Amit Gulecha Presentation at Traders Carnival 2018
1. TOPICS TO BE DISCUSSED
“Holy Grail” for successful trading.
Keys to be “Successful”.
“Easy” Solutions and making “millions”.
“Sure shot” ways to earn easy money.
How to “loot” the casino.
“Make Daily” 5-10-20-25K.
Generating “100-200%” return P.A.
10. TRADING
Trading isn't just about managing risk, it's also about
managing boredom, patience, discipline and the
10,000 other voices out there trying to pull you in
every direction. Stick to your plan!
Everything in this game is hellbent on destabilising
your mindset and subconsciously allowing emotions
to creep into your trading plan.
!! IGNORE THE NOISE !!
It serves ZERO purpose.
15. SURVIVE HOW ?
- Developing Skills
- Practice Practice Practice Practice Practice
Practice Practice Practice Practice Practice
(CA / Lawyer / Dr.)
- Following same over & over in a loop till u
retire or die
16.
17. SURVIVAL PHASE
DELAY IS NOT
DENAIL
I fear not the MAN who has practiced 10,000 Kicks.
BUT I DO FEAR
The MAN who has practiced one kick 10,000 Times
18. SURVIVAL PHASE
Lack of (S)kill
> Basic Charting
> Learning Simple Technical Patterns
> Follow same over & over in a Loop
> Avoid Paper Trade
> Execute Real Trade with less quantity
> Avoid Media Electronic, Social or any other
form
Skills?
19. Basic questions
- Bhai Market kaisa lag raha aaj ??
- Teji hai ya mandi ??
- Trump / Dow / china / trade war yeh woh kya effect karega
??
- XYZ big shot ney yeh woh liya thoda study kar k le letey hai
- After seeing Bulk Deal big guy bought this sold that..
puckka chalega / girega .. Subhe chaap / bech lete / dete hai
- Apna news puckka hai yeh chalega / girega !!
24. FACT
PRICE “ACTION” IS GOD
-DIRECTION OF PRICE MOVEMENT
IS THE ONLY THING ONE NEEDS TO
UNDERSTANDS REALISE AND
TRADE.
REST ALL IS NOISE. IGNORE THE NOISE
27. -Markets are not a laboratory where every
move can be justified like laws of science.
- Markets are not a courtroom where every
move should be justified with evidence.
- There are no laws that dictate price
movement, only ideas & emotions that do so.
- Market is a wild animal which moves as per
its own wish.
Type of Moves
28. Bullish BEARISH
FIND “SUPPORT” -
“BUY”
Find “Resistance” -
“Short”
Type of Moves
Trending Move
Pvt. Bank / IT/
FMCG
PSU Banks / Pharma /
Junks / Mid/Small Cap
Slow & Steady Fast & Furious
29. - Trend is your ever lasting friend.
( PSU / Pharma / IT / Pvt. Bank / FMCG)
- Change view once trend changes.
- Big money is made not by entering exiting a
trade multiple times.
- Big & Consistent Money is made by following
the trend till it lasts.
- Don’t pre-empt that trend will end.
Type of Moves
30. Type of Moves
Sideways Move
Goes Nowhere - days / months / years
Find upper - lower boundaries
Don’t anticipate / pre-empt a BO / BD
Tests real strength of mindset and patience
34. - May be false
- 1st breakout or breakdown tends to be
false
- Wait for retracement to buy / sell
- Follow the BO / BD with trend
Breakout & Breakdowns
37. Open High Low Close Concept
Open = High = Previous-Close
Open = High
Open = Low = Previous-Close
Open = Low
- Importance on Hourly / Daily / Weekly / Monthly
38. - Higher Highs & Higher Lows = Bullish
- Lower Highs & Lower Lows = Bearish
1st signal comes from either
simplest n most effective
Highs & Lows
39. - Only Two truths in life
- THE Only certain thing in trading
- Survival phase
- War not win by dying for country but by killing
enemy
- If Survive then only recovery
- ROC more imp then ROC
- Emotional
STOP LOSS
40. - Sitting in cash is most difficult part of
allocation
- 25% always cash
- Deploy max cash when clear trend
- Withdraw max cash when mid small caps start
rising madly 8-10-20% and every junk stocks
starts flying irrespective of fundamentals, starts
running (book out position or use tight stops)
recent eg. December madness n rest is history
Capital Allocation
41. - Zero sum Game
- Dying Asset
- Type of Option
- Call
- Put
OPTIONS - BASICS
42. OPTIONS - Type of option
Type Call Put
ITM
(In the Money)
Strike Price < Spot Price Strike Price > Spot Price
ATM
(At The Money)
Strike Price = Spot Price Strike Price = Spot Price
OTM
(Out of The
Money)
Strike Price > Spot Price Strike Price < Spot Price
43. OPTIONS - Unwritten Rules
- “Never Naked Short Deep ITM” options even if god
says it will expire worthless.
-OTM options are Multi-beggar options and also
likely to expire worthless.
-ITM or slightly OTM options are to be used for
purpose of trading.
44. OPTIONS - BASICS
CALL PUT
Buy SellSell Buy
Buying
“Greed”
Selling
“Greed of Fear"
Buying
“Fear”
Selling
“Fear with Greed”
BEARISH
BULLISH
46. Volatility
(like Nature &
Mood of female
easy to feel hard 2
understand)
How much stock price will fluctuate
based on change in uncertain events
Bull markets = Low Volatility
Bear markets = High Volatility
Historical Volatility How much the stock price
fluctuated on a day-to-day basis
over a given time period.
Implied Volatility Probability of how much volatile
underlying will be in near future.
Options -Volatility
53. Options Greeks
Delta
(Reaction of Option based on
Change in price of underlying)
Amount an option price is expected
to move based on a 1 Re. change in
the underlying derivative.
Gamma
(Rate of Reaction of Option
based on Change in price of
underlying)
The rate that delta will change based
on a 1 Re change in the stock price.
Theta
(Time is Money)
(More the time is wasted
better for writer)
Time decay, or theta, is enemy
number one for the option buyer. On
the other hand, it’s usually the option
seller’s best friend.
Vega
(Reaction of Option based on
change in volatility)
Amount an option price will change
for a corresponding one-point change
in implied volatility
54. Put Call Ratio (PCR)
PUT CALL RATIO =
- Overall market wide
- Individual Index / Security wise
- Individual Strike Pricewise
No. of Traded Put options
No. of Traded Call options
55. Put Call Ratio (PCR)
PCR Ratio Myth Interpretation
PCR = 1 -Indecision -Indecision
-Sideways to range-bound
movement
PCR > 1
but up-to 1.30
to 1.50
More put being bought =
BEARISHNESS (hedge for
longs)
-Writers aggressive on puts =
BULLISHNESS
- Upside continued
PCR > 1.50 More put being bought =
BEARISHNESS(hedge for longs)
-Writers aggressive on puts =
BULLISHNESS
- Strong Upside continued
PCR < 1 but up-
to 0.70-0.50
Aggressive Call buying =
BULLISHNESS
Writers aggressive on call =
BEARISHNESS
-Downside continued
PCR < 0.50 Aggressive Call buying =
BULLISHNESS
Writers aggressive on call =
BEARISHNESS
-Strong Downside continued
56. Open Interest
- Overall market wide
- Individual Index / Security wise
- Individual Strike Pricewise
Open interest = Total No. of open options and futures
contracts that exist on a particular given day.
57. Open Interest – Call interpretation
PRICE OPEN INTEREST INTERPRETATION
Bullish
Bullish & Short covering by
writers
Long unwinding (Profit
booking & Caution on long)
Bearish (writing)
58. Open Interest – Put interpretation
PRICE OPEN INTEREST INTERPRETATION
Bearishness
Short unwinding (Short
covering by writers)
Short Covering (Profit
booking & Caution on short)
Bullish (Writing)
59. Max pain price, is the strike price
with the most open
contract puts and calls combined
and the price at which the stock
would cause losses for the largest
number of option holders
at expiry.
-
MAX PAIN
60. Most options expire worthless at the Expiration
date with a hit ratio of close to 85-90%.
Assumption that “Maximum Number of Option
“Buyers” will lose money” at the time of expiry.
Option buyers feel will stand to lose the most
money.
Option writer takes the most reward.
Strike price where max options becomes zero.
IN SIMPLE TERMS THE STRIKE PRICE WHICH
WILL GIVE MINIMUM PAIN TO OPTION
WRITERS.
MAX PAIN
62. MAX PAIN Max Pain26300
0
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
25700 25800 25900 26000 26100 26200 26300 26400 26500 26600 26700 26800 26900 27000 27100
Max Pain- Banknifty
63. TRADING THE OPTIONS
TIME TO FORGET THE WISDOM N GET IN THE
CASINO TO MAKE MONEY.
Unless one jump in a pool one doesn’t learn
swimming.
Efforts are needed even 2 eat food.
64. TRADING THE OPTIONS
- Buying when expected move is fast else trade future
- Selling when a range is known
- Selling Put when bullish & calls when bearish
- Far Dated Options
65. When to Short Option ?
- Riskiest Trade
- Ltd gains unlimited losses
1) At the start of series with understanding of underlying VIX after
passage of atleast 4-5 trading sessions with build up in individual
strikes
2) Deep OTM are to be shorted in case of index
For eg. Nifty atleast 500-600 point for Bank nifty weekly options
which are as far as 1200-1500 Pts away from CMP and
- following basic trends
- based on VIX
- market direction
- Gauge overall inventory built-up as per OI & PCR methodology.
- Min 2-3% P.M. Should be the return in case of writing an
option
3) When inherent IV’s are high deep OTM options are priced very
high (due to event or some news expected + / - ve
66. When to buy option?
- Low Risk Trade
- Ltd Losses Unlimited Gains
1) Direction of the underlying
2) Slightly OTM are to be bought in case of index
For eg. Nifty at 10750 we buy 10800 call or 10700 put +/- 50
points for Bank nifty weekly options which are as far as 100-200
Pts away from CMP and
- following basic trends
- based on VIX
- market direction
- Gauge overall inventory built-up as per OI & PCR methodology.
- Min 2-3% P.M. Should be the return in case of writing an
option
- markets always gives sudden boom n bursts move especially prior
to expiry where nearby OTM spurts n fades
67. STRATEGIES
Bullish Bearish Neutral
1. Bull Call Spread 1. Bear Call Spread 1. Long & Short
Straddles
2. Bull Put Spread 2. Bear Put Spread 2. Long & Short
Strangles
3. Call Ratio Back
Spread
3. Bull Put Ladder 3. Long & Short Iron
Condor
4. Bear Call Ladder 4. Put Ratio Back
spread
4. Long & Short
Butterfly
5. Call Butterfly 5. Strip 5. Box
6. Synthetic Call 6. Synthetic Put
7. Strap
74. Advance and Decline Ratio (ADR)
• Measuring the breadth of the broad
market
• Advance and Decline Ratio is a
cumulative sum of the daily differences
between the number of stocks advancing
(stocks closing in green) and the number
of stocks declining (stocks closing in red).
• Use same for intraday to gauge the depth
of markets
75. Advance and Decline Ratio (ADR)
Markets
(Index)
ADR Implications
Trending Up > 1 Bullish
Tending Up < 1 & moving in
favour of
decline
Overall markets not participating and
either will give up in favour of other if
prolonged (distribution)
Tending
Down
> 1 Overall markets not participating and
either will give up in favour of other
Tending
Down
< 1 & moving in
favour of
decline
Bearish & Strong liquidation . Fire Exit
Mode
Tending
Sideways
Neutral and zig
zag move
Nothing conclusive. Go to Goa
88. 52 Wk High Low
Bull
Daily basis High > Low (Accumulation)
Daily basis High < Low (Distribution)
Bear
Daily basis High > Low (Accumulation)
Daily basis High < Low (Distribution)
Extreme reading at both ends sign of caution
96. Chaos Trade
- How to identify
Satyam Scandal / PNB Scandal
( PC J / Rcom / R Naval / Star )
- How to Trade
- Execution
97. Events
- How to identify
RIL Demerger (Jan 2006)
Ranbaxy Bought out by Dai-Ichi (2008)
Telecom Price war
(Pharma (USFDA) / Recapitalisation / SRF /
Mindtree / PVR (Race 3))
- How to Trade
- Execution
98. Crude / Currency / Metal Trade
- How to identify
(Crude Rise & OMC / Airlines)
Currency Impact on Exporters /
Importers (Bullish IT (Pharma
bearish so not much)
- How to Trade
- Execution
99. Methodology
- CHARTS CHARTS AND PRICE ACTION
- Trend yearly to 5 min
- Overall Structure
- Macros
- Global
- Currency , Bonds, Commodity esp. Crude
- Inter-market co-relations
-Swing Trading Based on weekly moves
-Finding stocks trading near 52 week High/Low
& there respective distances from same
101. Methodology
- Intraday trade generation based on 1 - 5 - 15
min charts
- Segregate positional trade from intra-day /
swing trades based on momentum of
underlying.
102. SCALPING
- Hit & Run Scenario
- Taking small unidirectional move
- Irrespective of overall trend
- Small Profit
- Stop Loss is only FIRE EXIT
- Targets are uncertain & Open
- If trade turns profitable manage stop at faster
pace.
- Only doable in a volatile market