Corona journey of Nifty

 Corona journey of Nifty  

Exactly before a year, it was a time of Nov end or December beginning in 2019. Most of us were very enthusiastic about the lifetime high of Nifty @ around 12111. The boom in the economy was in the air. All were excited about investments they did in 2015 or 2017 or even before. It was giving great returns. But life is very strange. It gives surprises at a time when no one expects.

Till the beginning of Mar 2020, Corona news was spread in every corner of the world. The market slowly was making new low every day. Many of us smelled some major downfall. Some had liquidity at that time, so they might have invested more in February 2020 or the beginning of March 2020. Nifty fell by 2000 points by then and it was trading at around 10000. No one knew what was the lowest of Nifty due to Corona's fear. But still, some folks were happy that they could invest at a good low. Sometimes “I-don’t-know-you-don’t-know” is better. Because the new low was coming soon then.

Then comes the D day of 23rd March 2020 and the lower circuit of Nifty happened. Trading halted in the exchange. Soon it touched the season’s low of 7511. Everyone was in terrific shock. NEWS channels talked about blood-bath everywhere. Major world indices observed bottoms. Last 4-5 years of returns of stocks washed away. No one has imagined any uptrend of Nifty in near future. It was a major setback for investors. Some even bid the stock market adieu for a lifetime.

 

Now in just eight months, Nifty touched its new high- lifetime high. Today’s high was 13055. Again, most of the stocks are performing far better with flying colors.  Old investment started giving better results.

Look at the graph, how correctly it shows correct-  ✔ sign! It's all corrected.

Once again, it proves fear and greed of the mass human beings drive the market. During the time when Corona just started in India, fear captured in people’s minds. Fear is instant, pervasive, and intense.  They just started selling. However, the reality was not that worst when Nifty touches lows. Then when it touched the lowest point, it has nothing to do but go up. People had developed hope for the betterment after seeing downfall. Now greed had started capturing people’s minds thinking this is very cheap and it has to come up. Greed is slower. This time in just eight months, it resulted in the lifetime high for the Nifty and many stocks.

It is imperative to remember now what Warren Buffett once said that it is wise for investors to be fearful when others are greedy, and greedy when others are fearful!

Check your fear greed meter now. Is it a time to invest more or hold or book profit?

Stocks selection for Short Gamma Option Delta Strategy

The selection of stocks for Gamma position is a crucial part of position creation. For Short Gamma, as its name suggests, it is created by shorting options that mean the Vega is negative. Technically when Implied Volatility is high, short gamma position is created and profit can be booked once Implied volatility decreases. Usually, it depends on many parameters. Let us understand some of the basic parameters.

1.    Stocks in Panic

Typically, during the panic, Implied Volatility (IV) reaches the highest value and as panic passes, it is started cooling down. Therefore, short Gamma position is created when IV just started cooling down and no further uncertainty seems. i.e. almost nearer to highest IV, it is shorted and once it completely cools down, profit can be booked. A trader can enjoy both Vega profit as well as theta profit.

2.    Stocks in very stable mode

Sometimes, some stocks are in idle mode, they have not decided to move in either direction. There will be no sector news around. The quarterly result is not scheduled in near time. Its bonus, split or dividend news is not nearer. Apart from it, no major world economic event happened or VIX movement too is stable, in that case, these stable stocks are extremely suitable for short Gamma. Though its IV seems less or at an average level, it will remain stable. There is no chance of movement in these stocks so no more delta neutral activities required and Delta trader can enjoy theta profit over a while.

3.    Weekends or long weekends or holidays

As Short gamma is the game of theta more than Vega, holidays are the best days to enjoy theta profit. Delta traders can create diversified ( many stocks) short gamma positions just before a day of holiday starts. The thing to remember here is that make sure to create short gamma position in at least 8-10 different sectors. May be delta trader can choose 1 or 2- the most stable, large-cap stocks from each sector.  It requires to manage delta-neutral properly and can run such positions for 3-4 days or till expiry.

4.    Highly impacted world economic news, Government Finance policy change, etc.

These are some uncertainties and no one can plan. But surely can be controlled. If it looks major, the best thing is to get out from the short gamma position and the wisest thing is to enter into long gamma position to enjoy Vega profit. Another strategy is to remain in the same short gamma position but buy enough protection. Even if Gamma position makes a loss, protection can earn you enough profit or at least balance out the loss. For beginners, it's best to get out by taking 4-5 % of Vega loss.

5.    Big Events scheduled like election counting date, Union budget, FED policy

It is common that market movement and hence Implied Volatility increases till an event occurs. Once the result is out, it is going to get settled. So, delta hedgers will grab these opportunities and once the event occurs, they enter into short Gamma position to take maximum benefit of Vega. These types of position can be squared off within some hours or one-two days. They are targeted for Vega profit, not for theta.

 To learn and trade Option Delta Hedging, Please visit  https://BlissQuants.com/Bliss_Coaching

BlissQuants Trading Philosophy

The term “trading” simply means “exchanging one item for another”. We usually understand this to be the exchanging of goods for money or in other words, buying something. It’s the same principle when we talk about trading in the financial market. Trading has two flip sides: One, trading is the most captivating business, if you have the right resources with the knowledge of underlying principles. Another one is trading can be a disaster if you trade with no or limited knowledge.

Now Connect the trade with shares-stocks dots, if the value of buying shares increases, then one make money by selling them again at a higher price. The beauty is that one can even make a profit by simply selling it at a high price and later buying it at a low price; if prices are going down. This is financial trading.

It is a profitable business only if you trade with enough knowledge and the right philosophy. However, sometimes, it defines as one of the most monotonous activity, as it demands a highly disciplined attitude, a great deal of patience and a thorough understanding of money management. No matter what it is in reality, the truth is that it attracts mankind for ages.

I am sure the following prominent quotes will make your trading philosophy more interesting on the globe.

• The stock market is a device for transferring money from the impatient to the patient. - Warren Buffett
• A trend is a trend is a trend.  - Richard Dennis
• The elements of good trading are (1) cutting losses, (2) cutting losses, and (3) cutting losses. - Ed Seykota
• If you can’t take a small loss, sooner or later you will take the mother of all losses. – Ed Seykota
• Money management is a true survival key. - Bill Dunn
• Everything flows. – Heraclitus
• Win or lose, everybody gets what they want out of the market. - Ed Seykota
• Measure what is measurable, and make measurable what is not so. -Galileo Galilei
• The market is never wrong - Jerry Parker
• Life is too dynamic to remain static. - John W. Henry
• If you want a guarantee, buy a toaster. - Clint Eastwood
• If you don’t risk anything, you risk even more. - Erica Jong
• No human investigation can be called real science if it cannot be demonstrated mathematically. - Leonardo da Vinci
• All through time, people have basically acted and reacted the same way in the market as a result of greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis. - Jesse Livermore

Here are some quotes from beginners and experienced traders from BlissQuants.

• Loss is an integral part of stock market business, learn to take it. -Bharatbhai Shah
• You can earn tons of money; provided you work systematically! - Nimisha Bhagat
• The stock market is not a get-rich-quick scheme, have patience! - Rupak Shah
• Path to become wealthy remains the same, no matter what business you do - Learn, Apply and be patient! - Falguni Vahora
• Owning a stock position is like having children, don’t get involved with more than what you can handle. - Harshal Shah
• There is no single theory to get success in the stock market. You can have your own theory provided if you have survived both bullish and bearish market. -Samir Vahora
• The stock market is the easiest way to earn money and loose too; if you don’t pay attention. Read it again! - Swati Upadhyay
• If you work strategically and analyze continually, you can earn money -Heena Maloo