Month: December 2021

Q2Y1 Returns

Q2Y1: Mean Reversion Trading Has Raised Hopes

It is time for introspection. This is a business and will be reported as such on my ITR as well. I am expected to make advance tax payments also every quarter. Thus, 13 weeks is a logical time to take a pause and look back at what I have done.

The above P&L results came during the following candles of Nifty:

The correlation is crystal clear. The returns were always good but when market was giving big range candles, I was getting close to 100% annualized returns. All thanks to mean reversion trading. This style of trading is not new to me. It was something which I did for almost 2 years before it started backfiring.  The style is extremely risky but here are some key things which I think are noteworthy:

  1. This works best between Tuesday and Thursday since hedge strike is cheap. It is better not to attempt such trades during rest of the trades
  2. Selection of mean reversion strike is on basis of DTE in my indigenous strike calculator
  3. Begin mean reversion only when setup is right else funds get depleted fast
  4. In continuation with above, paying attention to my custom indicators is the only way to know that it is ok to start adding positions
  5. Between the 3 timeframes that I use, the middle timeframe should be used for above (point # 2)
  6. The shortest timeframe always looks tempting but it is better to view it only as a pointer and take trade by looking at changes in option’s LTP
  7. If mean reversion trades are not being closed the same day, be mindful of the booked losses the previous day instead of looking at Zerodha’s current P&L on positions page
  8. If funds fall short, roll-in the strike such that overall premium is higher than earlier premium

Many of above notes came from crash of December 20th when I witnessed a drawdown beyond imagination. I hope that I don’t end up doing that again. Otherwise, my hopes are on cloud 9 right now. The CAGR for past quarter stands at 109% and overall CAGR till date is above 50%. This is phenomenal and beyond what I was aiming for.  

So,

Selling strangles + Mean Reversion Interventions = Happiness For Life?

Time will tell. But let me stick to it until the next quarter. If mean reversion interventions are cool, I may extend to trading banknifty also.

As I am feeling confident, I am raising my target return as 20% for the next quarter.

HAPPY NEW YEAR!!

Dec21W4

Dec21-W5: Final hurdles before uptrend? (Dec 27 to Dec 31)

What I said last week was ‘I don’t see why the downtrend should even pause.’ I was right but I did not expect to be so right so fast. A major gap-down opening on Monday continued by freefall meant that all objectives of the week were achieved on day 1 itself.  

Now the following is my analysis for coming week based on what I am looking at (You may want to open image in new tab or save it for better view)

This week is expected to swing both ways. As the market is rising back with a vengeance after the previous 2-3 weeks of downtrend, it will be difficult for bears to stop its momentum. Nonetheless, there are some important trendlines and price levels which can pose resistance. Overall, this week is basically not suitable for trading.  

Scenarios for the week ahead (highlighted as yellow box with red and green lines dissecting scenarios)…

ScenarioAnticipated Price Action
ConsolidationBetween 17500 and 16475
DowntrendIf breach below 16475; to drop somewhere till 15800
UptrendIf breach above 17500; to rise somewhere till 18300

Year 2021 has come to an end for all. It feels quite important, even for Nifty as it will start a new candle on yearly timeframe DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for

dec21w3 return

Dec21-W3: Am I overdoing the mean reversion stuff

Another good week while the market made its way to south. The main reason for goodness was mean reversion trades. If I remember correctly, I was not very comfortable in executing those as the market continued to fall even after executing the trades. I have started giving in to greed while executing these mean reversion stuff.  

So I traversed through the following candles during the week:

Here are the results  

Net Profit (after deducting brokerage)Capital deployed (approx)Week’s ROIAnnualized ROI for this weekTotal no. of weeks traded till todayAnnualized  return till today
Rs. 6870.59Rs. 1058414.71%67.83%2756.21%

The following is breakdown of week’s positions:

ROI Nifty

Dec21-W2: Swinging with the swings

Nothing much spectacular about the week even though the results are cool. I rate an annualized ROI for week above 52% as a very awesome week. Anything above 35% is good anyway. Therefore, I must understand how this happened. I think it was due to high VIX. Even though I incurred loss on 17500 CE call option and had to manage it similar to how I handled situation last week, overall profit for the week turned out to be good. I need to make the most of all these high VIX days. I don’t think I would get such good returns when VIX is low.

So I traversed through the following candles during the week:

Here are the results  

Net Profit (after deducting brokerage)Capital deployed (approx)Week’s ROIAnnualized ROI for this weekTotal no. of weeks traded till todayAnnualized  return till today
Rs. 11809.08Rs. 1046605.611.13%79.22%2655.63%

The following is breakdown of week’s positions:

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.

Nifty Dec21W4

Dec21-W4: Downtrend to trend? (Dec 20 to Dec 24)

What I said last week wasI usually use this combination to say that Nifty’s mean reversion is done and the previous trend shall resume now.’ I was right but I did not expect to be so right so fast. I was actually expecting Nifty to rise up a bit more before falling down.  

Now the following is my analysis for coming week based on what I am looking at (You may want to open image in new tab or save it for better view)

Since Nifty did not waste much time in resuming its downtrend, I don’t see why the downtrend should even pause. The momentum should only increase and eventually we may see Nifty around 16000 level but perhaps not this week.

Scenarios for the week ahead (highlighted as yellow box with red and green lines dissecting scenarios)…

ScenarioAnticipated Price Action
ConsolidationBetween 17300 and 16650
DowntrendIf breach below 16650; to drop somewhere till 16150
UptrendIf breach above 17300; to rise somewhere till 17800

UK and US citizens are struggling with Omicron while their economies are struggling with inflation. What a struggle. No wonder, Nifty too is struggling.

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.

Nifty_DecW3

Dec21-W3: Is Nifty overbought? (Dec13 to Dec17)

What I said last week wasKnowing the target is anyone’ guess for the time being, since Nifty may make a double bottom near 16800ish and strive for a reversal’. I was almost right as the reversal happened near 16900 level.

Now the following is my analysis for coming week based on what I am looking at (You may want to open image in new tab or save it for better view)

Let me write facts. Nifty is exactly at 21 EMA and 13-day stochastic is overbought. I usually use this combination to say that Nifty’s mean reversion is done and the previous trend shall resume now. In this case, the downtrend should continue. However, there is a probability for Nifty to create a fake uptrend before it does so. Therefore, it all depends on this triangle type pattern we are in currently. If we break and sustain above red line, we go up else go down. Let’s see   

Scenarios for the week ahead (highlighted as yellow box with red and green lines dissecting scenarios)…

ScenarioAnticipated Price Action
ConsolidationBetween 17850 and 16950
DowntrendIf breach below 16950; to drop somewhere till 16650
UptrendIf breach above 17850; to rise somewhere till 18225

Omnicron scare is also almost at the middle. Let’s hope the cases go down but that does not necessarily mean market will go up, though the vice versa is a different story.

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.

Dec21-W1

Dec21-W1: I got lucky & somehow was saved from a huge loss

In last week’s blog which referred to trades taken 2 weeks back, I wrote “shouldn’t I take such chances for the inevitable losses when they come?”

I traded in such a way past week that I brought the inevitable to myself. Luckily, the market went up and the rest of days were the usual.

The highlight of week of trade on 16500PE where I tried it all but couldn’t save it from booking it at a lot of nearly Rs. 50,000. I did not follow rules of mean reversion trading and started selling early. The principles of averaging too were not applied properly. I basically did all the classic mistakes which I used to make before starting wannabebull. Old habits just simply don’t die, do they?

Coupled with feelings of optimism, courage and perhaps some intellect, I sold ATM and ITM options on a couple of occasions. I sold ITM options on November 29 which gave immediate results. After breaking even overall (or that’s what I thought at that time), I closed that ITM trade even though my target was away on higher timeframe. The adrenaline rush was too much to handle. Wannabebull is not supposed to be about all that. And thus, I closed it all.

The rest of week was the usual. Due to high VIX, profits remained above average.

So I traversed through the following candles during the week:

Here are the results  

Net Profit (after deducting brokerage)Capital deployed (approx)Week’s ROIAnnualized ROI for this weekTotal no. of weeks traded till todayAnnualized  return till today
Rs. 23947.61Rs. 10226582.34%233.22%2554.45%

The following is breakdown of week’s positions:

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.

Nifty_DecW2

Dec21-W2: Nifty to play see-saw this week? (Dec6 to Dec10)

What I said last week was ‘The momentum is so strong that I anticipate Nifty to drop somewhere till mid line of purple or halt somewhere in between. Subsequently, the market should reverse and fly till somewhere between 5 EMA and 21 EMA.’ I couldn’t be more right, can I?

Now the following is my analysis for coming week based on what I am looking at (You may want to open image in new tab or save it for better view)

Nifty as of now is playing with every trader’s mind. It is in a difficult spot where making predictions is very tough. There needs to be some more price action for making more concrete recommendations. The downtrend should continue as long as price is below the green support line (the line’s previous touch-points were 28Jul21 and 22Apr21). Knowing the target is anyone’ guess for the time being, since Nifty may make a double bottom near 16800ish and strive for a reversal.

Scenarios for the week ahead (highlighted as yellow box with red and green lines dissecting scenarios)…

ScenarioAnticipated Price Action
ConsolidationBetween 17550 and 16850
DowntrendIf breach below 16850; to drop somewhere till 16150
UptrendIf breach above 17550; to rise somewhere till 18200

RBI is expected to announce rates, guidance and all on Wednesday. The fall of interest rates may end now. I guess I should take some loan before the party ends.

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for