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Reliance Industries Ltd (RIL) and Jio Financial Services Ltd (JFSL) Demerger Explained

by Dilip Shaw Date: July 18, 2023

in Investments, Newsletters

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.

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Do Not Follow Social Media Like YouTube Facebook Twitter Instagram Telegram WhatsApp For Share Trading Tips or Advisory Services

by Dilip Shaw Date: July 15, 2023

in Newsletters

Today I received a testimonial by email which I want to share and also my reply.

My reply is important. I hope it will help you too.

This is the testimonial email.

Here is the text of the email – grammar mistakes have been corrected:
Sir,

Deliberately watching your Emails.
But I am not able to executive what you mention due to lack of funds.

Mostly your analysis may be correct. I believe you are a masterpiece with higher intelligence in the stock market.

And this is my reply.

Here is the text of the email I replied:

Thanks, VijayKumar.

No, I am not a master but my logic is clear.
I just ignore the noise that most newcomers, even seasoned investors and traders believe.

Social media is a hell to seek knowledge in stock trading.
Unfortunately, while I am writing this email to you millions will be reading some tips on social media and following.

Regards,
Dilip

If you are one of those who believe making 2 lakh a day trading options/futures/equities is possible, then please do not follow the trash in social media.

In plain and simple language – making 2 lakh a day trading stocks, equities, options, futures, currencies, forex, cryptocurrency, commodities and/or whatever is available for trading today or will be available tomorrow is SIMPLY NOT POSSIBLE. Anything like this you see on social media is plain FAKE. STAY AWAY from them.

I know one Twitter handle that shows more than 2 lakh profits a day. I followed the handle to find out the truth. Then I found out that they are marketing 3000 software. They claim that they are making this much money because they trade with the help of signals given by this software.

And this handle is a lady. No, I am not making fun of ladies but – it looks like a fake lady pic taken from the Internet and used by this scammer.

The question is simple – if this guy/girl is making 2 lakhs a day what he/she will get by:

1. Showing this much profit on Twitter? This is a security issue as well. Will you post your salary slip on Twitter? It’s the same thing. Now even ED is finding out about these people and sending them Income Tax notices based on the profits shown on social media. Lol.

https://www.livemint.com/money/personal-finance/income-tax-department-cracks-down-on-tax-evading-social-media-influencers-details-here-11688018559860.html

2. Selling 3000 software. She/he is already making 2 lakh a day – this is 200000 / 3000 = 66 times the cost of the software every day. What will make a difference to her/his life by making another 3k a day assuming she/he can sell/get one software client a day?

Please be aware of such share trading scams on social media, especially on YouTube, FaceBook, Twitter, Instagram, Telegram & WhatsApp. Do research yourself, read good trading books or do a genuine course to enhance your trading knowledge. Stay away from tips/advisory services.

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Do You Own HDFC Ltd Shares Then Do This

by Dilip Shaw Date: July 8, 2023

in Investments, Newsletters

The board of HDFC Ltd. and HDFC Bank on Friday, June 30, 2023, approved the merger of HDFC Ltd. into HDFC Bank. The record date has been set as Thursday – July 13, 2023, to make the database of the shareholders of HDFC Ltd. to whom shares or HDFC Bank will be allotted.

Therefore, from Thursday – Jul 13, 2023, no one will not be able to trade HDFC Ltd shares even if they own them. In fact, HDFC Ltd shares will NOT show in anyone’s Demat account on and from Thursday, Jul 13, 2023.

Even though the details are now clear by the time I am writing this post there are a few points that may help you if you read this article. If you are reading it post the merger, this post will still help you in future if the same situation happens. So do read.

If you have not read the declaration by HDFC Limited you can read it here:

https://archives.nseindia.com/corporate/HDFC_03072023123649_SE_Intimation_Effective_RecordDate_30062023.pdf

Here are a few things that you can do if you own HDFC Ltd shares:

The most basic point is this:

Shareholders of HDFC Ltd. will receive 42 shares of HDFC Bank for every 25 shares held of HDFC Ltd. But it will take more than a month for the credit of shares to take place.

So my opinion is simple. Why get into an unnecessary hassle of waiting? Just sell HDFC Ltd Shares before Thursday, Jul 13, 2023, and book the profits – if you are in profit. Or if not, just sell and buy HDFC Bank shares when all the amount is credited to your Demat account in T+1 day.

In the 1 interim day HDFC Bank shares may fall or may rise – does it matter? It will be max 2-3% here or there, that’s it. So instead of the market makers doing the job of giving you the shares, you do it on your own and escape the hassle.

What if you hold HDFC Ltd. F&O contracts?

The existing F&O contracts of expiry months July 2023, August 2023, and September 2023 will expire on Wednesday, July 12, 2023, and shall be physically settled.

Again my advice is the same. Before the expiry date of Wednesday, July 12, 2023 – just close the F&O contract. Do not look at profits or losses. Read the above sentence again – if not closed and if not expired worthless – they will be physically settled.

Not sure if you have gone through the pain of physical settlements of shares, but just to give you an example here it is:

The lot size of HDFC Ltd is 300. The closing price of HDFC Ltd is 2,769.45 (NSE 07-Jul-23).

Now if physically settled you have to keep this amount ready (either to buy its shares or go for a penalty of not being able to deliver the shares. Please note that not being able to deliver the shares is even more painful as you will have to buy from the auction market which is at least 10% above the closing prices):

2,769.45 * 300 = 8,30,835.00 (Eight Lakhs 30 Thousand and 835).

So closing the options or futures trades of HDFC Ltd before Wednesday, July 12, 2023, is more important than selling the shares and buying HDFC Bank shares.

I pray to the almighty that no one gets into a physical settlement of shares. All I can do is teach people via my website – TheOptionCourse.com or via my emails. It is up to you to listen or not.

My financial management advice is simple – KISS – Keep It Simple Stupid.

In fact whoever made this proverb or whatever it is called. Kodos to him/her.

Keep It Simple Stupid (KISS) works not just in financial markets but in life as well. Just live below your means. Keep things simple not flashy and wear simple clothes – not branded extravagance ones, and you will save more than 10% of your salary compared to what you are saving now every month.

I hope you read this post till here and will implement what you learned, to improve your financials and life.

Update on 10-Jul-23:

Someone said in the comments section – “I also read somewhere that if you own less than 25 shares of HDFC, then you won’t get HDFC Bank shares in proportion, so I sold my HDFC shares.”

So I am writing some more updates on this topic.

What will be the average price for allotted shares of HDFC Bank?

The average price of allotted HDFC Bank shares will be calculated as follows: Invested value in HDFC Ltd. / The number of HDFC Bank shares received including fractional shares.

For example, if you had invested in 25 shares of HDFC Ltd. at Rs. 2500, the invested value will be Rs. 62,500.

If you receive 42 shares of HDFC Bank, the average price will be Rs. 1488.09 (62,500 / 42).

The fractional shares are cash settled, and the amount for these will be directly credited to your primary bank account as and when the trustee appointed by the company sells the shares.

When will I receive the amount for fractional entitlement?

If there is any fractional entitlement, the equivalent amount will be directly credited to your primary bank account after the trustee appointed by the company sells the shares. I think this will take 30 days approx.

What if I hold less than 25 shares of HDFC Ltd.?

Even if you hold less than 25 shares of HDFC Ltd., you will receive an allotment of HDFC Bank shares. For example, if you hold 10 shares of HDFC Ltd., your allotment comes to 16.8 shares (42 / 25 = 1.68 x 10 = 16.8). 16 shares will be credited to your demat account. 0.8 will be fractional and the amount for this will be credited to your primary bank account.

Update on 11-Jul-23:

By selling HDFC Ltd. shares and buying HDFC Bank Ltd. shares you will not lose anything. Here is the calculation:

Prices as of 12.57 pm 11-Jul-23:

HDFC Ltd: 2,783 * 25 = 69,575.00
HDFC Bank Ltd: 1670 * 42 = 70,140.00

As you can see the difference is just 70,140.00 – 69,575.00 = 565

So just avoid that unnecessary hassle.

If you have any more questions please ask in the comments section.

Some ideas to write this post are taken from tradingqna of ZERODHA.

Update on 13-Jul-23:

This is not a tip or advisory service, but post-merger of HDFC into HDFC Bank – which has already happened – HDFC Bank will become a financial powerhouse. It already was the largest private-sector bank in terms of customer size, loans and reach.

Now all the customers of HDFC will become customers of HDFC Bank. Once everything will finalize – it takes time – the market capitalisation of HDFC Bank will be Rs 14 lakh crore. This is mammoth.

The full picture is not clear yet but I feel this is a great time to collect some HDFC Bank stocks and sit tight for at least 20% up move.

Disclaimer: This is NOT an advisory service. I have just shared my thoughts in this post. Kindly do thorough research before investing.

Here are a few links that will help you to do some research on HDFC Bank Ltd. company. Decide to invest or not after reading:

Here is the balance sheet of HDFC Bank:
https://www.moneycontrol.com/financials/hdfcbank/balance-sheetVI/hdf01%23hdf01

Profit and Loss:
https://www.moneycontrol.com/financials/hdfcbank/profit-lossVI/HDF01

Interest Earned, Expenditure and EPS :
https://www.moneycontrol.com/financials/hdfcbank/results/yearly/HDF01

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What Will Happen to Nifty 50 After Crossing 19000

by Dilip Shaw Date: July 5, 2023

in Newsletters

From time to time I keep writing emails to my subscribers. A few days back I had written this:

On 20 Jun 2023, I had written this:

19000 will be a huge resistance.

This is just a short email that Nifty will find it difficult to cross the psychological level of 19000.

But once it crosses 19000 it will try to head to 19500 very fast.

With this in mind, you can take your trades.

Hope my emails help.

On 22 Jun 2023, I had written:

19k is a huge resistance.

A few days back I emailed that 19k will act as a huge resistance. You can see how Nifty is struggling to cross that.

In a situation like these non-directional option strategies work great.

If you are an option buyer I suggest keeping your stop loss and profit levels looking at the level of the stock or nifty / bank nifty – not the option value.

For example, if you bought a call option then wait for a 2% move either way for the stock/index to move.

Do not wait further. Either it’s a small profit or a small loss. But at least 2% moves come fast and there is not much theta loss. That way you can be in the game for a long time.

You can do my paid course and learn strategies that work in any market condition.

Let me know if my emails help you.

On 28 Jun 2023, I wrote:

Now anytime soon Nifty will cross 19000.

Once it closes above 19k – bulls will come with huge force and will take it quickly to 19200 – something and then a pullback.

The next few month’s range will be 19000 – 19500.

Trade accordingly but make sure to hedge your trades.

If you are ok with 3% a month and are a busy person who cannot watch the markets continuously you can do my Nifty and Banknifty course.

There will not be any stress as the trades will be fully hedged and you can trade multiple lots when you know that you will never face a huge loss.

On 1 Jul 2023, I wrote:

If you track back my emails you will find that I told you that Nifty will find it difficult to cross 19000 but if it does it will run.

So basically after crossing it was 200 points run the same day.

Retraction will come but major retraction will be only after it crosses 19500.

My emails will help only if you read and take calculated risks.

Enjoy your weekend.

Finally, on 4 Jul 2023, I wrote:

If you read my emails you may remember that I had written a few days back that Nifty will find it difficult to cross 19000 – but if it does then it will surpass 19500 very fast.

On 28-Jun-2023 it closed very near 19000. 18972.10 to be presise. In three trading days (including today) it is now just 100 points from hitting 19500.

A reversal will come after it hits 19500. It’s called psychological reversal.

All the people who bought stocks when nifty was at 18000 or so would be looking to book profits. And when they do nifty will fall.

Then bulls will take over and it will go up again.

This is how stock markets work. If you are into technical analysis then you can only trade intraday using whatever method like 5 mins candles or 30 mins / 1-hour candles.

They will not work for positional trading. For positional trading, it’s better to read the news and guess the future move.

On 05-Jul-23, I wrote:

What Will Happen to Nifty 50 After Crossing 19000?

19000 will act as support and 19500 will act as resistance.

This is for the short term as General Elections are coming. The current government to get votes will start announcing one after the other bonanza for business people and common men. This news will attract further investments in the markets which may take Nifty over 20,000 before the general elections.

Currently Nifty is on a rising trend because DIIs and FIIs have invested a lot recently in the cash market. The cash market means buying equities.

Have you ever thought about why NSE’s (Nifty 50 Index) and BSE’s (SENSEX 30 Index) go up when DIIs and FIIs invest and go down when they sell?

Because they mostly invest in stocks in these indexes only. They will rarely invest in a stock which has not made it to the top Indexes of India.

Why? Because a lot of money is at risk. They do not invest 10k or 20k like us, but they invest 10 lakh to many crores. This is the reason when they buy stocks, the Nifty 50 and Sensex 30 rise and when they sell stocks both of these Index falls.

Lesson from this email: Buy good quality stocks which have made it to the top Index. There are other good Indexes as well, you can invest in the companies that have made it into these top indexes as well.

Trade conservatively (my paid course will help), and invest by doing a lot of research. If you do this you will be making good income from stock markets in the long run.

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PKH Ventures – IPO – Construction and Hospitality Company

by Dilip Shaw Date: June 27, 2023

in Stock Markets

About The Company – PKH Ventures Limited:

It’s a real estate builders & construction company in Mumbai, Maharashtra.

Address: 201, A Wing, Fortune 2000, C-3 Block, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra 400051

Website: PHKVentures.com

PKH Ventures Limited is a construction company mainly engaged in construction and development, hospitality and management services business. The company completed construction of the Delhi Police Headquarters on April 21, including the construction of the 17-storey twin towers. Garuda Construction Co., Ltd., a subsidiary of Garuda Construction, is responsible for the civil engineering business. The Company has several in-house development projects underway including a property development in Amritsar, Punjab. Food park in Jalore, Rajasthan. Cold Storage/Facility in Indore, Madhya Pradesh. Chiplung, Maharashtra has wellness centres and resorts. In addition, the Company has received two Government Project Contracts relating to Hydropower Project and Nagpur Project, which are being implemented through its subsidiary/SPV. The company plans an IPO consisting of approximately 7.4 million OFS shares and 18.3 million new shares, for a total value of Rs 3.79 billion. Leveraging strong hospitality sector expertise

Founded in 2000, the company managed and operated restaurants, lounges, retail stores, concessions, bars, canteens and catering at various airports around the country. The company currently offers a range of mechanical, electrical and plumbing (MEP) services, including annual project maintenance and certain third-party O&M contracts. The Company has owned, manages and managed hotels in Mumbai since 2015, developing its two hotels in Mumbai, Golden Chariot Hotel & Spa, Vasai and Golden Chariot (Mumbai Hotel), a boutique hotel near Mumbai International Airport. We operate. With the knowledge and experience gained during the development of the hotel, the proponent entered the civil engineering business through Garuda Construction, which provides integrated construction services for residential and commercial buildings.

Asset-light and Diversified Business Models:

The company adopts an asset-light model in its civil engineering business, relying primarily on third-party suppliers for equipment and labour. Additionally, these companies generate income from a variety of completely independent activities. For example, a retired subsidiary, Eternal Building Assets, has already received a three-year pension, partly in cash, and will receive an annuity of Rs.780 crore per annum until FY2033. We not only grow our backlog but also undertake high-quality projects with the potential for higher profit margins, as well as well-known projects that lead to increased reputation, market penetration and visibility. Focusing. The Company is currently engaged in the construction of six residential projects for MMR’s third-party developer and promoter groups.

Overview of Financial Data:

FY0-22 Revenue/EBITDA/Adjusted PAT grew at a CAGR of 10%/127%/70%. FY2022 revenue was Rs 1,994 million and EBITDA was Rs 530 million. The EBITDA margin increased significantly from 6.2% in FY2020 to 26.6% in FY22. adjective The PAT was Rs.141 million, Rs.360 crore and Rs.450 crore for FY2020, FY21 and FY22 respectively. Profit margins are healthy with an average RoE/RoCE of 8.5%/4.6% for fiscal 2020/22. The average book value turnover was 1.7x for fiscal 2020/22.

Price Band of the Stock:

It has fixed a price band of Rs 140-148 a share for its initial share sale, which will open for public subscription on June 30. The initial public offering (IPO) will conclude on July 4 2023. The public issue comprises a fresh issue of 1.82 crore equity shares and an Offer for Sale (OFS) of 73.73 lakh shares by its promoter Pravin Kumar Agarwal.

The company through its IPO will fetch Rs 358.85 crore and Rs 379.35 crore at the lower and the upper ends of the price band, respectively. Proceeds from the fresh issue to the tune of up to Rs 124.12 crore will be used for investment in its subsidiary, Halaipani Hydro Project, for the development of a hydropower project. In addition, Rs 80 crore will be utilised for investment in the subsidiary, Garuda Construction, for funding long-term working capital requirements, and Rs 40 crore for pursuing inorganic growth and other strategic initiatives and general corporate purposes

Final View:

Financial figures for fiscal 2022 indicate that the IPO’s PER is 30 times, EV/EBITDA is 24.5 times, and EV/sales is 6.5 times, which is at the upper end of the price range. The company expects to grow in the coming years with several projects underway. The Company has received orders for three government-owned hotel development projects, and its subsidiary, Garuda Construction, is currently constructing six housing projects. PKH is also running several development projects in the future. Given the strong business outlook, strong financial position, hospitality expertise, synergies from the Amar Remedies acquisition and experienced management team.

Disclaimer: This is an educational post. Please do thorough research before investing in this IPO.

Click Here to Open a STOCK BUY AND SELL FREE Demat account to Subscribe to PKH Ventures – IPO.

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How To Build Wealth Using Option Income Trading Strategies

by Dilip Shaw Date: June 26, 2023

in Newsletters, Nifty Options

Since I started the Conservative Options Course in 2015, I have talked with many traders who either lost too much money trading options and wanted to recover their money or made some money now and then but not consistently.

It’s a privilege to be able to talk directly with so many traders all over India. So I know what they want, why they trade and why they lose.

Most traders want consistent income trading options. It is good that most of them knew that it is not possible to double the money in 2-3 months trading options but almost everyone said they heard that someone out there is making 100% or more in every trade.

But when I asked them to name that person, they replied that they have just heard not seen.

The fact is they will never see that person because no one makes a 100% return in every trade. If this is not possible then what is? Generating small but regular income is a possible trading option. Options trading is NOT a get-rich-quick scheme that most of the newcomers to the trading world think.

In this article, I will explain some option income trading strategies. These types of strategies try to generate income regardless of the market condition.

When I was new to the options trading field I thought the best possible way to generate easy money was to buy a call and a put at the same time – one of them will make money. This is simply not true. Though it may work 1 out of 10 times, you do not know which is that time and hold, so you may end up taking a loss even though this was the best time to hold.

If you want to make consistent income trading options you have to practise trading them initially on paper and then in the real market.

Options Income Trading are strategies aimed at generating profits or income over the long term while minimizing price and volatility risk. Unlike directional trading, income options trading does not rely on price fluctuations of the underlying asset to generate returns.

Income strategies are designed to perform best when the price of the underlying asset is flat. Due to the lack of direction, the yield strategy can be profitable in both bear and bull markets.

Some of them are iron butterflies, straddles, strangles, condors etc. They are freely available on Youtube and many websites online. Yet 99% of traders lose money according to a SEBI report.

My paid course, therefore, has all non-directional option income strategies. The difference between my course and freely available strategies is that you cannot contact anyone for help to understand the strategies. But in my course, you get help for one year. Without a mentor, any freely available strategy is not worth trying as anyone – even your neighbour can upload a strategy on YouTube. This is counterproductive and dangerous for their followers. You cannot blame the Youtube video makers for your losses. It was freely available and no one forced you to follow. So you can only blame yourself for the losses.

To be honest, unless a trader is good at discerning price movements and market direction, it is difficult to accurately determine the direction of an underlying asset’s price movements. Even technical analysis cannot predict the market direction 100% of the time. They are correct 50% of the time. This is because the short-term movements of stocks are very random. So discipline is more important that the direction you are taking as per your technical analysis.

Therefore it is advisable to trade direction independent strategies also known as option income strategies. One of the advantages of option income trading strategies is that you don’t have to choose the right direction.

For this reason, option income strategies are also called non-directional or delta-neutral strategies.

Trading for income doesn’t give you much profit, but it often doesn’t give you much loss either. The reason is all the strategies are non-directional and are properly hedged. The hedge ensures that you rarely lose money and even if you do you its not huge as the hedge will make some money while the original trade loses.

The naked traders lose everything however the option income traders only lose a part as some of the losses are offset by the hedge trade.

It’s unfortunate that most of the traders who know that a hedge will save them from huge losses still chose to trade naked in the hope that they will make a lot of money. In reality, vice versa happens. Then they go for revenge trading. Instead, one should keep patience and try to bounce back from bad trading.

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What Will Happen When The Nifty Bank Lot Size Will Reduce From 25 To 15

by Dilip Shaw Date: June 23, 2023

in Nifty Options

The bank nifty lot size will change to 15 from 25 and even the expiry day is changing. Read the details below.

BANKNIFTY Futures and Options expiry day is changing from THURSDAY to FRIDAY.

NSE (National Stock Exchange) has not given any reason for this but I feel they want to finish the weekly FnO contracts on the last working day of the week.

Please note that even though they are known as weekly contracts they start trading much before the start of the week. This means that technically an option expiring next week should start trading from the expiry day of the previous week, but they start trading before that.

So what will happen to the current contracts that are set to expire on Thursday?

Nothing to panic about – they will expire on Thursdays only until Thursday, 6th of July 2023. This will be the LAST Thursday expiry of Banknifty Futures and Options contracts. From next week the Banknifty options and future contracts will expire on Fridays.

The first FRIDAY expiry will be on FRIDAY 14th of July, 2023.

After the market closes on Thursday, 6th of July 2023, all contracts will show the expiry date as Friday of that week not Thursday. This means on Friday, 7th of July 2023, when you log in to your trading account you will see all bank nifty futures and option contacts showing the expiry date as Friday, not Thursday.
There is no other change. So there is nothing to panic.

Now coming to the banknifty lot size. Currently, it is 25, however, the lot size of banknifty futures and options is reducing to 15 from 25 now.

All contracts expiring after July 1, 2023, will have the lot size of 15.

Please note that when the lot size changes margin also changes as per the size of the lot.

See how with the change in the lot size, the margin of banknifty futures and option selling will reduce.

Here is the difference – margin calculation done in June 2023:

Current lot size 25 – Future / Option selling margin required: 1,47,032.00
All contracts expiring after July 1, 2023 – lot size 15 – Future / Option selling margin required: 88,668.00
Margin calculator used: ZERODHA

I think this is done mainly to increase the participation of derivatives traders of banknifty.

On one side the market makers try to reduce the retail traders from entering the derivatives markets, on the other side, NSE does tricks to get more retail traders to trade. Not sure what exactly they want.

Anyway, all I can do is remind you to is to trade safely and carefully. Learn to hedge and respect your stop losses.

What will happen when the Bank Nifty lot size will reduce from 25 to 15:

1. It will bring liquidity to the market.

2. The selling margin will reduce from Rs 1,40,000 to Rs 85,000. This is 40% less. So some of the experienced traders will become sellers, who were buyers till June 2023.

3. There are a lot of traders who still do not know that if you hedge then the margin gets reduced for selling options and trading futures plus it also reduces the losses. These sellers will increase the number of Nifty Bank lots sold, compared to what they were selling now when the lot size is 25.

4. Then you have some I-am-very-smart-trader thinking type of traders who know that hedging reduces the losses plus the margin required but still do not hedge because they think they can never go wrong. These people will sell more than they are selling now as they will have more cash in hand.

5. High liquidity brings down the volatility in the markets. This will decrease India VIX and bring down the option premiums of both Index – Nifty and Bank Nifty. This is good news for my course customers – the success rate of strategy 1 will increase from 70% to 80%.

6. Option buyers will lose less due to decreased lot size but their loss percentage will increase.

7. Risk management will become easier as traders with 3-4 lakh cash will have extra money now to mitigate risk. Though trying in vain to save loss in a losing position results in more losses.

8. I feel a reduction in lot size in Nifty will also follow suit.

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Where Should an Option Buyer Take Profit or Stop Loss

by Dilip Shaw Date: June 22, 2023

in Newsletters, Nifty Options

If you are an option buyer I suggest keeping your stop loss and profit levels looking at the level of the stock or nifty / bank nifty – not the option value.

For example, if you bought a call option then wait for a 2% move either way for the stock/index to move.

Do not wait further. Either it’s a small profit or a small loss. But at least 2% moves come fast and there is not much theta loss. That way you can be in the game for a long time.

You can do my paid course and learn strategies that work in any market condition.

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If You Hold Stocks That Have Fallen Be Patient

by Dilip Shaw Date: June 22, 2023

in Investments, Stock Markets

If you hold stocks that have fallen, be patient.

It usually happens that when the stock markets are low, few people buy stocks, and when they rise, everyone is on a buying spree. It should be the other way around.

If you have bought stocks recently (June 2023), they are likely near their all-time high, as Nifty 50 is also trading near an all-time high. From an all-time high, the stock usually falls. In that case, be patient. It will prove to be rewarding.

If you have invested too much in a single stock and if it has fallen more than 20%, then you can take a partial stop loss.

A partial stop loss is an exit from a few stocks you hold. It could be 25% of the stocks. You can hold the rest of them until they make a profit.

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India VIX at a Very Comfortable Level What it Means

by Dilip Shaw Date: June 16, 2023

in Stock Trading

India VIX at the time of writing this email is 10.65. This is considered a normal market condition. Which means it will be tough to predict where the markets will go.

So what can you do?

1. Research
2. Plan a trade
3. Decide where you will take a stop loss (this depends on how much loss you are willing to take).
4. Decide where you will make a profit. Ideally, your profit should be double your stop loss.
5. Take the trade.
6. Once it’s confirmed set the GTT (Good Till Cancelled) in the system and forget.

GTT is a feature that allows a trader to set a stop loss and profit in the system. So suppose you bought an option at 100. You can set the stop loss at 95 and the profit at 110. The GTT system will automatically trigger your profit or stop loss whichever is hit earlier, and cancel the other GTT order. This is called OCO – One Cancels the Other.

GTT stays in the system for one year or till the order is hit or till the expiry of the options/futures or cancelled by the user – whichever comes earlier.

Suppose 110 is hit – the system will close the stop loss order of 95 GTT automatically. And if 95 is hit, then the system will close the profit target order of 110 GTT automatically.

This broker gives GTT features free of cost. Plus it does not even charge on stock buying and selling.

More articles on India VIX:

Nifty And India VIX Are Inversely Proportional

How India VIX Is Calculated and What to Expect After Seeing High or Low India VIX

Low India VIX Indicates Not Much Move in the Stock Market

India VIX over 17 What It Means

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