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.

This is a copy of my email sent to my subscribers on 04-Sep-2023. You can also sign to receive such emails directly in your inbox.

Low India VIX is creating a problem. The markets are in a strange situation neither is it volatile nor India VIX is getting on the higher side.

After so many years traders have seen this prolonged low India VIX for so many days. From April 2023, India VIX is below 15 making a tough call for option buyers as well as sellers.

For option buyers, this is a problem as slow movement kills the premium and for sellers, this reduces the profit and they get discouraged from trading.

If it is not volatile buyers of options will most likely lose money.

If the options premiums are lower, then sellers will make money but it will not be very satisfactory.

Therefore during low India VIX, the volume of trading gets reduced.

But my teachings have always been the FIRST RULE of what Warren Buffet has said:

Never lose money in stock markets.

My addition: Even 1 Rupee profit is better than losing money.

Here are his exact words:

The first rule of an investment is don’t lose money. And the second rule of an investment is don’t forget the first rule.

Here are some more very popular quotes from legendary billionaire investor Warren Buffett:

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

Be fearful when others are greedy, and be greedy when others are fearful.

If you have not lost money in stock markets you are very lucky. But if you have lost then ask yourself – which situation was better:

1. A profit of just Rs.1/- after paying brokerages and taxes, or
2. Your current loss.

Anyone would pick a profit of Rs.1/-, but when you were trading did you ever think of proper risk management so that you do not lose too much?

If you have still not lost too much then good. Still not lost too much is less than 5 lakhs. Anything beyond this is too much. I lost 7 lakhs.

Please do not do revenge trading – you will destroy more of your wealth.

Learn to be both a conservative trader and an investor. It will help.

How long will this continue?

Some major news has to come out which has to shake the markets. Once that happens India VIX will go up. And once India VIX goes up option sellers will join the markets. Once the sellers join the markets the volume will increase.

India VIX is good for option sellers as the likelihood of the profit goes up. But greed does not allow them to sell is a different chapter altogether.

If you are an option seller you can keep selling options. Your return on investments will reduce but the success rate will increase.

Please hedge and sell options as selling options is a huge risk. By hedging you reduce the risk.

You can learn option selling with hedging in my paid course.

In an Initial Public Offering, there are usually two components:

1. Fresh issue of shares from the company
2. OFS – Offer For Sale from its promoters. Through this OFS component, early investors, including the company’s promoters, can sell a portion of their stake to the public.

When promoters hold a significant percentage of a company’s shares, it shows their confidence in the company. Promoters will likely have information about the company’s operations, financials, and industry outlook.

Their decision to hold a significant stake in the company suggests they are optimistic about its growth potential. Conversely, if promoters sell their shares (OFS), or reduce their stake in the company, it may signal that they are losing confidence in its prospects.

Either way, both Fresh issues of shares and Offer For Sale (OFS) are best avoided. The reasons are given below.

Whenever an IPO hits the market we start getting emails/SMS from our brokers or other sources to invest in the IPO. This is the reason why almost all IPOS gets oversubscribed.

However, data suggest not investing in IPOs.

Here is a List of Recently Failed IPOs:

Zomato – Online food delivery company – IPO came in July 2021 – A known brand yet failed
Sona BLW Precision Forgings – Auto parts manufacturer company – IPO came in June 2021
Nazara Technologies – The mobile gaming company – IPO came in March 2021
UTI Asset Management Company – An asset management company – IPO came in October 2020 – A known brand yet failed
PayTM – Digital payments and financial services company – IPO came in November 2021 – A known brand yet failed

And some others:

Reliance Power – A known brand yet failed
RateGain Travel Technologies
Cartrade Tech
Krsnaa Diagnostics
SjS Enterprises
Kalyan Jewellers India – A known brand yet failed
Fino Payments Bank
Aditya Birla Sun Life AMC
Suryoday Small Finance Bank
LIC – A known brand yet failed

No doubt investors of all these IPOs must be ruining their decision to invest.

And do not forget that you cannot invest a huge amount in IPOs. It is somewhere between 10 to 15k. So even if you make 10% on the listing day, what will you do with One Thousand Rupees?

If you want to invest in an IPO then have a long-term view. IPO is just another stock. When you invest in a stock, you do research before investing, right? Similarly, you should do research before investing in any IPO.

Many good company stocks are available relatively cheap compared to their valuations – invest your money there not in a new company. Not much is known about a new company except what we hear from brokers or some business channels. It is better to avoid them altogether.

I hope this article will help you to understand why it’s not good to invest in an IPO.

Do not worry about a stock fall. It happens as investing in stocks comes with risks. But you should do some management to manage risk during a huge fall. Read below to know how to manage risk in stock investments when the markets are falling.

After I started discussing stocks I received some emails from my subscribers who wanted to know what to do with the stocks they have in their portfolios.

It takes time to do research but then I helped them.

If you too are worried about your portfolio of stocks not going up despite Nifty hitting an all-time high in July 2023, then here is what you can do:

Look for small-cap stocks in your portfolio:

If you have not invested too much in small caps and if the loss is small like less than 2000 then I would suggest exit. These kinds of losses are bearable and will not hamper your quality of life.

However, if the loss of all combined small-cap stocks is huge then you can exit partially so that the loss is small and you can wait for the rest of the stocks to appreciate.

Then look for mid-caps:

Mid-caps are not as risky as small caps but anything is defined as risky if you have invested too much in one single stock.

Again the rule of exiting implies if the loss is small but if the loss is big, exit partially. Partially cannot be defined buy ideally 25% of the stocks you can exit. This will reduce the stress of holding too much of a too-bad stock.

Do you own Large Caps?

It’s always less risky to own large caps / blue chip company. With large caps, there is no rule. Just hold them, with time they will be in profit.

This is how you should manage your portfolio with time.

Date of posting this article: Tuesday – 18th of July, 2023.

By the time I am writing this post, the news is already out that the shareholders of Reliance Industries Limited will be entitled to one share of JFS (Jio Financial Services) for each share held in Reliance Industries. The record date is Thursday – 20th of July, 2023.

Why Reliance Industries is going for a demerger and making a separate company called Jio Financial Services Ltd?

According to experts this demerger decision is taken to keep the financial service business distinct from other businesses of Reliance Industries and may attract a different set of investors, strategic partners, lenders and other stakeholders.

What business will Jio Financial Services Ltd (JFSL) do post-demerger?

Post-demerger, they will lend money to consumers (Business-to-Consumer (B2C)) and merchants (Business-to-Business (B2B)), based on proprietary data analytics and eventually branch out to insurance, payments, digital broking and asset management.

Reliance already has a huge database of consumers via Jio and other products. So it will be easy for Jio Financial Services to market its products.

So suppose you have 100 shares of Reliance on the record date then you will get 100 shares of Jio Financial Services in your demat account within a few days. Expected days are anywhere between 30-60 days.

I have already bought some 🙂

Tomorrow on the 19th of Jul, 2023, the 197 shares will be in my Demat account. Even though the Indian stock markets have switched to settlement on the T+1 day – the shares come into the Demat account only after the market closes on the T+1 day. So effectively on T+2 day, the shares can be seen in the Demat account. Earlier it was T+2 days. The change happened earlier this year on Friday, January 27, 2023.

If you do not know – selling the shares which are still not in your Demat account – earlier T+2 days and now T+1 days, can be risky.

Advice: I am not getting into the details of why it is risky to sell shares that have still not come into your Demat account but for now please remember that you should sell the shares only after that (T+) mark is not shown in your Demat account and you can see the Qty of shares clearly in your Demat.

Some illiquid shares may get delayed to show even on the T+2 day. It may also happen due to technical reasons that the shares have not come into your Demat account. My point is why take the risk for that 1k or 2k profit that will not change your life? The reward is not worth the risk.

National Stock Exchange (NSE) will be conducting a special pre-open session for Reliance Industries Ltd (RIL) on Thursday, 20th of July, 2023. Why? Because Jio Financial Services is set to enter the NSE barometer Nifty.

As per the index methodology (a formula that is used to select companies to enter the Nifty), the spun-off entity would be included in indices. Will write this later when the information will be available.

JFS (Jio Financial Services) will be huge on the release day itself as some percentage of RIL’s cash holdings will shift to JFS.
So those who will have clear shares of RELIANCE on the demerger date – 20th of July 2023 will get the same number of shares of JFS within 60 days.

I think JFS will list anything between 200-250 per share.

RIL will for sure run up – so profit here too.

So if you have 100 RIL shares, here is your FREE profit:

100 * 200 = 20,000/- FREE/Additional profit. A conservative estimate. More if it lists at 200+.

Since these are free shares I will keep them for as long as possible as I believe that JFS will become a big company.

Update Thursday, 20 Jul 2023:

Why Reliance Shares Dropped – Explanation in Simple Language:

Since morning I am getting emails on why Reliance Shares Dropped today.

Let me explain in a simple way.

Two brothers own a company ABL Ltd which is listed in the stock exchanges and the current price let’s assume is Rs.100/-.

Now some fight happens between the two and they want to separate ways. The elder brother is an expert in 80% of the products and services sold by the company and the younger brother is good at the rest 20%.

They agreed that they will keep a hold on what they are good at.

So they file for demerger as per company laws. They are also willing to give to shareholders of their company, one share per share held.

Now technically this company will become two different companies and post-demerger the revenues will be shared as per the agreed percentage so that both companies keep functioning. In the above case, it’s 80:20 revenue sharing.

80% of the revenue goes to the elder brother and 20% goes to the younger brother.

But the stock is not divided – it is one + one.

So there has to be some price discovery post-merger for both companies.

To know this today there was a special pre-open price discovery session between 9 AM and 10 AM to discover RIL price ex-Jio Financial. Normal trading in Reliance Industries took place only after 10 am.

A special pre-open price discovery session was introduced on April 2023 to handle corporate actions such as mergers and demergers. A pre-open session helps in minimising volatility and discovering the best price to start normal trading.

Just like other days, the equity markets opened at 9.15 am today. The only difference was Reliance Ind price did not move till 10 am just to discover its actual price to trade.

Pre-open sessions happen every day 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, you need extra time. So that special one-hour session for Reliance was done.

Pre-open price discovery is out of the scope of this post – I will write on some other day but in short, when you place a pre-market buy/sell order, it’s matched with others buy/sell prices. The best price where maximum trades can take place is decided as the open price for all stocks when the market opens to trade at 9.15 am.

So what happened today? The overall market opened as usual at 9.15 AM with one difference – Reliance Ind price stock did not change in the Nifty or anywhere else till 10 AM. Till 10 AM, Reliance Ind quoted at a fixed price – that is at yesterday’s closing price which was Rs.2841.85 a share.

Price discovery of RIL (ex-Jio Financial) happened between 9.45 AM & 9.55 AM today. And then at 10 AM this morning, Reliance Ind (ex-Jio Financial) started trading. F&O contracts on Reliance Industries also started trading at 10 AM.

The price of Jio Financial was taken as the difference between RIL’s closing price yesterday which was Rs.2841.85 and the discovered price of Reliance in the special price discovery session.

While writing this post the price of Reliance is already discovered.

The price of Jio Financial Service is fixed at Rs 261.85 per share. So we can easily calculate the discovered price of Reliance post demerger.

So what was the discovered price post Jio Financial of Reliance? Here is the calculation:

2841.85 (RIL closing price yesterday) – 261.85 (Jio Financial Service price) = 2580.00

2580 was the discovered price of Reliance at 10 am today post demerger. Of course, it will change with time as trading continues.

Reliance is currently trading at 2617.15 which is 7.91% lower than yesterday’s close.

So those who held the shares of RIL yesterday are at a loss, right?

No.

Here is the profit:

Current price of RIL minus the price of RIL as per price discovery at 10 am:
2617.15 – 2580 = 37.15.

So even though RIL is trading almost 8% lower than yesterday’s close those who held the shares yesterday including myself are in more than 1% profit.

Hope all doubts are cleared.

If you still have any doubts please write in the comments section.

Update Friday, 21-Jul-2023:

Jio Financial Services will be maintained in all the NSE and BSE Indices at a constant price of 261.85 per share which was derived on Thursday, July 20, 2023. However, the stock will be dropped from all the NSE and BSE indices at the last traded price which is effective at the opening of the JFSL listing date + 3 business days.

For Instance: If, supposedly, JFSL lists on August 21, 2023, then the stock will compulsorily be deleted from both NSE and BSE on August 24, 2023.

For 3 days they will be included in Nifty 50 and BSE 30 – this will be a problem for Index funds. Not sure how they will manage it but if I get to know I will update this post.

Disclaimer: This is an educational post and not an advisory service. Please do thorough research before buying any stock as stock markets are subject to market risks. Read the full disclaimer here.