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Concepts & Tutorials

Premium Video: Do Not Hurry Exits, Says AP on Trading Options

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We’ve had options trading from AP in the trading room at Slack for over one month now.The idea of what AP is doing, is to educate us on how option trades can be immensely profitable and he is excellent at using charts to analyze pure long option strategies. These are inherently attractive, because:

• Long options cannot lose more than the premium paid – but have unlimited gain potential.
• The trading strategy AP uses has 5 maximum concurrent calls, each of which he employs only Rs. 15,000 to purchase options.
• Two lots for stock options, and four lots for index options. (For example 100 Nifty, 250 Infy etc.)
• AP uses trading charts to build trade entries and exits – he uses not just the charts of the underlying stocks, but also that of the options themselves, on an intraday feed; this provides a much better handle of stop losses and exit targets.
• Each trade has intermediate booking targets so he pyramids OUT of the position, which provides for better money management where options are severely volatile.
Do remember this is not investment advice – it’s purely to help learn the concepts. Indeed, many participants already use their own methods to change entry or exit parameters.

The First Month: Rs. 58,000 Profit

In August there were 37 trades in options by AP. (Okay, one was on July 15th, but started out on the channel). The posts are all in #ap-option-action and in #options on our Slack channel athttp://capitalmindpremium.slack.com .
• There were 22 winners and 13 losing trades (63% win ratio)
• Losing trades lost Rs. 5100 per trade while the average winner was Rs. 5700.
• Rs. 75,000 that was started ended up at Rs. 133,138 at the end of the month

Eq Curve

If you look at the way the curve panned out in the month the first half was immensely profitable though the latter half – which brought about massive volatility – hurt. But that’s the nature of the game – options, especially long options, are risky and curves change constantly.

Note: this is not indicative of course. We may have much better or worse months, but it’s important to measure where we stand.

The Video: Don’t Exit Early!

We did a 10 minute video with AP to discuss the learnings and one of the key things he mentioned were the failings in two trades – in both cases, the trade was correct, and the feeling of wanting to just about get the entry price drove him to exit early, and why that was potentially a bad thing.
(Note: you’re going to need hourly data to work closer with options, especially long options, as the movements are fast and furious).
Do give us feedback on slack or reply to this mail!
Options with AP is a special product exclusive to Capital Mind Premium members for two more months (till October end). Post that date this will be a separate product – but please be assured we’ll have a great deal for you! If you are a trial subscriber, do subscribe now to get access to Options with AP in our Slack rooms.
(For Trial Subscribers: Join us at https://www.capitalmind.in/get-capital-mind-premium/ with our annual package!)

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Disclaimer

Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.
Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.