Month: January 2022

With market all set to go long, I had nothing but put options. As Thursday came near, I kept some call options as well which helped in giving good returns. These kinds of weeks make it feel good. Small money made safely is always better than making large money with a lot of risk.

So I traversed through the following candles during the week:

Net Profit (after deducting brokerage)	Capital deployed (approx)	Week’s ROI	Annualized ROI for this week	Total no. of weeks traded till today	Annualized  return till today
Rs.14,691.5	Rs. 1162758.95	1.26%	92.11%	31	74.74%

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.

Overconfident of mean reversion tactics and filled with greed to recover ridiculous penalty due to SEBI’s shenanigans of last week, I entered the mean reversion trade early. I think it was Tuesday. The trade backfired and I was in deep red.

It was not like I was completely off the mark. On Wednesday morning, I did get a chance to exit almost at breakeven but emotions overcame reasoning. I did not book and watched the trade go back in deep red within rapid fire time.

I knew that the same strike of 17850 CE would not be able to recover by Thursday. I went in by another 50 points and shifted to 17800 CE. I prayed on Wednesday night and Thursday morning luckily opened with a gap down opening. Though the overall profit was good but witnessing a realized loss of Rs. 1.25 lakhs is simply unjustified.

In future, I should exit when breakeven and switch to safer strike until mean reversion target is met.

So I traversed through the following candles during the week:

Net Profit (after deducting brokerage)	Capital deployed (approx)	Week’s ROI	Annualized ROI for this week	Total no. of weeks traded till today	Annualized  return till today
Rs. 71,856.3	Rs. 1090902.65	6.58%	2658%	30	75.04%

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.

In a week when everything went right and I earned well via a methodical system of trading, I had to shell out a hefty amount of ‘other charges’ These are charges collected by dear regulator SEBI for penalizing retail traders like me who do not maintain lakhs of margin. To add salt to injury, it is impossible to know breakdown of these charges, at least on the console of Zerodha.

Rs. 15,000 of profit in the week was knocked away by Rs. 10,000 of SEBI charges. I have no interest in knowing the breakdown anyway. I know the reason. This is my punishment for being over smart and keeping negative margin on Dec 17^th. I thought that as long as I maintain positive margin by end of day, I am ok. However, our dear SEBI can randomly take snapshots 5 times a day and penalize if margin is negative.

Did I deserve to be penalized? Yes

Did I deserve a penalty of Rs. 10,000? Absolutely no

I say this because we Indians perhaps pay the largest taxes in the world for trading in a market where freak trades are becoming common and price determination is done by speculators sitting in Singapore. SEBI has no right to penalize me by this much amount if I committed this mistake for the first time, especially when it can change margin requirements 5 times a day as per its whims and fancies. Couldn’t I had been let go with a warning?

But as always, nobody will care. This piece of blog will just die, just like hopes of several Indian traders who wish for reduced taxes and penalties.

I guess once I become rich enough, I too will trade from Singapore.

So I traversed through the following candles during the week:

Here are the results  

Net Profit (after deducting brokerage)	Capital deployed (approx)	Week’s ROI	Annualized ROI for this week	Total no. of weeks traded till today	Annualized  return till today
Rs. 5327.98	Rs. 1085574.67	0.49%	28.99%	29	52.62%

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.

Monday was the day when all my loopholes of mean reversion strategy were exposed. The strategy which had been giving me windfall profits for past 13 weeks or so was almost showing me an unrealized loss of over Rs. 1,00,000. I need to write my experience clearly as it happened on Monday:

Time	What I did	What I should have done
First 15 minutes	I knew that Nifty was not oversold yet on shorter timeframe but I still went ahead and did averaging since my P&L of put positions was deep red	I should have rolled in the call options without disturbing put options
Next 15 minutes	I purchased hedge positions which were expensive	I should have exited calls and averaged puts
Until 1015 am	I exited hedges to save losses on them but that made my margin go negative	I should have taken hedges with intent to avg a bit more and exit hedges immediately
Until 1145 am	I rolled in put options until then went ITM while ensuring that new premium > current premium	I should have rolled in only once while ensuring new premium > current premium
Until 1245 am	Hopelessness	I should have repeated the cycle until contracts went ITM

The chink in armor of my mean reversion strategy is that hedges are simply useless if this strategy is being leveraged on any day before Wednesday (or maybe Tuesday, will need to check).

By God’s grace, market started reversing by 1 pm and I was able to hold my nerve until around 2 pm when I eventually exited my positions and ended the day at around Rs. 20,000 of realized loss. However, I was holding positions which if kept till expiry could have recovered the loss completely.

This was easier said than done though.  During subsequent days, the market’s ATR was big and it kept swinging here and there but mostly in positive direction. I had to wipe the slate clean multiple times, meaning that I wasn’t gaining much.

It was only on Thursday that I got a chance to do another mean reversion when I sold ITM contracts to the tilt while keeping hedges. While I did earn profit, I could have milked more by rolling out the strike with same number of positions. The idea simply didn’t strike me then. I now need to remember that Wednesday and Thursday are golden days of mean reversion, if done properly.

All above has led to awesome learning. I had been taking this strategy casually which I can’t afford to do so anymore.

So I traversed through the following candles during the week:

Here are the results  

Net Profit (after deducting brokerage)	Capital deployed (approx)	Week’s ROI	Annualized ROI for this week	Total no. of weeks traded till today	Annualized  return till today
Rs. 6870.59	Rs. 1058414.7	1%	67.83%	27	56.21%

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.

The whole week was quite normal though there was a bearish tone to it. I had to do a mean reversion once but other than that, the strikes took care on their own. Since I did not do anything unlike other weeks, there is nothing much to write about. This makes my blog so simple. Keeping it simple is the most beautiful thing in life  

So I traversed through the following candles during the week:

Here are the results  

Net Profit (after deducting brokerage)	Capital deployed (approx)	Week’s ROI	Annualized ROI for this week	Total no. of weeks traded till today	Annualized  return till today
Rs. 10397.8	Rs. 1058414.7	0.98%	66.25%	27	56.13%

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.