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Q1Y1: Nifty Option Trades need more introspection

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 13 weeks of trading correspond to following candles on weekly timeframe.

And the following is a representation of result:

The correlation is crystal clear. The returns were good when market was consolidating during the months from April to July. As the market went in uptrend in week of August, I was never quite in control of situation. Even though profits were posted in 10 out of 13 weeks, the 3 loss making weeks were good enough to wipe out all the gains.

There is a saying: “Option sellers eat like chicken and shit like elephant”

I ended up vindicating that saying, even though I knew this problem all along. It is for this reason that I have kept my target CAGR at 15% for the time being. The idea was that if I am able to beat this target, I will raise it up. For the time being, I have failed to achieve target. The next step is to aggregate my learning and trade better from now on.

So I learnt:

  1. Make strike adjustments whenever gap-up / gap-down happens
  2. Check charts twice a day
  3. Keep SL-M orders
  4. Keep taking as many SLs as warranted
  5. Keep charts tidy
  6. Be mindful of candle behavior across timeframes
  7. Roll-in strikes aggressively during trending market but not more than adjusted ATR during consolidating market
  8. Stop counting money
  9. Pre-empt SL positions and close them early (simple to say, tough to do)
  10. Exit positions when volatility compresses a lot

Last week, I realized that I should be doing iron condors instead of strangles. I earlier used to think that brokerage and cost of hedges would not compensate for additional gains via more lots. I think that theory is wrong and deserves a trial. If theory holds true, I would effectively be multiplying my gains by 1.5 to 2 times. That would be a huge boost to CAGR. I would be testing the theory in coming weeks.

But the whole point was to trade in direction of market. That is written loud and clear on my website’s home page. Yet, I ended up taking positions on both sides. The urge to eat laddoos on both sides needs curbing. I must respect trending market and stay directional.

Also, I need to stop sharing these posts here and there. I may not acknowledge consciously but my subconscious mind is asking me to keep this website as a log only. I am not gaining any feedback by sharing posts anyway. While log is an absolute must as it helps me in bringing clarity to my thoughts, the log deserves solace at least for now.

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