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INDIA VIX is continuously falling giving strong signals that Indian Stock Markets have started to stabilize.

Please refer my yesterday email for more information on why INDIA VIX keeps changing.

INDIA VIX today is down by 4.65% and is currently at 17.84. This is a clear indication that Nifty is getting very stable.

It is a request to directional traders please do not take any directional bets as you may suffer huge losses.

If profits are coming, due to panic and excitement, you will take it out in 10 or 20 points maximum, but if in loss, in the hope of a recovery, you will wait till expiry and lose 50-100 points. That’s the real life of a directional trader. It is sad but true. Hey I was a directional trader once from 2007-2010 and lost everything I had in savings in 3 and a half years time. Please read the mistakes I did too. I am sure some of you are doing the same mistakes I did years back. Please do not do them you may see the same results I saw.

That’s the reason I converted from directional trader to a VERY Conservative Non-Directional Trader.

I know you are a free subscriber but since you have given me your email it is my duty to ensure you do not lose money trading.
But unfortunately my job is limited to tell you the truth. I have no control over what you do, so to trade the directional or not, is your choice, but frankly it is a very dangerous life for a directional trader.

Read the following articles to know why directional traders lose money over the long term:

Aggressive trader loses more than Rs. 2 Crores trading options

Some other articles to know the realities of stock markets and to increase your knowledge on trading:

  • Why Non-Directional Traders Make Money
  • Control Your Greed Only Then Trade
  • How even Non-Directional Traders can make good profits
  • Can I Live a Life As A Full Time Trader
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    In this article learn what Is INDIA VIX And why it changes in the stock markets.

    As you can see INDIA VIX Is Continuously Falling, what does it indicates?

    India VIX 17-Nov-2016

    India VIX 17-Nov-2016

    You can see INDIA VIX here.

    First what is INDIA VIX?

    INDIA VIX is measurement of Indian Stock Market Trading Volatility.

    VIX is Volatility Index in stock markets. It is measured the way patterns in trades changes in the markets, or are expected to fluctuate in coming days. If too much trading is done or is expected due to some event, which is above normal trading days, Volatility Index increases. It usually increases before some big news is announced because it is a clear sign that too much trading may happen. Like the recent US elections.

    Why does it increase before the news is announced?

    The reason is obvious that too much trading will happen because traders get panicked and to save their positions start investing in speculative shares (greed following), or buy/sell too much calls and/or puts (again greed following). It does not matter to markets who wins or who loses money, but Volatility Index sees or is expecting to see abnormal trading patterns and increases accordingly.

    Once the news is announced it starts to fall.

    Why does it falls after the news is announced?

    It is simple, traders start to close their positions. Buyers become sellers, and sellers become buyers and trading slowly starts to get back to normal. And frankly this is expected after the news is announced so VIX starts to fall.

    When the VIX measurement software sees trading patterns getting back to normal it starts to fall. Of course it takes some time for the trading pattern to get back to normal as not everyone closes their positions the next day. Some do the next day itself or same day so most VIX falls the next day itself of the news announcement day.

    You can go back to INDIA VIX history and see that the max fall of -6.99% was on 10-Nov-2016 when the final results of Donald Trump winning the US elections was clear by night of 9-Nov-2016.

    India VIX from 1-Nov-2016 to 17-Nov-2016

    India VIX from 1-Nov-2016 to 17-Nov-2016

    After that there was an increase of 12.34% but it had to do with a different news – The Demonetization of Rs. 500 and Rs. 1000/- notes and its effects in Indian economy. People were confused and trading patterns changed.

    This is a good question in the comments section and I think this must be included for everyone to read.

    Question: Is the increase or decrease of India VIX associated with bullishness or bearishness?

    Answer: No. Usually VIX and Nifty are inversely related as far as direction is concerned. If you see Nifty and India VIX history, whenever Nifty falls India VIX increases and whenever Nifty rises India VIX falls. But it has nothing dodo with Nifty as VIX is least bothered about what is happening to Nifty. As written in the article above VIX increases due to panic among trades and expectation that speculative trading will start. Sometimes you will see Nifty will rise still VIX will also rise and vice versa. So basically VIX movement has its own set of rules and Nifty has its own. Inverse relation is mostly just a coincidence.

    Hope it is now clear why India VIX changes everyday. If you have any more doubts please ask in the comments section given below. If the question is good it will be included here in the article for everyone’ benefit.

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    Why Nifty Moves Up and Down

    Read to know why Nifty or any stock market in the world moves up and down.

    As you can see today (16-Nov-2016 at 11.23 am) Nifty is at 8156.20 just 47 points up or 0.59% up from yesterday’s close.

    This is the beginning of stability. Please refer my yesterday’s post where I had written not to panic as Nifty will soon get stable. As you can see sign of stability has arrived.

    You see a simple thing called Human Psychology working here. People who wanted to go short have given their best. There is something called as risk management. You can’t sell your home and short Nifty right? That limit for maximum people if arrived then stability will come, then these same people will start booking profits.

    How do traders who have gone short on markets book profits? They need to buy back what they have sold. Which directly means to invest money in stock markets.

    For example those who have sold Calls may be in profits but those who have sold Puts may be in huge loss. Now they must be getting phone calls from their brokers to invest money as their trade is in loss and margin blocked over. Some will infuse more money in their demat account in hope of a recovery, some will not, and their broker will close their positions as soon as max margin block gets close to nil as a risk management measure.

    Which means infusing or investing money into the stock markets. Many ask for collateral from their brokers to trade derivatives. These people will buy more stocks to increase their collateral margins so that brokers do not sell their shares at a loss to cover the damage as a risk control measure.

    Similarly those who bought Calls will be in huge loss, and those who bought Puts will be in huge profits. They will see their Puts to take out profits and who pays them money? The traders who sold Puts.

    If no shares were bought money is not invested in stock markets. just derivative trading is done. But if stocks bought to increase collateral or just to make a profit then yes money invested in stock markets and Nifty will rise if money invested is more than money withdrawn that time.

    If everyone starts selling shares – the Nifty 50 stocks, Nifty will fall down fast. And if everyone starts investing in shares – the Nifty 50 stocks, Nifty will start to rise. If both buy and sell are almost same, stock markets will be stable that day. This happens 80% of the days. Please remember that this is applicable to all stock markets in the world not just in India.

    Hope the logic of why stability comes in markets and why stock markets goes up and down is clear.

    Please ask me questions or leave a comment below if you have any doubts.

    If you do not know basic options please fill the form here. I will help for free:

    http://www.theoptioncourse.com/beginners-get-option-beginners-course-free/

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    In this article read the impact of demonetization of Rs. 500-1000 notes to the Indian Stock Markets. Will it help in the long term or not.

    In short: Please Do Not Panic Wait for Some More Days Things Will Get Fine

    This is law of nature. Peace before a storm. Same things happen in stock markets after 5-6 months. After volatile days in Jan-Feb, there was total peace. Nifty range was 8500 – 8900. Then suddenly two big news hit us in back-to-back two days.

    Donald Trump stunning the world not just USA and winning US Presidential elections where more than 90% per-poll surveys favored Clinton win, but Trump proved every projection pundits wrong, just like stock markets prove every market pundit and directional trader wrong.

    Next big news for India was making Rs. 500 and 1000 denomination notes worthless in matter of seconds. This is frankly good news for the long term for India as well as stock markets. Let’s use some common sense how this will benefit India and stock markets in long term.

    1. Black money launders will now fear in future at least for next 10 years to keep money in cash in their homes. They will rather start legitimate business and give employment to people. Lots of new jobs will be created and our economy will grow.

    2. Some may not be able to start a new business so they will invest extra cash in stock markets to grow their money. Stock markets will see a huge growth and investments. Do not forget investing in companies will let many other new companies come out with IPOs and again new jobs will be created. Indian economy will grow.

    3. Government will get money so Government job pay-scales will rise. People in government job will invest some money in stock markets for their future. They still do but the proportion will increase. Do not forget that that their are lakhs of people having Government jobs. Stock markets will give positive returns and will keep its pace of growth because of more money coming in.

    4. No new black money business will start as the new comers will fear this business. I think in the long term 90% of black business will die out and their kids will enter with that money in legitimate businesses. Indian economy will grow.

    5. As you can see all the above 4 combined, there is a 99% chance that the black money which were in format papers till now lying somewhere in thousands or even of lakhs of lockers in homes or offices, will now start entering the stock markets therefore Indian stock markets will grow at a good rate in the long term.

    So please keep the above points in mind and do not panic. This storm as usual will pass away and Nifty will come back to its previous level before US elections and then stabilize. How long? I don’t know but it will surly happen soon.

    What happens to people who predict the markets?

    Basically predicting markets is nothing but a gamble. If you win you make a lot but if you lose you lose three months of profits plus some more. After a few months they are down by a few lakhs then email me for the course – some even cry. Frankly this is happening since last 2 years since the day I started this course in May 2014.

    Anyway what I am trying to say is this just do not panic and please stop predicting the markets, you make money in short term but lose money in the long term. Do not forget you invest in stock markets to secure your future not to destroy your present.

    Many Group A companies are at a great support level, you can keep accumulating them. Please do your own research and buy stocks of companies with great Economy MOAT.

    What is Economy MOAT: The term economic moat, coined and popularized by Warren Buffett, refers to a business ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms. For more refer this article on Economy MOAT.

    Sell them when you make 10-15% of profits.

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    Read to know why Nifty is getting too volatile recently there is always a reason for too much volatility.

    Reason 1 For Volatility:

    There is some kind of uncertainty in the stock markets. Here are the reasons for uncertainty:

  • US election where the unknown and a non-politician won stunning the world.
  • Recent 500 and 1000 denomination notes being demonetized.
  • Uncertainty of the next move from Indian government and US next government.
  • Uncertainty over the world economics

    Reason 2 For Volatility:

    HNIs (high net worth individuals) selling stocks to run their homes as all the unauthorized notes of Rs.500 and Rs.1000 denomination that they owned and never paid taxes on, is now a waste, so the only option to get money is sell stocks to help to run their families. HNIs monthly expenditure goes beyond 1 lakh a month and I am sure they keep at least 30-50 lakhs in cash at home especially the ones who do business dealings in cash only and never pay taxes. These people are also selling stocks to get money to run their businesses too as they need cash for the short term.

    So is there anything to worry? NO they are limited people who cannot change the overall direction of the markets which is still positive. It is matter or time it will get stable, so there is nothing to worry especially the non-directional traders for whom market direction does not matter.

    For non-directional traders whether stock markets goes up or down it does not bother them because they know they will still make profits.

    Reason 3 For Volatility:

    Results season has arrived. People who love to hold stocks for the long term can look at good stocks and buy them. Since I am NOT a tip provider please do not ask me the names neither I will write here.

    Today, M&M, BPCL, Tata Steel and many banks would disclose their Q2 results. The most important banks results which are a must watch are SBI and Bank Of Baroda. You will see that most technical analysis will say their results will affect the stock markets. Well I do not care.

    I am an avid watcher of Nifty movement when results season arrives. But I have rarely seen this happening since 2007. After all Nifty is made up of 50 strong companies coming under Nifty 50. One or two companies cannot move Nifty too much. Yes if 10 or more companies results gets affected then there can be a big move.

    So just keep a watch on SBI results. After results season is over Nifty will calm down again.

    Just to check excessive volatility BSE today revised the circuit limit for share movement of seven companies. The new limits, effective today, will ensure stock prices do not go up or down beyond a level during a session. It has set a circuit limit of 10 percent for Ambition Mica, Welplace Portfolio and Financial Consultancy Services and Hindustan Adhesives. The exchange has also fixed a limit of 5 percent for Trilogic Digital Media, Milkfood, Mewar Hi-Tech Engineering and Eastern Silk Industries.

    My advice is this. All of the above companies, I did not even knew they exist. Only after reading news I found about them. What I am trying to say is if you trade companies which are unknown to common people please avoid trading in them you may suffer a huge loss someday in some company. If possible trade in Nifty 50 companies only whether it is Equity, Options or Futures.

    Now let’s use some common sense. Why only these companies were chosen where derivative trading is also not allowed? Because I am sure a lot of equity trading happens in these companies. I fail to understand why. But that’s not our job. The exchanges knows this better than us, therefore to protect small investors they have taken this measure which I totally support.

    BSE and NSE primary job is to protect small investors money that is the reason why exchanges are made. They are doing their job well and we must support them.

    Conclusion:

  • Too much of volatility in the markets currently is due to some short term uncertainties which will vanish soon and stability will come.
  • Result season has arrived. If some great stocks fall long term investors can buy and hold.
  • BSE and NSE are doing their job to contain and limit volatility in lots of small stocks. Please avoid trading in unknown small companies else you may suffer a huge loss someday in some company. If possible trade in Nifty 50 companies only whether it is Equity, Options or Futures.
  • Indian fundamentals are better than other emerging markets, so there is no need to panic. In the long term everything will become fine.
  • The State Bank of India has become the sixth most valuable firm in the country after it beat market valuations of IT giant Infosys and mortgage lender HDFC. This is a report from Mint. SBI’s market value touched Rs 2.19 trillion on Thursday after it saw a sharp rise of 8 percent bringing the stock’s value to a 15-month high of Rs 281 per share. The stock has gained 26 percent this year.

    Can you see if you buy good stocks with long term in mind you will surly make money in long term. If you buy small stocks to make money fast or double or money in one or two days you actually ending up with half the money you invested.

    Please it is a request – trade only is STRONG and WELL known companies with great ECONOMY MOAT.

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    In short US will go to polls on November 8, 2016. And results will be announced on November 9, 2016.

    The contest is between Democrat Hillary Clinton and Republican Donald Trump. Whoever wins the election, will become the 45th President of the United States of America.

    Frankly most Indians business houses favor Democrat Hillary Clinton to win the election because she is pro India and pro-business. No one knows about Donald Trump, so they do not want anything unknown to happen.

    But we all know it is not in our hands or hope just like speculators traders trade in stock markets on hope. It is in the hands of what most Americans want and vote for – just like stock market trading where only that things happens what most people want not what you or me want.

    That’s a major reason why speculators lose money and well planned traders make money.

    One point which is bothering most India market investors is that former secretary of state and Democratic presidential candidate Hillary Clinton’s double digit lead has somewhat eroded after the Federal Bureau of Investigation (FBI) announced fresh investigations into emails allegedly linked to her use of a private server. I am sure you all must have read this in news too.

    When will the next US President be announced?

    270 votes are need to win the US Presidents post. Whoever gets it wins. Due to a lot of scandals going on there is a chance that counting may happen again. Whatever most likely the winner will be declared by 4 am GMT (9:30 am IST), on November 9, 2016 when the polling will close in all states aside from Alaska. But Alaska does not have much voters to change the winner.

    All this will be known by the world by media but the formal announcement will be done when vice-president Joe Biden will announce the Electoral College vote most probably on January 6, 2017.

    India markets will do whatever they want from November 9, 2016 to November 25, 2016. After that things will become normal.

    Most likely if Democrat Hillary Clinton is announced the winner, Indians markets will surly go up and if Republican Donald Trump is announced the winner markets all over the world will take it negatively.

    So what to trade now?

    This advice is obviously hidden from this website and goes to my course subscribers only as it is part of my course.

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    The simple reason why India VIX is increasing almost every day and Nifty falling is that US elections are coming. According to a recent pre-poll survey Hillary and Trump both are fighting neck to neck. In fact in this recent survey Trump has taken a lead.

    The world knows a little about Hillary and what she might do to US economics which effects the worlds economics including India. She is pro-India. However not much is known about Trump and what he will do after becoming US president is a pure guess.

    For that reason alone and due to slight nervousness India VIX is increasing. It will start dropping fast once the elections are over and results are announced.

    In just 5 days US will go to polls. I am sure within a week we will know the final results or the winner who will go on to crate history and become US President.

    Till then VIX will keep rising.

    So what to trade now? It comes under my course and this advise goes to my course subscribers only. It does not goes to free subscribers. If you want them you can enroll for the conservative option course here.

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    A Very Happy Dhanteras to you all. Hope prosperity prevails among all of us.

    I know most of you will buy Gold Today for prosperity for the entire year to get Maa Laxmi blessings.

    Here is the best time to buy Gold, Diamond or Silver:
    12.05 pm to 1.27 pm.

    To perform Dhanteras Puja:
    5.30 to 8.30 pm.

    Now some important financial information on How To Invest In Gold this is applicable to all so please read:

    1. If you are rich you can buy any jewellery for yourself or your family members today. For you money does not matter so nothing more to say. Or do not buy its your choice.

    2. If you are not so rich and cannot afford more than Rs.30,000.00 I suggest for next three or four years buy Gold or Silver biscuits on which there is NO making charges. Preferably gold as it becomes an asset. Make sure they are Hall-Marked as it a guarantee of purity by government of India. Something like 916 and a triangle (Hall-Mark sign) will be made on it somewhere in a corner. Make sure it is there. The gold seller will tell you where it is else do not buy.

    In reality this is an investment in a SIP mode where you average out the cost of the gold next 3-4 years. They are available from 1 gram to 50 grams. You can buy whatever you afford.

    If gold prices fall next year buy more grams.

    After a few years you will have enough gold to sell and buy a big jewellery for your wife or/and yourself and exchange gold for gold. You will then have to pay only the making charges. You will feel that gold you got for free.
    It will not pinch your pocket.

    3. Gold bonds are also available which you can buy online from your broker. You can ask him and he will tell you how to buy. If your broker does not allow you to buy Gold bonds please fill this form I can help.

    [ninja_form id=10]

    Gold bonds are more safe and it comes with a guaranteed return of 2.5% a year on the purchase price. But if Gold prices decreases the bond price will also decrease. And similarly if Gold prices increases the bond price will also increase plus you also get that 2.5% interest. So you can do that too.

    Please note that buying Gold is different than investing in a Gold bond. Please do not mix them. These are two different things.

    Keep your gold safe. If you have too much gold I suggest open a locker in your bank. There is a charge involved please ask your bank manager for that. If you have less then no need for a locker.

    Hope this article will help you to invest in Gold.

    Here is what I got withing 2 hours from one of my course subscriber when I emailed yesterday that some do not even call me for a single doubt after doing my course:

    Janardhanan 27 Oct 2016 testimonial. Your results may differ.

    Janardhanan 27 Oct 2016 testimonial. Your results may differ.

    Thank You Mr. Janardhanan.

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    Just to let you know at least 20% of my course subscribers DO NOT contact me ever even for one doubt in my course. I think there are two reasons for it:

    1. The course is very easy to understand written in a very simple language. So for experienced traders doubts do not arise at all.

    2. Some people just enroll in the course to give me a tuition fee that’s all because they have learned a lot from my website and made money trading and they want to pay me for that not necessary for my course at all.

    I think 20% is less it could be more. Some do not even ask me a single question before paying for the course and not a single question after paying me.

    If you are one of them you are really special. Thank You from the bottom of my heart. Wishing You A Very Happy and Prosperous Diwali 2016. May God Bless You and Your Family for helping me keep doing my job of educating traders.

    One thing is for sure you do not get anything for free in life. Even if you are my free subscriber you have to read what I have written to learn it. So you are giving it TIME and HARD WORK. Both are not free neither for you nor for me. That is the reason I charge for the course.

    What is the difference between a free subscribers and someone who has done my course? The difference is HUGE. People who have done my course trade with a plan and make profits without tension every month, but those who have still not enrolled just are doing the same that is keep trading in tension and keep losing money.

    You invest more and get more that’s all. You invest less and get less this is how the world works. Knowledge cannot come for free.

    Today is Expiry day for all derivatives Options and Futures expiring on October 2016.

    If you have bought or sold an Option which is In The Money (ITM) you must close them before 3.15 pm or your risk manager or broker will close them at market price by 3.25 pm as a risk manage measure.

    If you are a seller buy it back and if a buyer sell it before 3.15 pm to avoid getting it closed at market price.

    If the Options you bought are Out of the Money by 3.15 pm and there is NIL chance of them getting In The Money then no need to close. You will save on brokerage charges and STT.

    Options expiring next month or after that will not be closed today as their expiry is on a later date so do as you wish with them.

    As far as Futures expiring today is concerned please close them all. It does not matter if you are a buyer or a seller of Future. Keep an eye and as soon as it is in profit just close it.

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    In this article learn the difference between an option time value and intrinsic value in short.

    Before reading this please open my last article on Call Option Put Option Pricing Differences as the Stock Moves up and down. Please open it in a new window. In fact by default it will open in a new window. This is because you may have to refer to it sometimes.

    Now that you have opened it please see that Nifty yesterday was at 8674 and these were the prices of Call Options yesterday:

    NIFTY 27-Oct-16 CE 8,850.00 2.95 (OTM)
    NIFTY 27-Oct-16 CE 8,800.00 7.40 (OTM)
    NIFTY 27-Oct-16 CE 8,750.00 16.00 (OTM)
    NIFTY 27-Oct-16 CE 8,700.00 32.90 (OTM)
    NIFTY 27-Oct-16 CE 8,650.00 59.00 (ATM)
    NIFTY 27-Oct-16 CE 8,600.00 95.75 (ITM)
    NIFTY 27-Oct-16 CE 8,550.00 137.40 (ITM)
    NIFTY 27-Oct-16 CE 8,500.00 182.60 (ITM)
    NIFTY 27-Oct-16 CE 8,450.00 215.10 (ITM)

    As you can see as the strikes move Out of The Money (OTM) the premiums start decreasing and as the strikes moves In The Money (ITM) the premiums starts increasing.

    Now here is where the time value and intrinsic values are doing their job.

    Yesterday was 25-Oct-2016 and the expiry date of Oct 2016 option is on Thursday, 27-Oct-2016 (tomorrow). Since time to expire yesterday was two days the time remaining is very less, you will see that today the premiums of the October month for ATM and OTM options will be much less than what it was yesterday.

    ATM Options of Nifty on 25-Oct-16, time remaining to expire 2 days and few hours:

    ATM Call Option: NIFTY 27-Oct-16 CE 8,650.00 59.00
    ATM Put Option: NIFTY 27-Oct-16 PE 8,650.00 34.65

    ATM Options of Nifty today (26-Oct-16), time remaining to expire 1 day and few hours:

    Nifty currently at 8635 so we take 8650 as At The Money (ATM) Option.

    ATM Call Option: NIFTY 27-Oct-16 CE 8,650.00 28.50
    ATM Put Option: NIFTY 27-Oct-16 PE 8,650.00 36.30

    As you can see both days At The Money Option was at the strike price 8650, but since yesterday Nifty has fallen:

    8674 – 8635 = 39 points – technically it is not much but a lot of ATM long option straddle buyers (traders who buy both Call and Put Option of the same strike same expiry hoping to make money from even a small movement) must be in loss today. Let us check the difference on ATM strikes of both Call and Put:

    Yesterday: 59+34.65 = 93.65
    Today: 28.50 + 36.30 = 64.80

    Loss = 64.80 – 93.65 = -28.85

    Some greedy traders buy 10 or more lots let’s see their loss = -28.85 * 10 * 75 = Rs.-21637.50.

    More than Rs. Twenty One Thousand + brokerages + taxes loss in a single day. That’s Mr. Greed for you. The biggest enemy is inside you but your Ego is not letting it go. Both Ego and Greed are traders biggest enemies. It is more than 50 years now but they still do not recognize them and keep losing money. Please let your greed and ego go if you really love your family.

    Coming back to our topic. What I was trying to say is that as expiry comes near the time value evaporates fast. It evaporates like ice. In the month start it evaporates slowly but in the last week it starts evaporating pretty fast.

    Time value of every option be it Nifty or any stock becomes ZERO on the expiry day 1 minute before the end bell rings.

    In India it is 3.30 pm. In India at around 3.29 pm 100% of time value of all options expiring that day will become ZERO, only intrinsic value will remain.

    Tomorrow is expiry day. You can check values of all OTM (Out of Money) Options of both Call and Put of any stock or underling will be very close to ZERO or will already be ZERO at 3.29 pm. Do check it out. If you are reading this after 27-Oct-2016 you can check option prices at 3.29 pm on the nearest expiry day for options expiring that day.

    Next will be slightly advanced class where we will discuss in-depth details on the Time Value and Intrinsic Value of Options.

    [ninja_form id=10]

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