I bought a stock and it rose 17% in a day, I bought it based on its chart, never in my dreams that I anticipated such a move, it was wild, obviously, and I sold it after the rise. 99% luck, period.
Had it been an investment based on fundamentals, I would have kept it, or would have waited to see if it can go up more.
I know about stocks falling 15% or more on some days. Are such profits common occurrence in FnO, you people experience regularly, with margin, leverage, pledging and all, common for you FnO guys, or special?
In one budget Nirmala Sitaraman asked some details or introduced some tax on FIIs. I think it was 3 budgets back. Hearing this I bought 1 Lakh worth of Puts. Next Monday market tanked and gave 2L return. I wanted to drop my kids to school and exited the position. If I help it till evening I would have got 4 L and it I held it till Thursday expiry I would have got 16 L .
I was very sad.
It’s easier to keep losses in positions longer than profits. Like if your positions are in loss you will hold longer. But the moment you see some profits you would want to exit.
You take a position. In next 10 mins you see a loss of 10 percent in your positions, you will hold on to it expecting a small rebound telling yourself you will exit at cost. Here as per your SL may be you should have exited. But you won’t. Booking loss is very different.
But if you see 10 percent profit in 10 mins, you will just exit it.
Now this won’t hold good for all the traders. The experienced ones trigger SL without letting their emotions come in. And also trial SL when in green.
Am saying even if he didn’t have to pick his kids, it wouldn’t be easy for him to hold on to his position after he already made 2 lakhs out of 1 lakh. Come on. That’s 200 percent already.
Would he really hold it overnight to make it 16lakhs?
There are ifs and buts but when real money is involved it’s not that easy.
One more example. I had entered Tata Elxsi at 500 in April 2020 or something. It went to 900 in less than 2 months. That’s like 80percent profit in 2 months. I booked it. And then if you know it went to 10k also in less than 2 years. But I can’t say if I held on to be for 2 years I would have made my capital 20 times.
Yes, like KBC. A person wins 50,00,000, and if he answers the next question correctly, he wins 1 CR, else he will lose the 50 L. So yes, it is personal.
So how do you hedge your PF, can you give an example?
If one feels market is overbought, he can buy a put option. Once he gets that dip, he can book it. But you will lose out on the premium.
Sell call option. But here you only get some premium. It’s not really a full hedge.
Sell futures again if you think it’s overbought.
Personally, right now I have sold futures for 50 percent of my portfolio value, when nifty went to 18660. Futures was at 18780. At the same time I also sold 18300put of Dec expiry. For the remaining 50 percent of the value I have sold 19500call. So basically if we get that level in December my equity portfolio becomes 0.
If I get that 18300 level I will square off both positions. If I don’t, it’s fine. I anyways got 120 points on futures. Some day nifty may come down. Even if it doesn’t I have another 50 percent remaining. Same time I can keep selling lower level puts.
Again this is not a complete hedge. I am protected only for a small dip till 18300. Also I will lose out on potential profit if market goes up from here. So hedge always comes with a cost.
Thank you, that is more than I can understand at the moment.
If one’s PF grows with time, he may think of ways to protect it if he feel the fall is coming, bracing for impact, so to speak. And of course even with a simple FD, there are a few caveats, so with FnO, there will be intricacies and nuances.
