buyers are also getting a headache. INDIA VIX (volatility), has fallen taking down the premium they paid to buy puts, but Nifty is just not going down.

What about Future traders?

Same as option buyers or sellers, they just do not know what will happen.

In any case the in the recent Nifty rally 50% of the Futures buyers made money and 50% of them lost? Why? Because those who sold lost and paid money to those who bought Futures.

As you can see directional traders are living a divided life. Some months profits some months loss, but in most cases losses are more than the profits. This happens for years until they quit trading.

If you are also a directional trader please do not live in the hope that one day or one month will recover all your losses. That day rarely comes. On top of that you must also add the money lost due to fixed deposit that you could have done on that money year on year.

Which means compound the losses with 8% per year that you could have made by doing a fixed deposit.

If at all you make a profit, it must beat all the losses and make at least 15% per year on the lost money only then can you say you made a profit, on trading else even if you are making 5% per year on trading, you are actually losing money.

Case with non-directional traders with proper hedging is totally different. History is proof that 70-80% of the times there is no trend in the stock markets. And when there is trend only 50% of directional traders lose money.

If history is proof that 70-80% of the times there is no trend in the market, can you change the future? No one can, that’s the reason I became a strict non-directional trader. See benefits yourself.

I do not care, neither am bothered where Nifty is heading, all I care is how much profit I am making. Means is not important to me, ends are important.

Conclusion:

Being a directional trader is a very difficult job and most of them burn their fingers every day. Non directional trader burn their fingers rarely and do not live on the edge like directional traders. In my experience it is better to be a non directional trader than a directional trader trying to make too much money but actually end up losing it.

Exit Polls have predicted victory of BJP. If this comes true there is a chance of Nifty opening gap up on Tuesday. But how much gap up? No one knows.

But in many instances exit polls have been proved wrong. So what happens if BJP looses? Nifty will open gap down on Tuesday. But how much gap down? No one knows.

This where speculators lose money.

I am sure some 50% traders will put their hard earned money on the line in the long straddle trade.

If no move comes and VIX dropped, they are set to lose money.

Keep in mind that these are the times when speculators are betting on heavily. I think per trader the money on risk will be Rs. 50,000. And average loss will be 50%. So just in a matter of days 50% of traders money will be lost.

Disclaimer: The above is a pure guess as per my experience. Unfortunately there is no data monitoring of total money made a lost in a day. Only data monitoring is about trades done not who lost and who won. So there is no way to know total money made for how many traders and total money lost for how many. Data is only open for open interest. So the above is a pure guess on what happens when traders speculate trading or take a gamble.

That does not mean we should not trade during these days. This is the reason the directional strategy is there in my course. In the event in a loss two things happen:

1. Loss is limited and minimized, and
2 .There can be a profit even if the direction the trader takes is wrong. Yes you read that right. Even if your view is wrong you can make money.

See this:

WhatsApp Testimonial on 24-Aug-2015 the day Nifty Fell by 500 points for Directional Futures Trade of my course – It was Futures Buy – The trade still made money – Results may vary for users

His view was wrong yet he made profits. How many times do you make money when you traded a future or option and went wrong on your prediction and yet made money?

My guess is not even once as how can you make money if the trade went against you? Yes it is possible. How it is possible is written in my course.

Conservative Options & Futures Trading Course – Directional and Non-Directional

Do not forget you get 6 months support and paid emails to trade the strategies, for a one time payment.

You can pay here using credit card.

Read how trading without knowledge can take all your profits away and even your principal amount.

A few months back I got this email from one of my potential customers:

Dear Mr Dilip,

I have read the articles in your website and all the emails that you have sent to me for the past 5 days which were very informative and educative. They were very useful and soothing also.

I was doing delivery trading as a long term investor from 2003 and till 2007 I had earned Rs 4.24 lakhs as profit. In 2012, I entered into day trading and till date I have lost Rs 2.70 lakhs through it. Six months before some devil worked on my mind and I entered into Options trading without any strategy and lost Rs 1.12 lakh till date. All those money could have been saved by me had I gone through your educative articles earlier.

My balance amount with my broker have shrunken to Rs 30,000 and it seems I have to add some 50,000 to undertake your course.
So, I will contact you on joining your course after 5 or 6 months.

I thank you very much for taking efforts and spending time to educate the so called greedy investors like me.

Selvamani

Here is the screenshot of his email:

From 4 Lakhs to 30 Thousand Rupees Loss

This is what happens with traders who have made money on either luck, fluke or got lucky taking tips. Over a long period of time neither luck or fluke nor tips can help you make money in stock markets or any other business.

Luck and fluke are temporary, knowledge is permanent.

Let the above not happen to you. Let greed not conquer you take away all your profits or increase your losses. He has not mentioned his principal amount. i am sure his losses are not just 4.2 lakhs it is much more than that if principal is included. Assuming he was lucky and doubled his money in 4 yours his loss is:

4.2 lakhs + 42. lakhs – 30000 = 8.4 lakhs – 30000 = 8.10 lakhs loss.

If you have made even 1 lakh loss do my option and future trading course today. The course fee is 6% of your loss or even less. Control your loss and do the course today. You can get the payment details here.

Date: 3-March-2017

Please read my yesterdays article: Markets are Looking A Bit Stretched.

The highest it reached yesterday was 8985, then a fall.

See this NSE close 02-Mat-2017:

Nifty Close 2-Mar-2017

Right now it is at 8874 (11.30 am, Date: 30-March-2017). This has happened earlier too.

Read this:

8000 a big support for nifty comes true

Even though I feel fall will not be sharp, so it is better to trade non-directional strategies. You can learn non-directional strategies in my conservative options course.

The idea is to trade in the correct way with proper hedge and not go by what science or astrology says about the markets.

Stock Market And Options Trading Is Not Astrology or Science

Neither Science Or astrology has anything to do with Markets.

I read a lot of websites daily on stock markets. Most of them said 8950 is a very strong level for Nifty to cross. If it crosses then there will be a sharp breakout on the upper side which may take Nifty up to 9200.

But as you can see the ground reality was totally different. Nifty does not know the difference between 8950 and 6950, it is just a software to manage trades. It can neither push itself higher nor push lower. It can only do what the traders do that is all.

If trading was science technical analysis would be a subject of specialization in engineering colleges. Fact is it is not. Stock market trading is not science. Of course there are some technical terms that are used to define what it is – like support, resistance, PE ratio etc. But trading is not science, its a completely different game altogether.

Traders mind set and Economy of a Country Has to Do with Markets

Some people go by astrology to trade. Really? What has the position of The Sun, Mercury, Venus, Earth, Mars, Jupiter, Saturn, Uranus, Neptune or Pluto has to do with stock markets? Nothing.

Their positions, shapes or sizes cannot do anything to stock markets. Please do not trade according to astrology.

Astrology trading is same as speculative trading. Do not follow Astrology Trading.

One person called me yesterday and said he will pay me today. When I asked why, he said because tomorrow will be 03-03, an auspicious day according to astrology because it is 3 and 3.

I am sorry if you are reading this but frankly 3-3 makes no sense as far as stock markets are concerned. If it was something personal then fine I am ok, but if the thinking was that astrology will help you to make money in stock markets, then no you are wrong my dear trader.

Please do not take it negatively, I am only saying what my experience says.

When you pay for my course you not only help yourself, but help me to keep working hard to keep writing and helping other gain trading knowledge through my blog, It is obvious my time does not come for free neither money to keep this site up and running.

So thanks to all who have paid for my course, I will keep writing as along as possible in the site.

Payment detail for my course is here.

Conservative Option Course Details is Here.

Happy Trading Everyone.

Date: 02-March-2017

9000 may be touched soon, but Nifty is looking a bit stretched. This has happened after Trump speech. This can be said as emotional reaction to his emotional speech.

In my experience stock markets do not run on emotions for long. Once 9000 is breached, a lot of people will start booking profits and Nifty may fall. So chances of fall after 9000 is breached is more than Nifty crossing 9100.

Why do I think so?

Because in the ground there is no dramatic change in the profit statements of most companies. In fact in India after the demonetization of Rs.500.00 and Rs.1000.00 notes many companies suffered losses or got lower business than usual. Things are normal now, but it will definitely show in the next two quarterly results. GDP will also come down this financial year.

Here it is, Nifty fell after hitting almost 8985 today – 02-March-2017. This is image of Nifty closing on 02-March-2017:

Nifty Close 2-Mar-2017

I am sure all Technical Analyst must be saying that Nifty will go even higher. I am not a TA, I just look at how Nifty behave as per the economics of our country and trader’s mindset. 🙂

Disclaimer: This is not an investment advice to go short in the markets. I am not an investment advisor. If you want to take any investment decision please do thorough research before investing in any stock or take advice from authorized investment advisors. Stock markets investments are subject to market risk please invest with proper research.

Even if you want to trade on your own it is better to get good education in stock trading and then trade properly. Of course like our school and college education, no good education comes for free. Its good to invest to learn and trade or invest, rather speculate and invest.

To help you become a better trader and investor I offer two online courses which you can do anywhere from your home:

1. Conservative Option and Futures Trading Course for Short Term Derivative Traders.

2. How To Invest Well & Retire Rich for Long Term Investors.

If you are interested to know about these courses please contact me.

History has it that Benjamin Graham and Warren Buffett are role models as far as value investing in stocks is concerned. These two accumulated so much wealth that Warren Buffett, even today is one of the richest man in the world.

However it is not easy to emulate these two great investors, but there is a slightly easier way to hand pick a few stocks to do value investing which is defined in the course how to invest well to retire rich. Those details cannot be shared here. However this article will help those who have done my course more.

Here are some of the important things to before investing in a stock for the long term:

Buffett’s Investing principles of investment:

Note: These Investing principles will look very easy, but the fact is they are not.

Intrinsic Value of the Stock Is Very Important:

Intrinsic value of a stock is its current price compared to the company’s future earnings power. This is very difficult to assume. And for those who believe in back testing when they want to test any option strategy here is where all their back testing will fail.

This is the reason never believe in back-testing. It is just what may have happened in the past but it is not guaranteed to happen in future. There is no dearth of many strategies that have performed very well in back testing, but failed in actual live trading. People still believe in back testing for reasons better known to them.

Nifty is not a living thing that it will keep repeating its own history in the future. 2007-08-09 is the best example of back-testing gone bad. Nifty went 50% down and then 50% up within two year.

And then it never happened till now. How in that case is back testing worthwhile?

Back-testers are the ones who look at the past but are unable to look at the future. A far as stock investing is concerned those who look at future only make money.

Past is past – if a stock has given 100% return in 12 months then there is no guarantee it will give the same return in future. Back testing cannot find out the intrinsic value of a stock.

Future earnings can be guessed by how well the company is performing and what are the chances of it doing the same business and keep the pace of its growth in the same rate as last few years.

Obviously this cannot be done in any stock, you need to classify stocks to do that. There is a way to do that written in the how to invest well course.

Once you have selected the stocks to research future valuations gets a bit easier to reach because you research only in good stocks.

Area of business

Like if its morally legal (like food), morally illegal (like gutka, tobacco etc), cultural or modern depending on the current prevailing society, is this business sustainable by future generations etc.

Business Management

Who are the people who are running the business and managing it. Have the decisions they taken in the past benefitted the company or not? Is some kind of fighting going between them etc.

Financial Measures and Value

Some of the Buffett principals were easy to execute but difficult to calculate. For example Economic Value Added (EVA), is difficult to calculate but easy to implement.

Economic Value Added (EVA) is an estimate of a firm’s economic profit in future. EVA is the net profit less the equity cost of the firm’s capital. The idea is that value is created when the return on the firm’s economic capital employed exceeds the cost of that capital.

Please read above the Intrinsic value to some extent is trying to figure out how well is the stock price placed in compare to its future profits.

EVA is hard to know, but once you know its easy to implement. If EVA signs are positive he bought the stock immediately without looking for support resistance etc which most day traders do. If the company’s future is bright it’s stock will definitely rise in future.

Calculation of EVA needs a lot of mathematics and adjustments. Once you get to know how to calculate EVA, it’s easy to take a decision to buy a stock or not.

Small Note: For intraday day traders these things does not matter. All they need is to control emotions and trade. On top of that intraday day traders get a huge margin of over 200% on the capital used therefore they can exit with small profit or loss. However stock investors for the long term need 100% of the capital to be invested. For them the above does matter. For multimillionaires like Buffett it is even more important because they deploy a lot of capital in one stock. They cannot do it without proper research.

Buffett had to foresee the future of a company before investing millions.

As you can see the above is very easy to understand but difficult to find out. Buffett initially did it all alone but later had resources to look into these before investing the money.

Today 23-February-2017, is India’s Stock Markets Exchange Derivatives – Futures and Options expiry day for derivatives for the month of Feb 17 not other months.

Which means all options and futures contract for this month Feb 17 will expire today at 3.30 pm. Out of The Money (OTM) options will expire worthless and In The Money (ITM) options will have only the intrinsic values left in the premium at around 3.25 pm.

Therefore you must close all options for Feb 17 contracts before 3.25 pm (5 minutes before market closing to avoid leaving it open by mistake), if possible, especially In The Money (ITM) options. Please read carefully to know the reason. In short it is dangerous to leave it not closed.

Old subscribers may remember that I have keep saying in my blog since last two years, do not let your options expire worthless, there can be a penalty by the exchanges.

Securities Transaction Tax (STT) is A Huge Danger to Let Option Exercised and Not Closed Before Expiry Day

Now there is even more and severe danger of letting them expire exercised (not worthless). The Securities Transaction Tax (STT) tax on options that do not expire worthless but get exercised face a huge Securities Transaction Tax (STT) of 0.125% on the Total Value Of the Options.

What is an Exercised Option?

An option is considered exercised if it was bought any day before expiry, is In The Money (ITM) and not sold before the expiry day of the that expiry month options only.

An option is considered worthless if it was sold any day before expiry, is Out of The Money (OTM) and not bought back before the expiry day of the that expiry month option only.

Securities Transaction Tax (STT) is not applied on worthless options which were sold and not bought back and are Out Of The Money (OTM)

Securities Transaction Tax (STT) is applied on exercised options which were bought and not sold before market closing on expiry day and if they are In The Money (ITM)

Important Note:

To avert chances of any penalty or to avert risk of STT (no one knows all the rules of STT), it is better to close all derivatives, options or futures, In The Money (ITM) or Out Of The Money (OTM), before the expiry day.

Though some of my options too expired worthless in Jan 2017 too, but luckily they were all sold not bought and they were Out of The Money (OTM). There was no brokerage and no STT levied on my options since they expired worthless and were sold not bought back.

But even if there was no STT done on sold options that expired worthless, I still recommend close all derivatives before expiry day. Now we just do not know what may happen. If your brokerages are too high you can register with a low cost brokerage firm which costs next to nothing to close options and futures. It is better to pay a small fee rather take the risk of letting options expire in the money or out of the money, exercised or worthless.

Contact me to help you open an account with the lowest and one of the best brokerage form in India.

Please note that only February 17 month options will expire today, not any other months options.

So, this rules applies today to February 17 month options only. Today is options and futures expiry day of February 17 month options and futures contacts only, rest of the remaining months options and futures will not expire today.

Small Note: My Conservative Options and Futures course is designed in such a way that we do not wait till expiry day to avert these kinds of dangers. They are very conservative in nature and have risk management inbuilt due to hedge. This is the reason a lot of traders are doing pretty well trading my strategies since 2014. Contact me to know more about it.

What About Securities Transaction Tax (STT) on Options That Are Closed Before Expiry Day

In the case of options trading and closed when the markets are opened anytime before the expiry day, the Securities Transaction Tax (STT) is 0.05% on the premium. This is ok and it makes sense and is easily affordable.

But here is the problem and a BIG one.

What About Securities Transaction Tax (STT) on Options That Are Not Closed Before Expiry Day?

The Securities Transaction Tax (STT) on exercising an option is 0.125% on the total value of the options bought. Exercising of the option is that you bought an option (it does not matter when you bought – 60 days, 50 days, 40 days, 30 days, 20 days, 10 days or on the expiry day for Intraday day trading), but are not willing to close the trade to save brokerages and taxes, or have forgotten to close it and leave it till expiry day’s markets close – after which you cannot trade them.

This is where the problem lies. When an option is exercised, the Securities Transaction Tax (STT) is paid on the entire value of the option and not just the total profits made.

Example on Securities Transaction Tax (STT) On Options Getting Exercised

For example let’s say Trader “A” forgot to sell his option on expiry day. Nifty closed at 8872.55.

It does not matter what the premium was of the options he bought when Nifty closed.

Suppose Trader “A” made a profit or loss of Rs.1 lakh. Again it does not matter what the profit or loss was made on an exercised option.

Why profit or loss does not matter here you will know soon.

The Securities Transaction Tax (STT) will be Not be levied on Rs.1 lakh profit or loss. It will be levied on total value of the In The Money (ITM) options.

Supposing the above trader bought 1000 lots of Nifty options and forgot to sell it and it got exercised. Nifty on that day closed at 8872.55.

Since Trader “A” allowed the Nifty options to be exercised, he has to pay STT on the full value of the options bought.

Here is the Calculation of STT on Exercised Options Bought but Not Sold Before Expiry Day

One lot of Nifty option currently is 75. He bought 1000 lots. Nifty closed at 8872.55

Total value of the option:

8872.55 * 1000 * 75 = Rs.66,54,41,250.00 (Rs. 66 Crores, 54 Lakhs, 41 Thousand and 250.00)

0.125% of 66,54,41,250.00 = Rs.831,801.56 (Rs. 8 Lakhs 31 Thousand 801.56)

Profit was Rs.1 lakh.

STT needs to be paid = Rs.831,801.56

So the trader is in loss of = Rs.(100000 – 831,801.56) = -731,801.56 (Rs. 7 Lakhs 31 Thousand 801.56)

This in spite of making a profit if Rs.100,000.00 on the options he bought.

Or even after making a profit of Rs.1 lakh, Trader “A” will be in a huge loss of Rs. 7 Lakhs 31 Thousand and 801.56.

Do not let such a situation ever come in your entire life of trading.

A real trader Mumbai-based Chirag Gupta, is currently facing a loss of Rs.18 Lakhs even after making a profit of Rs.6.07 lakh on the options he bought but did not close on the expiry day of January 2017. He bought options for 0.05 but did not close for reasons known to him. I cannot say why he did not close as he has not said it anywhere, so I do not know.

In absolute shock he has started an online petition to stop this STT on exercised options. Here is the petition:

https://www.change.org/p/security-transaction-tax-stt-a-trap-for-traders-and-a-systemic-risk-for-capital-markets

A Note to Mr. Chirag Gupta: If you are reading this let me tell you that I am extremely sad with what happened to you. I am sure my readers must be also be very sad after knowing your story. Please let us know in the comments section why you did not close the options you bought before markets closed on that fateful day? It will help us tremendously to avert such a situation. Sorry Mr. Chirag Gupta, but lets hope for the best.

His article is published in Economictimes as well.

Conclusion

Close all Futures & Options on or before its expiry day to save huge Securities Transaction Tax (STT).