Jul21-W5: Anticipation of big trading move deserves strike correction

The highlight of last week’s Nifty Index 50 moves happened during July 28, 2021. It more than made up for all the deadness since July 22^nd. I think law of inertia skews trading psychology of novices in a big way. It definitely got the better of me.

With Friday, Monday and Tuesday being dead days, I had a notion at back of my head that I don’t need to see charts. I can’t be too tough on myself though as I literally had no time to check charts as I was preparing for a job interview. But lesson learnt, I must check charts twice a day if I have open positions or close them if I really don’t have time,

While it is easy to do chart analysis in hindsight, but it was absolutely clear on July 27^th that a big move was about to happen. I must remember that this method of option strangle trading is a mix of predictive and reactive analysis. Therefore, I should have closed my positions on July 27^th and waited for market to set the direction.

But I did not and July 28^th morning never gave me a chance to make any corrections. With job interview from 9 to 10 AM, I checked market by 10:15 and understood I could not do anything. While the Put Options were at a loss of more than 500%, call options were not giving any profit. All thanks to vega.

I checked my blog for making sense of what market was doing. I made some minor adjustment to drawings and patiently waited for market to take bounce. I meanwhile could not help but think that if I would book over Rs. 10,000 of loss, it would mean going back by 3-4 weeks. Luckily, the market respected the expected support level and put options eventually went back in green.  

This entire headache could have been avoided if I had made correction on Tuesday itself. This has happened twice now in consecutive weeks. I need to watch charts more carefully and press the exit all button if I am having a bad feeling about stuff. This is like the movie ‘minority report’. I must pre-empt drawdown before it happens because mitigating it later does not work.