If you read todays all news papers and yesterdays 24/08/2015 all news channels you find only one Breaking News all over saying bloodbath on all world stock markets and in India biggest crash in 7 years and investors loses Rs. 7 Lakh Crore in one day.
If you are new to stock market please remember this is all bullshit. If somebodys lose Rs. 7 Lakh Crores then it doesnt mean that money vanish in air but the real fact is that somebodys profit 7 Lakh Crores.
Stock market has simple funda if you are a buyer then someone is seller so if you got loss thats one side of coin, another side is someone who sells you make profit.
Yesterday Nifty Close -500 and Sensex -1600 this scenario is very rare in market but if you are Die heart Day Trader this type of day makes Fortune for you.
Yesterday 7800 PUT of Rs. 7 at market open become Rs. 150 at market Close that means gives 2100% profit in just one day with very limited risk. If you Buy this Put on Friday then this profit goes more than 4000%. Thats really Huge.
To make this kind of money you need 32 years in Bank FDs. and almost 14 years in Mutual Funds, only when they continuous gives 24% p.a. return with 100% Risk of your capital.
So New Traders please dont be panic by these kind of news until you are a Day Trader. We dont care what is happening in China or Greece or USA or India. Just wish God give these kind of days more often.
Thank You.
Happy DayTrading.
THis is like saying... hey look the lottery drawn... its drawn once in 6 or 8 years... limited cost but returns are very huge...
Even if one is into naked options buying no one can't allocate 100% trading capital to just buy PUT and wait for lottery, usually traders go for 25% to 30% of allocation on options, as there is chance to lose all the 25 to 30% in the case of naked option buying.
Sure it was a great day for skilled traders, that's unquestionable, just throwing in some sense to the pie in the sky type of arguments.
Just to capture and fully exploit days like this one needs quite a lot of emotional preparation and insights, most people who actually bought PUT cut their profits in the pullbacks... that's how real life trading goes...
so... the 4000% returns on theory will be more like 1000% return on account if one managed to get into the trade. Assuming he got stopped out couple of times by the violent pull backs... it will be 300-500% returns ... assuming he exited after initial huge profit...thinking how can market go below this or he felt like not giving his money back after 100% return on capital!!!... it will be 100-200% on account, which is super awesome anyways.
All these applies only to skilled traders usually having years of training... for the rest its... like river full of money but I can only have a sip of it... damn! (still there is another group who mistook the bounce on friday for long!).