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Can billionaire manipulate the market heavily and make profits as if he buy any stock futures heavily due to which its price shoot up then he immediately sell it and make profit ?

Hi @nithin

you have mentioned below statement in a blog
“Probably among the best careers on this planet, but as I said earlier it also requires some inborn skills and it is best to stop if you don’t see it in you.”

I would like to know when should one stop trading…? if a person stays with his initial capital without blowing account after 2 to 3 years(but not earning profits) do he need to stop trading…? any ideal time zone with correlating to capital and profit/losses…?

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  • Selling a put: You have an obligation to buy the security at a predetermined price from the option buyer if they exercise the option.

This predetermined price is the strike price. Your acquisition cost = strike price. You can use this for calculating capital gains. This is straightforward.

The tricky part now is what P&L do you consider for your short option trade. Since the option got exercised, I think you should consider the entire premium received as a profit.

So in your case,

SBIN stock, acquisition price = Rs 500
SBIN PE, short at Rs 20 & buyback at 0 = Rs 20 profit

The current price of SBIN is Rs 430. Unrealized loss of Rs 70 on your holding and Rs 20 realized profit on options. So your current loss (realized + unrealized) = Rs 50 which is correct.

I think this is the right stance to take. I hadn’t really thought about this since physical delivery is such a new concept.

@Nakul how are we handling this on Console P&L?

@TAXIQ.IN @Quicko what do you think?

I have done intraday trading for a decade+ before Zerodha. I stopped once Zerodha started. @Nik continued trading and has now set a hedge fund. He is a phenomenal trader and I have had it on my list of things to do to interview him and ask about his trading style. Will try to get this done soon.

Btw, this is a post from 2013.

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It isn’t that easy to get in and out of large positions. Most large traders lose tons of money just trying to buy and sell. When someone is trying to buy or sell large quantities markets automatically starts moving up or down. In an illiquid mid cap stock, you can sometimes lose 10 to 20% trying to buy just Rs 10 crore worth of stocks. So typically when large traders take positions, they do it slowly and over many days. So it isn’t easy to suddenly just sell and make a profit, even exiting has to happen slowly. But markets are smart, when someone large is exiting a position, markets tend to fall much quicker as well.

Of course in a liquid stock, the impact cost isn’t as much. But you can’t just move the price up of a very liquid stock easily.

But pump and dump scheme is very common in penny stocks. I had written about this here. Do check it out.

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Trading is very addictive and requires you to be brutally honest with yourself to determine the stoploss. Firstly if you aren’t enjoying trading and it is adversely affecting your personal/professional life, you should stop it immediately or reduce your trading size to where outcomes have very little effect. Most people end up continuing trading after a loss just to recover the losses (revenge trading) and that is like being in quicksand, the harder you try the worse the situation becomes.
I think giving yourself 3 years is a fair time. If you aren’t able to consistently make a profit even after 3 years, I think you should stop active trading.

I think the most important aspect of trading is the ability to make peace with worst case outcomes. So knowing that you can potentially blow up all the money in your trading account and only keeping as much money there losing which won’t affect you personally is the optimal way to trade.

Do read through some of these posts that I have linked in this comment.

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@nithin @nik

  1. I know it is a way for fewer people to lose lesser money, but I believed having leverage and trading with securities approximately 2x-5x more than your capital was one of the stock markets’ greatest plus points.
    So Considering how few Indians are actively involved in the capital markets, Don’t you think the new SEBI Rule of 100% margin required for intraday trades, is very discouraging for (aspiring and active) traders? Curious to know your thoughts on this.

  2. Why does the quantity freeze for Nifty/BNF options keep changing/decreasing? For ex.: It was 5000 for Nifty options a few months back and now it is at 1800.

  3. Also - If you do not mind sharing, how much was the capital with which Zerodha was started? And how long did it take to breakeven?

There is still leverage available right? You can trade stock at 5x and all F&O anyways have leverage built into it. What SEBI isn’t allowing is leveraging over and above this. I think before this rule kicked in, it was the wild wild west with brokers giving unlimited amounts of leverage to attract customers. Leverage is like WMD (weapons of mass destruction), a systemic risk that could bring the entire system down.

Let me give you an example of a close shave the industry had. Last year crude on one of the expiry days settled at a negative price. Thankfully for us, SEBI had asked MCX to shut down exchanges by 5.30 pm and not the otherwise 11.30 pm when international markets close. So all intraday positions on that day were closed by 5.30 pm. That day with the 15% margin for crude, the industry had bad debts of over Rs 300 crores when the end of the day positions was settled at a negative price. If the markets were open and brokers were giving additional intraday leverage on Crude oil contracts, that loss could have been Rs 3000 crores. Many brokers would have gone bankrupt and that loss could have been more than the money available with the MCX settlement guarantee fund, which means that it could have taken down MCX clearing corp along with it.

So yeah, it was prudent for SEBI to have preemptively done something about this.

Customers who trade using excessive leverage, eat like ants and shit like elephants. By this what I mean is that since the leverage is high, traders are fearful and exit with small profits. And every once in a while there is a big move against the trader where the losses are quite huge.

I personally think it is a good move for the industry and the trader. By the way, this isn’t really good for the brokerage industry and us as a business in terms of revenue. Leverage leads to more trades and hence higher revenue for the brokerage business. But that said, what is not right for the customer can’t be right for the brokerage business in the long run.

I think exchange has been tweaking with this to reduce the instances of freak trades. Essentially market orders that move the price up and down quickly. Check this

~Rs 1.5 crores. We used Rs 90lks to pay as a deposit to get a membership on the exchange, Rs 20lks to do up our office and set up our websites, and Rs 30lks was really what was left on the table to run the business on day 1. We got super lucky to get here without having to raise any more capital after that. I don’t think it is possible to do this today.

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Thank you @nithin for your response :smiley:

Why @zerodha Not Developing Charting Platform-like trading view.

Because trading view (TV) charting is available as a commoditized product. It is available on Kite as well. Check this article on how to switch between ChartIQ and TV

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If the futures is trading at premium does it signifies to go long and if it’s trading at discount to go short.

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@nithin this is exactly how we handle it in the console P&L. All physically settled ITM options are closed at 0. The entire premium paid or received will show up in the P&L as a loss or profit respectively. Consequently, equity positions are opened at the strike price of the expired option.

In the case of physically settled futures, the futures position is closed at the settlement price of the underlying on the expiry day. This is because there’s an MTM on futures on the expiry day as well. Consequently, equity positions are opened at the settlement price of the stock on the expiry day.

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Since the past few days I have been noticing that my “Available cash” is less than the “Opening balance” even if I did not buy any shares. I am an options trader, Today I sold some options so my AC should have been more than the OB. I pledge my holdings for margin so in no circumstance my cash should be used, Is there some new margin rule that I am missing.
PS This is just during market hours and after market everything tallies perfectly

[quote=“nithin, post:162, topic:122428”]
Rs 1.5 crores. We used Rs 90lks to pay as a deposit to get a membership on the exchange, Rs 20lks to do up our office and set up our websites, and Rs 30lks was really what was left on the table to run the business on day 1. We got super lucky to get here without having to raise any more capital after that. I don’t think it is possible to do this today.

If I am not wrong Zerodha was started as prop trading firm. If I may ask if I want to set up a proprietory trading firm today, how much initial capital should I be looking to do it comfortably.
Will around five cr do the job initially ?

Can you create a ticket https://support.zerodha.com/ and share the ticket number with me. Tough to answer without knowing more details.

No, Zerodha was started as a retail brokerage firm. Yes we did prop trading, but that was not the reason to start Zerodha.

If you want to do prop trading by becoming a member on the exchange, yeah I think atleast Rs 5 crores. Otherwise the exchange deposits and fixed costs (tech, compliance) of being brokerage firm will eat into your capital significantly.

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@TAXIQ.IN , @Quicko

Your opinion also appreciated.

Thanks.

Damn, the response here is crazy and this was so much fun😀 We’ll try to schedule one AMA with the Zerodha soon.

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