This risk can be minimised by buying higher level long dated call options. For example , you are bearish and you’re buying March end Put options of 18k levels, at the same time one can buy 19K level March end Call options by putting 10% of the total money that was put in Put options. So if market goes to 19k , your call options price might go up by 3 to 4 X , whereas your Put options price may become half (it does not go to zero). That way , you have very less risk of losing money.

Seeing the current ownership under Non-Institutions, improving the liquidity seems a possible reason. Non-Institutions hold 38.1% of the overall shares. Out of that –

1. ~66% with 9 entities/individuals
2. ~7% with pure retail (Individual share capital up to Rs. 2 Lacs)

The expectation might be that the pure retail ownership would increase due to price reduction after the bonus.

Details –

How We’re Playing This Market

As it is apparent that we’re bearish for at least for next 6 months, we are playing this market in many different ways .

a) We participate in counter-trend bounces (bear market rallis) whenever we feel that a rally of more than 800-1200 points can be expected . This we do by buying Index as well as Stocks in Futures.

b)We participate in downward rallis by shorting Index as well as Stocks in future

c) We’re not day to day traders ,so we don’t engage in weekly or monthly options.These happen to be very volatile and one can loose whole capital if one is not a technicals-expert , can’t sit in front of the screen whole day , does not have experience and is not trained in behavioural part of investing.

d) Our key strategy in current market
Our key strategy to play our bearish view is being executed by buying puts and that too very long dated. Currently we have bought 18000 and 18500 Puts for March End.

We keep on adding these puts whenever market goes up above 17200 ( when it goes down the price of puts goes up , so we don;t buy at that time)

Why 18000-18500 – becuase everytime market has turned back from that level so it has become a key resistance.

Why March End – Because March gives us time for our view to play out. Most of the people loose in options (even though their view might be right ) because time goes against them i.e. view does not play out with-in a given time frame. By playing March-end puts , we’re making time our friend , not our enemy.

How this works out :
Our expectation is that market may go down lower. If our view plays right , the price of our Put would keep going up ( but if our view proves wrong , the Put price would go down,thus we would loose money) .In this kind of trade, one does make multiply his money, but there’s a chance of a decent return .

Other advantage of this simple strategy is that our downside is known to us. In these options, one might loose all the money invested in buying these puts. But that’s the maximum risk whereas in many other strategies, the risk can be unlimited.

Caution : a) Returns would depend on timing of buying the Puts, if someone buys these 18000 puts when market is at 16000 and market does not go down further, there is a chance to loose money.

b)Also other obvious risk is that your view may not play right and you end up losing value of your Puts.

c) This needs lot of understanding and experience , so don’t try if you don’t understand these instruments, you’ve not practiced enough and your behaviour is very fickle ( you loose your sleep over overnight movements and M2M losses)

d) Here one should be prepared to loose all the money ,just like when you go to casino. Know your limit before entering the casino (with no expectaions of returns)

e) This is our strategy and we can exit or take a U-turn any day without putting any post – so don’t follow us on our strategies. This post is just to make you aware about the way we approach tthe markets.

Note :We played on the other side between March 2020 to Dec 2021 i.e.we were buying long dated Call options of next levels of Index. E.g. In March 2020, we were buying 12000 Calls of July and we kept on buying long dated Calls of next higher levels throughout the bull-run.

Hope this helps .

@hitesh2710 Sir,

Got up in the middle of the night for water and saw an email notification of your post & I had to read it & my sleep is gone!

You are not only fond of Ferrari, you will switch from a Bugatti to a Ferrari @ 200 mph if the Bugatti is found out to be Maruti in disguise .

Actually, I have considered if these (Nykaa/ PB/ Delhivery) will turnout to be a Naukri type (7 years of consolidation from 2006 – 2013 breakout) and if so, these have only completed 1 year listing & so I will have to incur humongous opportunity cost if at all.

As you said, the price action should give me that clue first hand. While they have already have given that clue because they are at lows while market rallied. So, the price action for the next 2 quarterly results will confirm whether it’s a Naukri or a Page or a dud. I still believe market wants to see consistency in few quarterly results before rewarding them.

6 more months of price action to satisfy the bug of conviction & patience in these 3 stocks and I will take a decisive action to hold or trim allocation. I will be objective sir & will report lessons & learnings post this.

For now, only half my PF is running/ walking with Dmart, Page, Triveni Turbine (please have a look at this stock).

Now, back to sleep