- Wealth PMS (50L+)
The Short Only Strategy has done miserably this month, and I’ve made a few mistakes of not cutting positions earlier (though I did do well cutting HDIL) and not having specific stops in place.
I’m also “virtually” rolling over this month to Jan. This is an early rollover, and in the process I will add a few fundas.
First, I keep the Nifty position the same – a short strategy must have some kind of short on the Index. Implied volatilities on options are attractively low but the time to expiry is still too high (for Jan), so I might do puts in early Jan.
I’m stopping out of DLF. My mental stop was 320, but I should have maintained a trailing stop – after all, the stock was at 190! If I’d done a 20% trailing loss, like I did with HDIL, it would have saved some grief. As a penance of sorts, I’m getting out of DLF, though I continue to be bearish on the real estate sector. I’ll take this short again later when the stock shows weakness.
I’m cutting position sizes on HDFC and Bharti. HDFC hasn’t gone up or down, but a trailing stop would have helped – at this point it’s got to be around 10% – or 1700. For Bharti, since I got in around 650, I’d keep the SL at 740; very close, but I have only one contract on.
I’m adding Satyam. It’s a small position, just one contract. I’m bearish on IT for the short term, and Satyam is by far the weakest in the pack – it is likely to get impacted by any sort of negative US/Europe news, any issues with customers it will face due to the Maytas fiasco, any regulatory action. Positives for it are a buyback news, and any takeover attempt – have to cut losses quickly on this: Stop loss, 190.
Here it is then. It’s done about 10% since inception, nothing dramatic, and unleveraged. The drawdown from the peak (which was +22%) is now nearly 12% – not good, and I must improve on it.
Disclosure: Don’t take this as advice, please. The strategy is not something I expect anyone else to follow. It is only virtual and I have no positions on the above, other than some system-based positions on the Nifty which are both long and short. I am not responsible for any losses if you do follow this – and you shouldn’t be, please do your own research. (There is enormous risk in shorting)