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[Jeareh]

Hi Amit,

When you do pair trading, which is hedged, there is no need of stop loss. Target can be fixed for both upper profit and lower loss. Strict exit at both level.

Early you was confident in going long in your directionless trade. But later it seems you shifted to short. Is there any reason?

We know that this pair trade works really well, needs no analysis, in times of breakouts. During sideways, earnings in one leg will be eaten by the other losing leg. Days gap open up will help to earn some net profit.

 

[jamit_05]

Jeareh

Hi Amit,

When you do pair trading, which is hedged, there is no need of stop loss. Target can be fixed for both upper profit and lower loss. Strict exit at both level.

You say Lower Loss, I say Stop Loss...
In Shorts, SL plays a very pivotal role.

Early you was confident in going long in your directionless trade. But later it seems you shifted to short. Is there any reason?

Not shifted, but still experimenting. Last trade made minor profits.
Shorts seems to have potential, because most of the days are sideways, within 80 points range. Therefore, shorting after a big move appears to hold potential. But lets see. Trade results will tell.

A note of warning :Attempt shorts only if you trust yourself to adhere to stop loss.

We know that this pair trade works really well, needs no analysis, in times of breakouts. During sideways, earnings in one leg will be eaten by the other losing leg. Days gap open up will help to earn some net profit.

Just like I promised.

Simple. No analysis, no tension. Just profits. Like Rasna... just add water.

The super best part is.... a trader does not have to be a well-rehearsed professional trader. He can be a novice and still make a bundle. In longs, even if a trader messes up with the SL there is very little damage he can do to his account.

However, he does have to be shrewd and adamant about his Position Sizing. A 50% fall in account will require 100% growth only for recovery (Ground Zero)

Therefore, the traders (or hedger, I say) should follow the following Position Sizing Policy... without fail.

1. Consider an account of Rs.1L
2. Cut it in half. Hence, Rs.50K as trading capital, Rs.50K as buffer.
3. Invest only Rs.50K per trade. If SL hits, means you lost 5 to 10%; This you can replenish from the buffer.

As a result, each trade will have a uniform Position Sizing. This, I believe, is the Singularly Most Important Factor required for Success on this thread.

 

[jamit_05]

Am still holding position from Friday... in expectation of some major dhoom-dhadaka.

It is in the air, that RBI will balance the -ve news of Greece. Therefore, we will take our profit when we get it... and quietly wait for the next trade. Will save the heroics for some other area in my life

Pls note that, it is my strong intention to balance the % of loss with the same % of profit... to eventually have a positive outcome on the balance sheet.

 

[jamit_05]

As for the position... all the time-decay kicked in today... cost was 117 on Friday EOD... now 87... a gap down of almost 30 points.

Did not get a chance to exit at SL....

Now, volatility is expected to kick in after RBI announcement. This will give a chance to exit at break even or at Stop Loss.

This helps us affirm one rule.... Friday to Monday is mostly favoring time-decay. So longs must go Friday EOD. If need be, enter a new position on Monday....

 

[jamit_05]

The coming two weeks, till expiry will teach us much about the dynamics near expiry.

The way I see it... the OTMs will be cheap and will grow at a really fast pace as momentum builds. The disparity between OTM and ITM premiums, in %, is much more.

 

[jamit_05]

Looking to purchase 51/53 at a cost near 65; Waiting for NS to reach 5200;

 

[jamit_05]

In expectation of RBI announcement:

New trade initiated:

5300 CE 24.10
5100 PE 45.35

Total Cost... 69.45;

Have kept the investment amount to a constant.

 

[veeemkay]

The coming two weeks, till expiry will teach us much about the dynamics near expiry.

The way I see it... the OTMs will be cheap and will grow at a really fast pace as momentum builds. The disparity between OTM and ITM premiums, in %, is much more.

Personal observation: During the last week to expiration (can start from thursday before expiration thursday) you can sell a pair in the morning after stabilization and sell it at 3:00 to make roughly 10-12 points in decay. Avoid expiration Thursday as it is very Choppy. SL is usually 50 points movement from where you got in.

 

[jamit_05]

Personal observation: During the last week to expiration (can start from thursday before expiration thursday) you can sell a pair in the morning after stabilization and sell it at 3:00 to make roughly 10-12 points in decay. Avoid expiration Thursday as it is very Choppy. SL is usually 50 points movement from where you got in.

Do you mean, sell in the morning and buy EOD?

 

[vssoma]

In expectation of RBI announcement:

New trade initiated:

5300 CE 24.10
5100 PE 45.35

Total Cost... 69.45;

Have kept the investment amount to a constant.

i hope you changed your SL or booked