Monthly returns for the month of March 2020, trading Index Options – Let’s discuss this,
All my trades are made on Nifty 50 Index Options because I’m not allowed to do any Intra-day trades and stock Options since I work for Finance Company. ( Prior this I used to do only Intra-day trades on stocks)
Trade summary (Mar 1st – Mar 31st)
So, you can see the screenshot from Zerodha Console which says few key things like;
- Realized P/L is Rs. 9850 and
- Net Realized P/L stood at Rs. 10800
And It was quite evident that I Incurred a Charges of close to Rs. 1000.
One thing we all traders should know is the cost we incur to execute a trade irrespective of our profit or loss we gonna make from our trade.
Good part of these charges are we can claim as deductions for taxation purpose.
Which Strike Price & Why?
As far as Strike Price is concerned, if I have lot of time then I select 150-200 points away from Spot Price (Current Nifty 50 Index Value) both above and below to Spot Price. My profit margin ranges somewhere in between 50%-120% with a maximum bearable loss of 40%. ( I trade on weekly options)
If I’m equipped with some other work and still want to trade then I look at 50-100 points away from Spot Price. Here, my profit margin ranges somewhere between 7%-20% with a maximum bearable loss of 10%. ( I trade on weekly options)
So If my Invested value comes down by that % then I’ll book my loss and close my trade.
You might be thinking why different Profit %?
The answer is simple, the closer the strike price to the spot price the less chance of losing and less Profit Margin as well & vice-a-versa.
The one who understands this Makes Money and one who doesn’t pays it.
Because making profit in Markets is all about taking money from the other person. Every Buy order has parallel Sell order and every Profit has parallel Loss for every trade one does.
Strategy I use & How to apply it?
To be frank and precise, I don’t know anything about Charts ( apart from Basic chart) and I primarily rely on Current Conditions and Volatility in the Market. You can say that I trade on News and I feel that this is one of the most riskiest and dumbest ways to trade Markets.
Why the hell I trade on News?
The answer is quite simple – That’s what I know and It works for me!
So, the point I’m trying to make here is ‘ You do what ever you want to do and better try and test all the available strategies out their and then finalize which works best for you and stick to your strengths.’
One bad trade, in fact in this context it’s better to say ‘ one dumb trade ‘ can eat all your profits and even make you sit in loos. So, try to be as discipline as you can and make sure everything goes according to plan.
So this is the Monthly returns for the month of March 2020, lets have a look at April here.
Until then, this is Rushi. Happy Trading!