TradingUpdate

Trading: Up 40% since Aug 30.

10 comments Written on October 27th, 2007 by
Categories: TradingUpdate
Trading updates: I'm up nearly 40% since I started (versus Index gain of 27%). A lot of changes to the portfolio this week.

On cash stocks, I had sold Jai Corp at 1278 as it showed signs of weakness...I bought nearly all of it back today as it showed strength again. I also bought L&T (at 3335) and Reliance Capital (at 1745). Today I added HOV Services - a stock that is unbelievable but seems to have been overlooked by everyone - at 205. A result arbitrage trade in Voltas didn't quite work out, so closed it at a small loss. Closed positions: IGate, as I decided it wasn't quite showing the momentum I wanted. Bought at 338, sold at 355 within two weeks.

F&O: Expiry was on Thursday and I sold out the 5100 puts as the Index neared 5200 as there was very little time left to expiry and these options were expensive. I owned some 5700 calls which obviously didn't make the grade, but they were high risk and low cost anyhow. A number of Nifty future trades, based on momentum based directional calls, yielded nearly 20% on the investment this week. I took a loss in the Suzlon future the day before its results and I was totally unaware that the next day was results day! Had I stuck on, I would have made over 60% on that investment in a day - lesson learnt: don't exit a stock before you check its event calendar.

Small losses also in NIIT Tech (waited for results and then the market didn't like 'em), India Cements (another ridiculous intraday play - note to self: don't play the intraday game, it doesn't work for you) and in Nifty puts and calls on Expiry day (it was an attempt at a pinning strategy which didn't quite work).

I managed a result move in Satyam - results being good, I picked up the future for a three day move. The very next day the stock ended up 5% higher, and I sold - the leveraged move yielding about 4,200 per contract. I sold as it retraced actually, a trailing stop loss in a way. Some quick momentum moves in RPL as well, over two days, have yielded an F&O profit. I own the stock in cash (as a longer term purchase) but the intraday moves in RPL scare me, as it could wipe out a significant amount of my capital. So I end up taking small profits. Lesson here is: Either increase your capital or don't use these stocks on F&O, because I will not always be lucky.

What's coming out of here is certain parameters I am comfortable with, and certain others I am not. There are lessons on multiple fronts: what kind of stop losses I should have, how I should deal with massive volatility, what kind of positions are within my comfort zone and finally, what data I need to make important trading decisions. My aim is to beat the index comprehensively - right now I'm up 40% and the index is up 28% in the same time frame, and I need to be much better. What's interesting is that I did not overleverage myself, so I didn't have too much of a problem during the dip, in fact I recovered all losses the day after the dip.

Note: This is my trading update. I don't mean to recommend any of the above stocks, or even that you try anything like this. Don't do it because I do it - as I've said I can afford to lose a significant amount of the money invested.

Posted in TradingUpdate

Trading updates: How have I fared?

2 comments Written on October 18th, 2007 by
Categories: TradingUpdate
So here goes two huge days. I did reasonably ok and would like to share some of the trades.

As Wednesday opened limit down trading was halted for the day. I decided I would expand stop losses to 20% from peaks, and exit all leveraged positions. When the market opened, I had futures of Axisbank and HDFC bank, both of which opened horribly down. When I squared off, I was down Rs. 60,000(!) and really needed a miracle. Suzlon energy hit my expanded stop loss at 1575 and I squared that one too, giving me a net profit on that trade of around Rs. 200 a share (bought at 1381), about 15% profit in a month.

I managed to buy Jai Corporation, a stock that's been upper circuiting all this while. In the madness some people sold it too. Another stock I picked up was Mudra Lifestyle - great results and I expect the stock to double in a year. Yes, not really a trading call, but one needs the long movers as well.

As the market started recovering, I sold one of the protective puts I owned - Nifty 5100 for a small profit. I also initiated a new long call option at Nifty 5500, bought at 92 some of which i traded out within the day for a 9K profit.

I then closed the day with two open positions - NIIT Technologies at 359 and Reliance Industries at 2639(both on the futures). NIIT Tech was bought because IT was the only sector that performed well, adn this was the weakest stock in that sector for the day, and I figured it will catch up the next day. Reliance was a pure momentum call for working with results today.

I closed Wednesday with a huge loss, about 9% down.

Thursday was interesting. NIIT Tech opened hugely up, and kept moving upwards. I sold it at 402, giving me a profit of 43 per share = Nearly 25,000 on a lot of 600. (This is for an investment of about 80,000 as margin).

Reliance hovered around 2800 when I set a mental stop loss of 2750, close by to cover a rapid fall. Also my overnight Nifty 5500 calls were hugely profitable so I sold them out at 250 or so. And my earlier purchased protective puts at 5100 were in bad shape (obviously) so I exited some of them.

Then the Nifty started to fall. I first took out Reliance at 2750, gathering a 110 Rs. gain on a lot of 150 - about 16,000 return in one day for a margin of 80,000. To cover any positive impact from results I bought a Reliance 2800 call at Rs. 85 per share. Set the stop loss on that to Rs. 50 (Options need WIDE stop losses)

The Nifty then seemed to settle at 5550 so i thought perhaps it's best to work with a strong stock, and chose the SBI future at 1800. It immediately retraced to 1780 when I sold and saw Rs. 5,000 vanish just like that!

I now had nothing left on futures, only a few 5100 puts which were increasing in value as the market went lower. All stocks were keeping above their expanded stop losses. Just before close I bought Nifty 5700 calls at Rs. 25 each.

At close of day today I was up over 7% nearly recovering all the losses of Wednesday. I have only two open F&O positions: Nifty 5100 put and Nifty 5700 call. If it swings wildly in any direction, I'll end up making money.

Stocks wise: Sintex has dropped 10% to 400, Reliance is at 2539, JaiCorp is still heating the upper circuit at 1248 (buy price: 887 and 1189). IGate is hovering at 202, Praj Industries is down to 196 (buy: 228) and Mudra is down about 5% at 80.

Marked to market, I am up 28% on the whole portfolio. The index is up about 19% in te same time, so I've done slightly better. Let's see how the rest of the month goes.

Posted in TradingUpdate

Trading updates again: Up on a down day

2 comments Written on October 13th, 2007 by
Categories: Commentary, Stocks, TradingUpdate
I've finished this week of trading and it's been quite spectacular.

Reliance Industries, which I bought as a run up towards the AGM on Friday, went bonkers just before the actual meeting. It was at 2728 when Kaushik and I discussed and implemented a hedge strategy to cover us against any disappointments during the actual event. I sold my future (at 2728) and bought a call option at 2700 for Rs. 130 per share - a net total of 19,500 given that a lot is 150 shares. Mukesh Ambani announced no big news during the result - note: no short term big news like a bonus or split - so I walked out of my hall, down to my study and hit the sell button. Traders had got wind of it already it seemed - my call option was down to Rs. 80, so I took a Rs. 50 loss.

You might think - if you'd held the future it would be the same thing. Well, the future quoted at 2650, a drop of 78 from my buy level. One reason for the call staying higher is because an option, when it's out of the money, always has some value - an intrinsic time value. This is what caused the Rs. 28 difference between the future and the option. (Note that at the end of the day, Reliance closed at 2560, while the option dropped to only Rs. 54. If I'd held to the end, my loss on the future would be Rs. 168 per share, and on the call, only 76 per share.)

Effectively my buy price was Rs. 2421, so there was room for a lot of cheer. A profit of over Rs. 250 per share for a future lot of 150 = around 37,000 as profit. Investment : Rs. 80,000 as the highest margin payable. Time frame was about 1.5 weeks.

I sold RPL, a call I had picked up earlier this week from the momentum. The call option went up from Rs. 10.8 per share on Monday, to Rs. 18.5 when I sold, a profit of Rs. 8 per share. For the lot size of 3360 shares, this is a profit of Rs. 25,000+ - on an investment of 36,500 (10.8x3360).

When the Nifty slid downwards, I decided to cover out my 5400 and 5600 call options. I'd bought the 5400 call for 67 last friday and the 5600 call for 70 (on Thursday) and I sold at 190 and 88 respectively. A reasonable profit considering the Nifty plunged about 50 points further from when I sold. The day was quite profitable, even when the Nifty was about 1% lower than it started.

Holdings in stocks are doing well. IGate, which I picked up on Wednesday, is 10% higher, at 374 (I bought at 338), and Jai Corp is doing the upper circuit again at 1027 (I bought at 887). Praj Industries has dropped to 212 (bought: 228) but I've decided to keep that as the reasoning here was fundamental - that ethyl alcohol blending policy was framed and initiated. Another stock, Sintex, is up about 5% at 392 (bought: 370).

I'm left now with almost 55% cash. In the last month, I've finally outperformed the index - 22% versus 20% for the index. But the difference is: I have only used about 50% of my capital in September!

Where am I today? I've bought protective puts - to cover against any spillover of the last hour carnage to Monday. other than that, no F&O positions. Stocks wise, Kamat Hotels, RIL and Suzlon, apart from the ones above. They still look strong from a momentum perspective (none have hit their trailing 10% stop losses). I still have cash which gives me opportunities on Monday. I'll post a note when I buy more.

Note: This is my performance, and not stock or portfolio advice.

Posted in Commentary, Stocks, TradingUpdate

A Phenomenal Two Days

1 Comment » Written on October 11th, 2007 by
Categories: Commentary, TradingUpdate
What momentum! Nifty and Sensex are reaching new highs - with Sensex near the 19,000 mark, and the Nifty crossing 5500.

Firstly some updates. From my positions, things have spectacularly improved, to give me a net return of 21.2% since Aug 30. (And I'm still at 20% cash!) The last two days have been just incredible.

Sintex has gone up 5% today, to 392. Reliance is still holding strong at 2630, and they have a board meeting tomorrow. Jai corp has been limit up the last two days, with a net 10% return since then. Suzlon is now at 1775, a gain of around 28%.

New Additions: IGate at 338, a stock to hold till December, they are planning to buy back all shares, and that should be at a good premium to the current stock price. Praj Industries at 228; the new ethanol blending policy fits very well for a six month play (I know this is not momentum, but I'm taking a detour).

On the F&O Side: NIIT Tech yielded a small gain, but gains from a Nifty 5400 call and Nifty 5600 call are stupendous - nearly 350% on the former and 60% on the latter. The Reliance future is now at 2663, a return of around 35% on the margin paid. An RPL call bought on Wednesday at 10.85 is now at 17.2, a 60% gain.

Overall, I'm up about 21% (this is considering taxes and brokerage etc.). Not too bad, but still under the index. Some learnings:

  • Most of the first part I was underinvested. Less than 20% of the amount was in stocks, not a good thing.
  • Most of the gains are in F&O. The moves are fast and tend to be very good because of the leverage possible.
  • I can't trade intraday. I think I'm not made for it. While I've made some profits, the biggest chunks are in the stocks and F&O that I've held for a while. A weekly pattern may work better for me.
  • The markets move really fast, but you needn't be on them all the time. Even at my level, I find it difficult to understand small moves, but the larger pattern is more visible. So it's best to watch the market around four times an hour and then stay on the screen in the last hour (when HUGE moves happen).
  • There are always new stocks moving, and you have to watch for fast movers. Don't wonder why - the questions must come later.
  • You needn't catch the full move. If a stock moves 50% and you catch only 30% that is also worth it.
  • Respect stop losses especially in futures trades. It's stupid to lose a lot of money when you are leveraged. When you make an exception, understand that you stand to have much higher risk. I doubled an RIL position once when technically I should have been hitting my sell button, but I had bought for the board meeting and felt the stock has power. Since the risk was high, I exited most of my other futures positions on that day.

Okay now a disclaimer. I'm doing this because I can afford to, and because I have the time to. Don't do this if you don't have my appetite for risk, or if you can't provide the time to track the markets. This is extremely risky. I may just be lucky. This is not stock or market advise.

I think tomorrow will be a big day - either up or down. There is a distinct possibility of an RIL Split or Bonus, either of which will drive the stock, and therefore the market, to higher levels.

Infy results were out today but I'll analyse those in a separate post.

Posted in Commentary, TradingUpdate

Sensex at 18K, My Current Momentum Trading Status

7 comments Written on October 9th, 2007 by
Categories: Commentary, TradingUpdate
The Sensex broke the 18,000 mark today, and was up around a 1000 points from its lows. The Nifty broke 5300 and closed strongly too. The amazing thing? Apart from the many records this has broken, the markets closed up when the sentiment seemed to be negative at the start of the day.

It seemed like the 18K mark was not too far away (a comment I made on Sep 27 put the timeframe as two weeks from that date) but the momentum still looks strong enough to carry this much further.

So what's the deal? Firstly, this is results season and either a) people are expecting good results or b) some people already know the results through some leaks and are pre-empting a buy. The third option c) is as follows.

FIIs have put in more than 1400 crores today as well. That's a 2800 crore investment in two days. That's a lot more money than they used to put in a month! So option c) is: FIIs have rated our market higher than we are willing to rate it.

Consider this: Reliance, which has had a dream move to 2600, is still trading at a forward P/E of 26. Granted, that's one of the highest P/Es it has got, but it grows at more than 33% year-on-year! This quarter their revenues can be staggering considering increase in refining margins (is happening all over the globe), foreign currency gains (they have big foreign currency loans), acquisitions - one in africa and one in south east asia, and of course the IPCL merger. If we aren't willing to pay at least growth P/E for this stock (i.e. P/E = EPS growth) are we really overvalued? You can do the same math for Bharti, NTPC, L&T etc.

China on the other hand gets a market P/E of 45. Given that we're a similar economy, is 30 too high a P/E? That is a Sensex value of 24,000.

Note: I'm not saying that's a target. What I'm saying is: What seems "overvalued" may suddenly seem to show value.

Overall, still a cautious mood out there, so the momentum will stay upwards. Tell me if any of you see signs of euphoria, of your cousins suddenly talking stocks to you or the TV anchors and analysts going really gung-ho about our "fantastic economy".

Now for a step back. I've not yet published my trading diary (too lazy) but here's the current status:

Kamat Hotels: At 202, gain of 30%. (Buy: 155)
Reliance: At 2600, gain of 30%.(Buy: 2000)
Suzlon Energy: At 1673, gain of 20%. (Buy: 1380)
Sintex: At 361, LOSS of 3% (Buy: 371)
Jai Corp: Bought today at 887.3 (No gain, no loss)
RIL Future: At 2600, Profit of 40% (buy:2421)
Nifty 5400 Call: At 110, profit of 40% (buy:67)

Closed Positions:
Marksans Pharma: LOSS of 12%, bought at 125, closed at 110.
Nifty Futures: Net traded profits of about 10%.
RIL Future: net booked loss of 0.1% (some up, some down)
RPL call: Loss of 18% (Options are very risky)
NIIT Tech: Net loss of 3%.

Overall, I'm up 10% from August 30, 2007. Which isn't much because the Index is up nearly 19%! But I've had a lot of learning in the process, which I'll mention in another post. Right now I'm moving to about a trade a day with a weekly outlook. It's interesting!

Posted in Commentary, TradingUpdate

I’ve exited RNRL

9 comments Written on September 27th, 2007 by
Categories: Stocks, TradingUpdate
As of 5 minutes ago, I am now out of the RNRL trade. I bought at 78 last Friday and watched it move to 93 on Monday. It hung around and today has shown a dip to 85. I sold at 87, a profit of Rs. 9 (11.5%). That's about Rs. 1150 on an investment of 10,000.

Just a post to mark the trade.

Posted in Stocks, TradingUpdate

Transaction Updates:

9 comments Written on September 24th, 2007 by
Categories: Commentary, Futures, Options, Stocks, TradingUpdate
Some updates on the transaction front. (Continuing from here)

Bartronics hit my trailing stop loss (last high: 285, today's price reached 257). I sold at 255. From my purchase price of Rs. 201, this is a Rs. 54 profit in less than four weeks, a profit of 27%. My net gain on this Rs. 10,000 investment was Rs. 2,700 (booked).

United Spirits, another momentum player I had picked, hit near my 10% stop loss within a few days! I had bought a few at Rs. 1848 and the price reached too close to Rs. 1700 for my comfort (which was my stop loss, a little less than 10% but more easier to calculate). I sold at 1735, a loss of Rs. 110 per share. This is a net loss of Rs. 660 (I had 6 shares, close to 10K invested).

Exited parts of Ranbaxy and DRL. I know I had mentioned them as my longer term picks, but right now I am more into the momentum theory and want to pare down my longer term positions. With the dollar weak, I see these stocks underperforming in the near term, which is my current investing horizon.

Kamat Hotels is still doing well, at 175. I continue to hold.

I bought about 10K worth of Reliance Natural Resources (RNRL) at Rs. 78 just before close on Friday. It's up about 22% today, at 93. Trailing stop loss moved up to 84.

Futures and Options: A Nifty play today - bought 50 Nifty at 4912 and sold at 4942, a profit of Rs. 1,500 for an investment of Rs. 23,000. Intraday, very fast move, would not advise anyone else to take it.

New F&O position: Bought one lot of RIL October future. Very interesting stock, makes acquisition news and has good stuff coming along: I expect great refining margins, EPS rise (and PE contraction) through the IPCL acquisition (which has lower PE than reliance) and some interesting Foreign exchange gains from its FCCB loans. Stop loss is 2250 (closer because this is a leveraged future).

All added up, I've booked net profits of Rs. 9,000 (net of losses) and there is about Rs. 3,000 of unbooked profits in teh positions, with a total investment of about Rs. 60,000. Counting just the booked amount, this is about 15% in a month.

At the end of September I will produce a full trading diary which details my trades (if any of you are interested of course).

Note: The quantities and amounts above have been modified proportionately.

Another note: This is an extremely risky strategy. I could have been purely lucky, and the same luck may not occur to you. To me this is money I can afford to lose, you may not be in the same position. Do not try to repeat what I'm doing unless you are fully aware of the fact that you may lose ALL your money. This is a post purely for educational purposes. I will maintain a more detailed trading log.

Posted in Commentary, Futures, Options, Stocks, TradingUpdate

A 5 day holiday and some performance updates

6 comments Written on September 13th, 2007 by
Categories: Futures, Options, Stocks, TradingUpdate
I'm taking a break till next Tuesday for an outstation holiday. I wanted to post a quick message about my momentum moves.

Two weeks ago, I decided the Nifty wasn't going anywhere and had talked about a last minute put option I wrote before the last expiry. I then decided to do a quick two-four week strategy on some stocks which I thought would move fast, and get out of the trade soon.

First pick: Bartronics at 201. It moved up nearly 10% that day - it was up from a 180+ - and I decided this was the beginning of a move. Had been watching the stock for a while; I don't care about the fundamentals because this was a momentum call. I'm still holding it because it hasn't moved against me - current price: 253. Profit (unbooked): 25%. I continue to hold with a stop loss at 230. Investment: Approx Rs. 10K, profit Rs. 2,500 unbooked.

Another mover: NIIT Technologies. This stock started moving and I picked it up at 307. The momentum carried it through to 360, and it reversed back to 340 yesterday, when I sold at about 341. Profit (booked): 11%. Invested Rs. 10,000, made Rs. 3,000.

F&O moves: Last monday, I wrote a straddle - sold a 4450 put and a 4500 call, collecting Rs. 10,500 as premium for a lot. Bought back today at a net premium of 157, giving me a Rs. 53 profit. Investment (margin net of premium) Rs. 30,000. Profit: Rs. 2,500 (8.5%, booked)

Kamat Hotels: bought at 155, is at 166 currently. I have some longer term stock in, but I bought for momentum. I continue to hold as I see it moving by November. Stop Loss: 155, current unbooked profit: 7%. (Investment: Rs. 10,000, unbooked profit Rs. 750 or so)

For a total investment of Rs. 60,000, I've booked a profit of 5,500 and left about 3,250 unbooked profits. That's 8,750, a profit of about 14.5% in two weeks. This is quite radical, considering the Nifty has moved up only 2% in the entire period.

Soon, I'll try to create a model momentum portfolio with a capital of Rs. 100,000 and demonstrate how I manage it. My new company, Moneyoga, is going to help - we are creating software that will help our users (of which I will be one, of course) create virtual portfolios and track the results online, with details such as biggest losers, biggest winners, average term of holding, max risk and so on. This should be a lot of fun and learning for all.

Note: The quantities of the above have been modified proportionately.

Posted in Futures, Options, Stocks, TradingUpdate