Let us weigh the pros and cons of roll over.
Initial bullish collar was established as follows :-
Futures 1 lot buy @ 18303
18900 CE 1 lot Short @ 223.90
18300 PE 1 lot buy @ 476.05
Maximum risk was = 255 points
Maximum profit was = 345 points.
BE @ 18558
The collar was closed as follows :-
The roll down was initiated while futures @ 17900 (Loss of 403 points)
Bought back 18900 CE @ 119 (Profit of 104 points)
Sold 18300 PE @ 692 (Profit of 216 points)
Net loss = 83 points (Please add charges)
New collar (rolled down) established as follows :-
Futures 1 lot long @ 17900
18500 CE short @ 218
17900 PE long @ 474
BE @ 18156
Maximum rink = 256 points
Maximum Profit = 344 points
==============================================
With new collar, the BE point has been brought down by 402 points.
New profit target point is now 18500 instead of earlier 18900 which looks quite achievable. If BNF crosses 18500, I will close the trade.
Profit will be = 344 (rolled collar) - 83 points (1st collar) = 261 points.
In a nutshell, the cost of bringing down 400 profit target down is 83 points. This is achieved without averaging the trade. (Traders know well the consequences of averaging a loosing trade). The roll over is achievable without increasing the burden of capital. (Traders know that averaging a loosing trade requires unlimited capital which is impossible task for anyone).
Protecting the capital or keeping the risk under control is the utmost important task of a trader. It ensures your survival in the market for pretty longer period. If you can survive in the market for longer periods, your chances of making money increases.
