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Trading updates again: Up on a down day

I’ve finished this week of trading and it’s been quite spectacular.

Reliance Industries, which I bought as a run up towards the AGM on Friday, went bonkers just before the actual meeting. It was at 2728 when Kaushik and I discussed and implemented a hedge strategy to cover us against any disappointments during the actual event. I sold my future (at 2728) and bought a call option at 2700 for Rs. 130 per share – a net total of 19,500 given that a lot is 150 shares. Mukesh Ambani announced no big news during the result – note: no short term big news like a bonus or split – so I walked out of my hall, down to my study and hit the sell button. Traders had got wind of it already it seemed – my call option was down to Rs. 80, so I took a Rs. 50 loss.

You might think – if you’d held the future it would be the same thing. Well, the future quoted at 2650, a drop of 78 from my buy level. One reason for the call staying higher is because an option, when it’s out of the money, always has some value – an intrinsic time value. This is what caused the Rs. 28 difference between the future and the option. (Note that at the end of the day, Reliance closed at 2560, while the option dropped to only Rs. 54. If I’d held to the end, my loss on the future would be Rs. 168 per share, and on the call, only 76 per share.)

Effectively my buy price was Rs. 2421, so there was room for a lot of cheer. A profit of over Rs. 250 per share for a future lot of 150 = around 37,000 as profit. Investment : Rs. 80,000 as the highest margin payable. Time frame was about 1.5 weeks.

I sold RPL, a call I had picked up earlier this week from the momentum. The call option went up from Rs. 10.8 per share on Monday, to Rs. 18.5 when I sold, a profit of Rs. 8 per share. For the lot size of 3360 shares, this is a profit of Rs. 25,000+ – on an investment of 36,500 (10.8×3360).

When the Nifty slid downwards, I decided to cover out my 5400 and 5600 call options. I’d bought the 5400 call for 67 last friday and the 5600 call for 70 (on Thursday) and I sold at 190 and 88 respectively. A reasonable profit considering the Nifty plunged about 50 points further from when I sold. The day was quite profitable, even when the Nifty was about 1% lower than it started.

Holdings in stocks are doing well. IGate, which I picked up on Wednesday, is 10% higher, at 374 (I bought at 338), and Jai Corp is doing the upper circuit again at 1027 (I bought at 887). Praj Industries has dropped to 212 (bought: 228) but I’ve decided to keep that as the reasoning here was fundamental – that ethyl alcohol blending policy was framed and initiated. Another stock, Sintex, is up about 5% at 392 (bought: 370).

I’m left now with almost 55% cash. In the last month, I’ve finally outperformed the index – 22% versus 20% for the index. But the difference is: I have only used about 50% of my capital in September!

Where am I today? I’ve bought protective puts – to cover against any spillover of the last hour carnage to Monday. other than that, no F&O positions. Stocks wise, Kamat Hotels, RIL and Suzlon, apart from the ones above. They still look strong from a momentum perspective (none have hit their trailing 10% stop losses). I still have cash which gives me opportunities on Monday. I’ll post a note when I buy more.

Note: This is my performance, and not stock or portfolio advice.

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