/How Yes Bank helped me make $155 in a day.
yes-bank

How Yes Bank helped me make $155 in a day.

# Option Millionaire # Smart Trading # Income Proof

  1. Can you make money trading?
  2. How much money can I earn?
  3. How every other person is minting money in markets and I loose?
  4. Do traders ever make money?
  5. What are the basics of trading?

These are the common questions which comes in mind of a trader,and I am sure most you will be relating with it, while trying to create wealth or make money in stock markets. After all, what is better in life to make money on certain clicks of button. This blog of mine will take you through answering all these questions, explained in detail with the help of trade.

With my last 11 years of experience, I will share a blog separately which will help beginners, intermediate traders and scholars. Here I am going to explain again about how I made $155 in Yes Bank trade (This is additional profit, I made good money taking delivery of Yes Bank at Rs.29.40) . Although, this money got credited in my account the very next day, but the trade is still open till F&O expiry, which is on 31st Oct’19. The idea of explaining strategies through trade makes it a practical examples for newbies and easy to understand.

Moreover, the series Option Millionaire is a continuous series on which I am going to write. I’ll be committing myself to certain trades, using simple single options or little complex multiple options strategies in a single trade.

To begin with, let me tell you my reasons for using options to trade along with cash buying ( I try to avoid futures, but if opportunity is compelling, I commit myself).

  1. They help in buying protection for portfolio holdings (Called Hedging).
  2. To keep generating profits, with the help of underlying. Till the time I don’t sell my deliveries (I speculate here but with proper risk management controls in place).
  3. Options Provide better cost efficiency than cash buying.
  4. Higher return possibility and multiple trade execution at one go.
  5. Better application of strategies as compare to cash based buying or future trades.

Options can actually give you freedom from your 9-6 job, and you can make real quick money. Trading Discipline and knowledge of Technicals plays a key role. Few more things which can be kept in mind are.

  1. Don’t become a compulsive trader.
  2. Control your inquisitiveness.
  3. No need to try and make million dollar trades.
  4. Slow, steady and thoughtful increases their chances by 80% to make multi millions.

This might spin your head, and question which will be coming to your mind is – why the hell I have not been trading through them if life is so simple with them. My friend, don’t worry you are not late, just requires continuous reading, discipline in your practice

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Things from which you have to stay cautious are, there are huge number of fake tipping companies in market, stay alert is best strategy. As until unless the adviser is not putting his bet on a trade whether it goes right or wrong both adviser and broker have made their money. Who looses in the situation? its you.

Trade which made $155 in a day

Frankly, I didn’t had money to commit to this trade, but the beauty is I could still do it. With the help of holdings which I had of YES Bank 18300 ( @ Rs.29.40) shares, my broker has offered me limits instantly 20 times of my holding. isn’t that great.

But the catch here is if I use that money and there is outflow of money, the broker would have charged me whooping 24% annually. So I need to be cautious while committing to this trade, as there were two challenges I have to come over:

  1. The risk of interest burden on my profits, If at all I make them. Although I am in profit in the trade without any out flow of limit.
  2. to be critical in my trade choice, else in event of loss broker would sell my holdings, that could have been a double whammy. If happens.

To counter first risk, instead of buying any thing in cash, futures or options, which would resulted in cash outflow, I choose to sell the option of yes bank Strike price 25 of October 2019 expiry. this is the trade which I entered on 11th Oct’19 at Rs.0.70, Strike price 25, with selling of 8 lots, i.e; 17600 qty. This trade blocked the margin of Rs.2.75 lacs but there was no outflow from account.

Moreover, when you sell a call or put option, you offer the the buyers of option to take risk as you transfer your risk. So they pay the premium of taking risk and as an option seller I received the premium.

Stop loss

No trades come without inherent risk. Infact, this trade has possibilities of going into unlimited loss. because I am the option seller, where as my counter party who is an option buyer has limited risk and possibility of unlimited profit. But I still choose this trade because of my high conviction.

Along with the conviction, I am maintaining a stoploss of Rs.35 in cash market price of Yes Bank. If price starts coming below 35, I’ll come out of trade.

This is a classical example for a beginner to learn, here, at expiry if stock price of yes bank start going below 25, I will start making losses( Unlimited ) . But if the price stays in any where above Rs.25 per share the premium paid by my counter party who is an option buyer, will go to zero. This is all game of probability. How to calculate the greeks of options, that will make this article very lengthy. i’ll take that up separately.

Current Status

The poor option buyer, in anticipation of making multi fold profit in this trade is already in more than 50% loss as the premium has reduced in my favor to Rs.0.30/- per lot of Strike price Rs.25. By the time I am writing this its 16th of Oct.

My Reasons for this trade

As, I have taken you through the trade, let me explain why I committed here.

  1. I was not expecting any big supply coming in Yes Bank, when I sold option. Even one of the major promoters almost entire stock got liquidated around Rs.35/-. That has been well absorbed at around price levels of Rs.35/- by markets, which I am maintaining as stop loss.
  2. Since there was no outflow from my end, and the premium I received in advance, around $155, which makes 4% of return in a month. If I extrapolate it to a year, it becomes 60% return for the year. all this without having any capital. made this compelling trade.
  3. My Chances of winning this trade were as high as 90%, as half of month has passed, and premium has fallen by more than 60%.
  4. Management commentary of new investor coming.
  5. For option buyer to win yes bank had to loose additional 40% of its price in next 15 working days, that was too much of an ask by short traders.
  6. Capital gains from options are kept in mind, since they are counted as speculative income you are liable to pay tax. here after tax considerations also, I am in good green.

My advise to readers, would be to have proper understanding of options before they start dealing in them.

If you want me come with more option strategies on other stocks too, pls do write back.

Markets have been beautiful place, if you can just manage your emotions, maintain discipline.

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I welcome again you all to this boss free life. Success lies with those in trading who does not aim to hit sixer on each ball. keep taking ones and twos. or in simpler words be the Dravid of Stock market than being Sehwag.

Please share with your friends, colleagues and family, If you liked this article. I’ll keep writing more with the advanced strategies and other stocks analysis. If you have specific queries feel free to write to us on help@finiqi.com.

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Anvesh is committed to make life simpler for investors being SEBI registered IA(Investment Advisor), CIEL(Centre for Investment Education & Learning) Certified Level 1, AMFI Certifed, Capital Market & Derivatives Market Certifed from NISM & pursuing Ph.D. in Cloud Funding. He has a stint of more then 11 years in banking and investment industry at key leadership positions and professionally engaged at Investocafe.com