This post was written on Thursday, 08-Feb-24. Since the stock markets are changing every second the data written in this post may not match if you are reading it later. I also send my articles to my email subscribers via email. If you also want to get my emails kindly subscribe in the form above this post.

The Indian General Elections 2024 are expected to be held in India between April and May 2024 to elect 543 members of the Lok Sabha. I thought let me write a post on what you can expect from the markets in the next 3-4 months.

1. INDIA VIX will increase till the elections are over. Then start decreasing once the results are announced.

Have a look at the INDIA VIX. This is the graph of INDIA VIX from Jan 24 till date. Can you see it’s slowly rising?

INDIA VIX 08-Feb-24

It may go up to 20-22 or more depending on what is happening in the country. This is one of those few times when INIDA VIX and the markets do not depend on economics or business news. Even the fundamentals of the stocks may not work during the next 3-4 months.

A Note: This post was written on the 17th of Jan 2024. During this time the pre-market session was from 9:00 AM to 9:15 AM. If it changes in the future please refer to the stock exchange website for timings.

Not many investors and traders knew about pre-market sessions and demergers until the Reliance Industries Ltd (RIL) and Jio Financial Services Ltd (JFSL) Demerger. Since Reliance is a popular company it made demerger popular. People started Googling the word demerger and pre-market session. What was the reason? Searching for demerger is obvious but pre-market and price discovery were searched because on Thursday, 20 Jul 2023 there was a special pre-open price discovery session between 9 AM and 10 AM to discover Reliance (RIL) price ex-Jio Financial. Normal trading in Reliance Industries took place only after 10 am.

This was new for Reliance shareholders and those who keep an eye on share market news. The usual time for pre-open sessions is from 9 to 9.15 am to discover the price of the stocks to start trading from 9.15 am. But for demergers and mergers, extra time is required. So that special one-hour session for Reliance was done.

No this was not the first time it happened. But usually when it happens in a small or not much-known company people tend to ignore it. However, Reliance is a top-rated company so it caught the people’s attention. In this article, I will explain in simple language what pre and post-market sessions are and why they are required.

What is a Pre-Market session?

The pre-market session is done for price discovery of all stocks in the secondary market. The secondary market is a financial market where investors buy and sell securities that a company has already issued. For example ITC, Reliance, Wipro etc. This is different from the primary market, where new securities are issued and sold to the public for the first time. The primary market is the IPOs. Once listed the stock is traded in the secondary market.

The secondary market closes every day at a certain time and opens on the next trading day. Now here is a problem. Suppose a company XYZ closed at ₹30 on date 10, then on the 11th it cannot open at ₹30 especially if some news had come while the stock was not traded. So who will decide the opening price of that stock? The answer is the Price-Discovery session. Those 15 minutes of trading can discover the opening prices of the security.

This is a practical example of how the pre-market session works:

In the pre-market session, any trader can log in to their trading account and place a limit order to buy or sell a stock. The system takes note of the price traders are willing to buy and sell a stock. This helps in locating equilibrium prices for the day. The pre-open market session comprises 3 phases viz. the order collection period lasting for 8 minutes, the order matching period lasting for 4 minutes and the buffer session of 3 minutes to ensure a smooth transition to actual trading. The price bands applicable in the pre-market session will be the same as in the normal market.

Breakdown of the Pre-Open Market Session:

1) The Order Collection Period

It’s also known as the order entry session. It starts at 9 am and ends at 9.08 am. As soon as the pre-market session starts the order collection period starts. During this period the trader can place limit orders to buy and sell shares. They can modify or cancel the orders as well. The system will randomly close the session between the 07th minute and 08th minute, no orders can be placed, modified, or cancelled after the closure of this period.

Can a trader create a limit order for options and futures?

No. Price of the futures and options (FnO) is derived from a method (Black-Scholes pricing model) that can function only when the underlying stock or index is being traded. In the pre-market session, stocks are not traded. If someone places an order in FnO it will be rejected.

2) The Order Matching Period

The order matching period starts at 9.08 am and ends at 9.12 am. What happens here? In this session, the order confirmation and the order matching are completed. This is done by the backend software to decide the opening price of a stock. How this is done?

It constitutes of three steps:
1) First – the eligible limit orders are matched with eligible limit orders.
2) Second – the residual eligible limit orders are matched with market orders.
3) Third – market orders are matched with market orders if any.

3) The Buffer Session of 3 minutes

This starts at 9.12 am and ends at 9.15 am where the actual trading begins. As you can guess where the volume of trading is low but still it helps to make a smooth transition to open-to-all live trading.

Does a pre-open session reduce volatility?

Yes, it does help to reduce volatility by helping arrive at the equilibrium price based on demand and supply. For example, if demand (buy orders) is more than supply (sell orders), then the price has to open above the last closing price. The real-time demand and supply decide the best opening price for that stock. This way the opening price of a stock is justified which leads to a reduction of speculative trading and brings down the volatility.

This is the real reason for having a pre-market open session which brings stability in the markets.

When it comes to options trading it is very important that you have a trade plan. Without a trade plan, you are not trading but speculating. You should be very careful when the trade is live. This is possible only when you have a trade plan.

Every step of the journey when the trade is live should be there in your mind like when to take a stop loss and when to take the profit out. However, this simple thing is not followed when the time comes.

Whether you’re experienced or just started to trade, mastering these small but critical aspects can make all the difference:

1. Having a Trading Plan: A well-thought-out trading plan is your roadmap to success. It keeps you on track and helps you avoid impulsive decisions that can lead to losses.For example, I bought an option for ₹2,500/- I will sell it at 10% profit or 10% loss. Then it would be best if you exited at any cost at either of these two prices – ₹2,750/- (profit) or ₹2,250/- (loss). Do not break this plan at any cost. Keep the target stop loss in the system and leave the trade. Ideally, the profit should be double that of the loss. I have given the above example just to help you understand.
2. Following Your Trading Plan: It is one thing to have a plan; it’s another to stick to it. Discipline is the cornerstone of consistent profitability in options trading. Almost 90% of the time if you break the trading plan you will suffer a huge loss.
3. Having a Trading Journal: Your trading journal is your archive of lessons learned. It helps you track your trades, identify patterns, and refine your strategies over time. You can also check your trading journal to know what works for you and what doesn’t.
4. Periodically Reviewing Your Journal: The best traders are their harshest critics. Regularly reviewing your journal allows you to learn from both your successes and mistakes.
5. Monitoring the Greeks: Understanding and tracking the Greeks can help you fine-tune your option positions and manage risk effectively.
   Learn about the Option Greeks here:
   https://www.theoptioncourse.com/Option-Basic-Course-by-DILIP-SHAW.pdf
   HTML version is here:
   https://www.theoptioncourse.com/options-greeks-explained-delta-gamma-theta-vega-rho/
6. Being Aware of Earnings Dates: Earnings reports can cause significant price swings. Being aware of these dates allows you to adjust your positions or avoid unwanted surprises.
7. Setting Price Alerts: Don’t be chained to your trading screen. Set price alerts to stay informed when your pre-defined entry or exit points are reached.

Imagine having the knowledge and discipline to master these fundamentals.

That’s precisely what my option course is designed to help you achieve.

Whether you want to generate a consistent income or enhance your trading skills, this course will empower you with the tools, strategies, and insights you need.

Join us on a journey towards options trading excellence.

Gain the edge that successful traders possess by mastering the small things.

Your future as a confident, disciplined, and profitable options trader starts here.

Health Tips for Full-Time Stock Market Traders

Full-time stock traders need good health to make correct decisions to execute trades. It is not easy to make a decision to trade or not, identify an opportunity, take position size decisions and make a decision to take out profits or take a stop loss.

If the trader is not in good health, they cannot make correct trading decisions. Here are a few tips to keep yourself healthy:

Since I follow some simple techniques to keep myself healthy I request you to follow me as they are easy hacks to keep yourself healthy. Here they are:

I do not drink – do not smoke. Please copy me this from today and forever.

I go for morning walks and exercise – Om vilom and Kapalbhati Pranayama (both take just 30 minutes). I also exercise daily with some very effective and less time-consuming exercises. These are:

• 5 squats (45 seconds)
• 5 push-ups (30 seconds)
• 5 lunges (45 seconds), and
• 30-seconds plank.

All of the above take just 30-40 minutes but are very effective exercises for health.

Again I request you to copy me, please. If you can do more exercise, then great.

I never eat up to the brim – I leave 25% of my stomach empty. This is a Japanese tradition called – hara hachi bu — a reminder to stop eating when their stomachs are 80 per cent full. It is in their tradition – that’s the reason the Japanese median age is 50 years. According to Trafalgar, the average life expectancy in Japan is the highest in the world, at 87.32 years for women and 81.25 years for men. In 2020, the average life expectancy for women was around 87.8 years, and for men, it was over 81.6 years.  If you want to live long copy them.

I play badminton/cricket/table tennis for 1 hour daily to stay fit. This is better than hitting the Gym which is boring. If you can, please copy this too. Or if you can go to the Gym twice a week please do.

I’m not sure if you can copy this – I do not see social media (unless required) for more than 15 minutes a day. Staying away from mobile forces me to chat with my kids, wife or friends (this is real not virtual social life). Try to stay away from social media for a day and you will feel the difference. I hope you copy this too.
And now on finances.

Invest only up to 20% of your salary in risky investments like stock markets. If your take-home salary is more than 1 lakh then if you want you can invest up to 30%.

If you can still save more then save them in government-backed guaranteed return schemes like FDs and debt funds.

Do not invest in Gold and cryptocurrencies. I do not have a Cryptocurrency account. Na rahega baans na bajegi bansuri (means ‘to treat the trouble at the source to avoid a bigger or more difficult mess’.) It means (if there is) no bamboo in the first place, there won’t be any noise of the flute (to deal with).

The above is just 520 words but if followed, it can change your life – health-wise and wealth-wise.

Wishing you the very best in the year 2024 and beyond.

This is a copy of my newsletter sent on 21-Nov-23 to my subscribers. If you want to register to receive my emails you can register in the newsletter form on this page.
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I received a lot of emails in reply to the email sent on 20-Nov-23. The text of that email was:
========================
Hi,

This is just a general question.
Have you planned for your retirement?
How much are you saving and where and what kinds of returns they are making?
Do you invest in NPS (National Pension System)?

Reply and I will try to help you plan your retirement. This will also help me to write a good article on what Indians are doing for retirement – the mistakes they are making and how they can improve.

Thanks,
Dilip
========================

Here are some of the emails I received.

Email 1:

Dear Dilip,

How are you?

I have only a PF (Provident Fund) for my retirement and to secure my family I have taken a Term Insurance Policy.

I am now 53, please let me know if any better can be done at this age, I know I am late but I have my valid reason, but still, I also understand very well that reasons will have no weight, ultimately we have to have money which has to be the ultimate result, this is the reason I took trading even though it’s known to be risky, please guide me.

Thank you
Regards,
Tony

Here is my reply to Toni:

53 is late – only 7 years to go for retirement.
Of course, you can take a private job till at least 65 years of age if health permits – then retire. This will help you to accumulate more money and be ready for retirement.
In the PF are you investing 1.5 Lakh a year (max limit)? If not please do it for the remaining time and try to extend it to 20 years for compounding to take effect. Real compounding will be in the last 5 years (15-20).

A term insurance policy is a good decision. Make sure to have at least 50 lakh term insurance.

You did not mention any health insurance. If you do not have one, then buy a health insurance policy for 5 lakh minimum for your family.
Once you retire take out all the money from your PF account and invest in a good short-term debt fund. These debt funds are safe and return 1% more than FDs.
In our old age, we must ensure that the money we made/got for retirement should be safe. Therefore I have recommended a debt fund and not an equity fund.
Redeem only what you need every month. This will become your pension.
Hope this helps.

Regards,
Dilip
==================================

Email 2:

Dear Dilip,

I have kept aside some money for retirement. Not sure if it is sufficient or not. Our family do not earn much. My wife is a homemaker.

For retirement, I have plans to do three things.

1. Be a part of an NGO that looks after challenged girl children.
2. Travel to at least one state in India every year.
3. Make my home in such a way that my Children and Grandchildren will love to visit at least once a year if they are not staying with me.

I do not have NPS (National Pension System) since I am an NRI.

The above are answers to the specific questions.

Regards,
Sony

My reply to Sony:

Sony as far as I know NRIs earn very well.
In any case, you can start investing whatever you can save.
If you do not know Non-Resident Indians (NRIs) aged 18 to 60 can invest in India’s National Pension Scheme (NPS) by adhering to KYC norms. The NRIs can make contributions to NPS from their NRO/NRE account.
If you do not have an NRO / NRE account kindly open one and start investing in NPS as soon as possible.

Regards,
Dilip

Note on NRO (Non-Resident Ordinary)/ NRE (Non-Resident (External)) Accounts

This table will help you to know the difference in these accounts:

Email 3:

Dear Sir,

I retired already a couple of years back. Planning was done while I was in service.

Regards,
Gautam

My reply to Gautam:

Thats good.
Do you get a pension?

Regards,
Dilip

I have still not received a reply from him but I guess since he was in some service he must be getting a pension. Or his company must have paid him a gratuity.

What is gratuity? Gratuity is an amount paid by an employer to its employees for rendering their services for equal to or more than 5 years. Gratuity is paid to an employee as part of his/her salary and is considered to be a benefit plan which is designed to help the employee during his/her retirement.

Please note that a Gratuity is paid 100% by the employer to the employee. There is no contribution required from the employee during the term of the service.

If you are also in service and your company has a gratuity program then my advice is that do not avail Voluntary Retirement Scheme (VRS) if you will miss out on gratuity. Some people retire early to get a higher-paying job. But you must do calculations of what you will miss if you retire early before deciding to retire.

===================================

Email 4:

Hi Dilip ji

Not yet…

Sachin Aggarwal

This email surprised me as Mr. Sachin has still not planned for retirement. Retirement and investment planning should be started from the day you get your first salary. The earlier you invest the greater will be returns. If you plan well early for retirement you can retire before the age of retirement.

So I replied to him, “What’s your age and why you have not started to plan for retirement?”

Regards,
Dilip

Awaiting his reply.

=============================

Email 5:

Sir, so far I have not planned for retirement.

Saving in FD, SIP.

I am 25 and want to retire by 45, working in a PSU bank as a clerk.

No investment in NPS (National Pension System) so far.

Thanks and regards,

Anjana

Here is my reply to Anjana:

>>  Saving in FD, SIP

Continue and also invest in PPF. It can be opened in any SBI Branch.

Regards,
Dilip

=============================

Email 6:

Hi Dilip,

I have been actively concerned and investing for retirement from 2016 onwards. The plan was to at least build a 30X corpus of inflation-adjusted current expenses. For that, investing in index mutual funds (Nifty 50, Next 50, Midcap and Small Cap index) 1X of current expense in equity: debt ratio of 80:20 plus EPF (Employees’ Provident Fund).

Still, I am doubtful of achieving the goal. So the plan is to increase the investment by 10% every year.

Start a PPF (Public Provident Fund Account) as well.

Jijesh Janardhanan

Here is my reply to Jijesh:

Continue the other investments – do not break the SIP if the market falls.

Regards,
Dilip

His reply:

Yes PPF is also there, since the interest rates are low, I have stopped in between. Now whenever doing equity: debt rebalancing, will add to PPF (max 1.5L / year).

SIP is continuing.

Jijesh Janardhanan

=================================

I have given you a lot of advice in this post on how you should plan for retirement and why it is important to start as early as possible for compounding to take effect so that you can retire peacefully.

Hope you will start planning for your retirement soon.

Current Nifty price:
19108.20

NSE 31-Oct-23

Source: https://money.rediff.com/index.html

Expiry date: 30-Nov-23

For the Call option, I am adding 1000 points to 19100. 19100 + 1000 = 20100

Here is the price of 20100 CE – LTP is 13.20:

20100 CE NSE 30-Nov-23

For the Put option, I am subtracting 1000 points from 19100. 19100 – 1000 = 18100

Here is the price of 18100 PE – LTP is 27.40:

18100 PE NSE 30-Nov-23

Do not panic when the stock markets are falling. Keep patience and wait for the markets to rebound.

From 20,192.35 on 15-Sep-23 to 18,877.20 on 26-Oct-23. Looks like a big fall right? Yes, it looks, but in percentage terms, it is just a 6.51 per cent fall.

NSE 26-Oct-23

In my opinion, it is not something to fear about. But in reality, see what is happening in the markets. Nifty VIX (a.k.a India VIX) has risen 9.70% today:

India VIX 26-Oct-23

If you do not know India VIX is the measurement of panic in the markets. It is inversely proportional to stock markets – not just in India but across the world.

You can read more about India VIX here:
https://www.theoptioncourse.com/nifty-and-india-vix-are-inversely-proportional/

Strangely, HNIs who have invested a lot in the markets do not panic in the fall – they make decisions based on fundamentals, not percentage fall. They will never invest in a company that looks weak in fundamentals. They see fall as an opportunity to accumulate more stocks. But they will add more only in fundamentally strong stocks. They leave the not-so-fundamentally strong stocks. They do not add more stocks.

They have the patience to hold.
My advice: Copy them. Do not sell your stocks in a panic.

This is not the first time stock markets have fallen more than 6 per cent. Every time it falls, it rebounds. So wait for that re-bounce.

Other things that you can do.

If you are an HNI you can do covered calls and make a monthly income during falls. There is a good way to do covered calls however since it is part of my paid course  I may not be able to explain here.

Or you can create a married put. You can read about married-put here:
https://www.theoptioncourse.com/married-put-explained/

Married put is a put option bought to protect losses from further fall of the stock. If the stock falls the put will make money.

Hedging is a beautiful tool to save huge losses in options, futures or even equities. Though my course is limited to Nifty and Bank Nifty options and futures hedging – once you learn hedging you will be able to trade anywhere like commodities, Nifty Finance, BSE Options and Futures, USD-INR pair trading etc. and create a hedge.

You can check my course fee here.