this is an excellent return (seeing as it’s unleveraged). Although, You’d get a more realistic number if you discounted 2020?
What I actually meant was - that such a move is enough to trip safe limits of many accounts now.
On June 22, 2017, the price of ethereum crashed as low as 10 cents from around $319 in a matter of seconds on the Global Digital Asset Exchange (GDAX).
Citigroup took responsibility for the flash crash that took place on May 2, 2022, which caused some European stocks abruptly turn lower. Apparently, one of traders made an error when inputting a transaction (hence the name “the fat finger crash”), but soon after Citi identified the error and corrected it.
The floor of the New York Stock Exchange (NYSE) stopped trading for three hours and 38 minutes on July 8, 2015. Trading was quickly shifted to the 11 other exchanges, including the NASDAQ, BATS, and many “dark pools.” The NYSE lost 40% of trading volume as a result.
The cause of the shutdown is still unknown. It could have been linked to the closure of the Wall Street Journal’s homepage, or the grounding of United Airlines flights. Both occurred on the same day.
The yield on the 10-year Treasury note plunged from 2.02% to 1.86% within a few minutes on Oct. 15, 2014.8 It quickly rebounded. The plunge made it seem like a sudden surge in demand for these notes. Bond yields fall when prices rise. It was the biggest one-day decline since 2009.9 Volume was double the norm.
Many blame the algorithm-based programs that are responsible for most of the trading in the U.S. Treasury, with estimates of 50% in cash securities and 60% to 70% in futures. An increase in electronic trading has reduced the bank’s involvement and over-the-phone orders. The combination of automation and high frequency trading can speed up any reaction in the market.
There was also limited liquidity in bonds available to sell. The market depth was unexpectedly low, even though the volume in the 10-year note was up.
The Dow fell 1,000 points within 10 minutes on May 6, 2010. It was the biggest point drop on record, costing $1 trillion in equity.
A London suburbanite, Navinder Sarao, was sitting in his home using a personal computer at the time. Investigators found five years later, in 2015, that Sarao had made and quickly canceled hundreds of “E-mini S&P” futures contracts. He engaged in an illegal tactic known as “spoofing.”12 Waddell & Reed destroyed liquidity in the futures contracts as a result by dumping $4.1 billion worth of contracts.
The CME Group warned Sarao and his broker, MF Global, that his trades were supposed to be executed in good faith.
The NASDAQ is famous for flash crashes. It closed from 12:14 p.m. to 3:25 p.m. EDT on Aug. 22, 2013. One of the computer servers at the NYSE couldn’t communicate with a NASDAQ server that fed it stock price data. Despite several attempts, the problem couldn’t be resolved, and the stressed server at NASDAQ went down.
NASDAQ computer errors also caused $500 million in losses for traders when the Facebook (now Meta) initial public stock offering was launched. The IPO was delayed for 30 minutes on May 18, 2012. Traders could not place, change, or cancel orders. A record 565 million shares were traded when the glitch was corrected.
yes, I’m aware of what flash crashes are
Just sharing information on the forum
I don’t think the exchange will let such things happen (would bankrupt most brokers)- only a guess. So, I wouldn’t worry about any >3sigma events.
(I only take fully hedged positions but I’m quiet a paranoid person)
My thoughts are similar. Nevertheless I am still not going to load far-otm naked puts to the brim. Doing that will keep me out of my comfort zone. Yes, I am paranoid too
No. I’m a short to medium term investor. My holding period is few weeks to few months.
This also means you have to keep 17L in cash/ cash equivalent for it to be a cash secured put. Now while the returns on the margin blocked can seem good, you need to consider the return on the margin + idle cash. (We have had a similar discussion on the scalability of cc, and familiar with your xirr working). I am sure you must not be selling multiple 100 qty CSPs with different expiration using the same 17L cash kept aside to secure it.
For me, it just doesn’t work. To sell 10 lots of nifty puts at 17k strike, one needs to keep aside 85L idle (or any liquid instrument) to cover it.
And on the subsequent arguments on flash crashes and other surprises, I have just internalized this:
“Risk is what’s left over when you think you’ve thought of everything .”
But if it works for you, that’s something phenomenal. 40% cagr with a meaningful capital over 5yrs is unheard of - so congratulations for that!
It’s coming out of debt funds. So am utilising the same funds twice. Again using these funds for selling deep OTMs on two expiries per week.
Already mentioned a lot of adjustment I do in other posts. So yeah.
I know some day what am doing won’t work.
41% a year on average, for over 5 years is fantastic.
I wonder, how much could it have been if you were less conservative.
I can go either ways. So no regrets.
Curious, has this approach beat the buy and hold? (Assuming you don’t participate in f&o)
I have tried initially with the buy and hold concept. It never worked. I have so many examples where the price went to the highest and within one or two years it fell back. Classic example is ITC. I realised that buy and hold is never a good strategy. In fact if the stock is rightly identified, and you have capital, you should do “buy and accumulate”. Just buying and holding will never work. I had HUL with an average cost of 650. The price is now 2,600 (approx) but the number of shares was only 125. What is the use?
Once the stock is identified and when it peaks (according to me) will start selling in small quantities and when it falls (no hurry as to when it falls), will buy back the same. Will use the averaging both ways. The advantage is my average cost of the stock falls and once my average cost is at a level which I am comfortable, I will then start to accumulate keeping in mind my average cost… This ensure that my portfolio will be in green.
To do this, you need to have quantity, hence buying is as important.
The exception is with Nifty 50 ETF. This is only a buy and accumulate and I do not sell. When I first invested in this ETF, the AUM of SBI was around 98,000 crore (approx). Now when I checked it is 154,850. This means since I started, the AUM increased by approx 56,000 Cr. This again means, that there is a constant fund inflow to buy the underlying stocks. This is just one ETF, if all Nifty 50 ETFs are accumulated not sure, how much will be the AUM of all AMCs for nifty 50. Another factor which impresed me is Net Income as a percentage of AUM is 5.79% of this fundsfrom the dividends etc. Hence it is only buy and accumulate.
Discl: I could be totally wrong in the above, but this meets my overall strategy. I invest only surplus over and above FDs.
The reason this confounds me is this:
The way nifty 50 works is, as the price of an asset goes up, more share are bought (allocation increases). Non performing or assets that go down as sold (moved out of nifty 50). This is why it works much better than 90% of asset managers.
Now, selling when when prices are high and buying when they are low is pretty much the opposite of the nifty 50 philosophy (so to speak).
This only means that averaging shouldn’t really work.
Nifty is only a way of buying & selling shares depending on their performance. So if it works for nifty why wouldn’t it work for all the others buying and selling individual stocks?
What am I missing here?
(I understand that individuals can choose to sit out (have lower allocation & convert to cash)but this too should average out over larger time frames)
I was talking about individual stock not Nifty 50 ETF. I dont sell Nifty 50, I hold and accumulate.
This is beyond me. I do not understand. Buy low and sell high is the way to make profit.
i was too…
Statistically, stocks that go up tend to go higher in the long run and vice versa.
Agree. It works more reliably when your portfolio is 10+ growth stocks.
Do you have any rough estimate on the split of these returns from
c)Futures and Options
Not at all. Because my derivatives positions are based on the portfolio holdings. Some times I may have loss in Fno and gain in equity. And sometimes the other way round.
For example. I went long on HUL in futures at 2300 and kept selling calls of 2500 from April 2020. During Russia war in Feb 2021, it came down to 1950. I closed futures and bought it in cash. Selling 2500 calls continued. After it crossed 2500 I switched 2500call to sell futures. And sell 2500 put. (ITM options are not liquid in stock. Net effect of 2500call or short futures and short 2500put is same.) past 4 to 5 months am doing this. So in my equity portfolio HUL is showing profit of 2600-1950= 750 per share. But after 2500 I have booked loss in futures to the extend of 2600-2500=100. Yes. I have covered this loss already by selling calls and puts. I will be just rolling over month after month because the future premium is giving me more than risk free return. What I get out of selling puts against this future is bonus. I prefer booking loss in FNO to convert the gains to LTCG.
Today I rolled it over to Feb.
If you see I have got 14 points. It’s more than risk free return.
This is just one example. It has happened with other stocks and even nifty.
blinded by this Why would you not use dark mode