Thursday, December 19, 2013

10% draw down in single day

I made hell lot of money before couple of weeks. At that point of time I thought some special power has come to me on trading. I thought I could easily figure out the way to make money in the markets.

Unfortunately it didn't took 10 days to realize that markets are bigger, smarter than me and I gave back most of my profits in just a day. Yesterday was Fed Event day and I bought both call and put options which is otherwise called as Strangles. I thought I could make hell lot of money on both the sides and wait for the fed to help me for my profits. 

Fed tapered, but its not as hawkish as everyone expected and eventually Indian markets did nothing severe to make profits for me. I lost my money. I went for a kill and got killed.

What is the lesson?

1. Not all the events would pan out what we expect for.
2. When a particular event has been focused for so long, one must make sure that it could possibly be priced in the shares.
3. Don't commit big money, no matter what the out come would be. Always have a shield and approach the markets and markets wont ran away.

Bless in disguise

1. Thank god, this trade didn't clicked. If it had clicked I'd thought myself as hero and would probably try to do the same maneuver during the time of elections. I'm planned to commit big money, but thankfully lesson has been learnt before the elections. Despite this outcome, I'd commit my money, but with best risk management and make sure I make only profits from the trade no matter where markets goes during the day after announcement of results.

2. I'd be doing my election trade very very carefully because I'd be putting my own money in line which is really big compared to what I was trading. 

I'm back to biz of doing my research in depth manner and I'd be doing for next 10 days and would probably stop from trading. 

I've no regrets on this loss because its bound to happen and I didn't hesitate to book it when I realized that it didn't go according to my plan. I've to understand few issues on option pricing and would probably come out much prepared for the next big trade. Till then, without any hesitation I'd be licking my wounds. 

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