Staring At Massive MTM Losses - What Should I do Now?

What Should I do Now?

  • Do Nothing. Nifty might close at around 5800 by March end

    Votes: 6 22.2%

  • Book losses and save your skin!

    Votes: 10 37.0%

  • There are other strategies to save the position.

    Votes: 10 37.0%

  • Serves you right for betting so much! haha!

    Votes: 3 11.1%
  • Total voters
    27
  • Poll closed .
smartcat

smartcat

Active Member
#1
#1
I have 400 Nifty 5400 call (March expiry) options bought @ Rs. 335 on 22nd Feb 2012.

Initial investment - Rs. 1.34 Lacs
Current value of 5400 call - Rs. 147

Mark to market losses - Rs. 75,000.

Yes - and you guessed it right. I'm quite new (3 months) to options. I know this is sheer foolishness to have taken such a huge position - but such daredevilry resulted in massive profits in February :p From now onwards, I only intend to take smaller positions.

But what do I do with this position? If I square off position, I will be in profits overall (Feb profits + Mar losses) - but I don't like the idea of losing 75k this month. What are the chances of Nifty closing at 5800 by the end of this month? Do I let the position remain, and stand the risk of losing Rs. 1.34 Lacs or stop my losses at Rs. 75k? Or are there any other strategies I can try out to save the position or profit from the current situation?
 
Last edited:
S

SexyTrader

Well-Known Member
#2
#2
smartcat said:
I have 400 Nifty 5400 call (March expiry) options bought @ Rs. 335 on 22nd Feb 2012.

Initial investment - Rs. 1.34 Lacs
Current value of 5400 call - Rs. 147

Mark to market losses - Rs. 75,000.

Yes - and you guessed it right. I'm quite new (3 months) to options. I know this is sheer foolishness to have taken such a huge position - but such daredevilry resulted in massive profits in February :p From now onwards, I only intend to take smaller positions.

But what do I do with this position? If I square off position, I will be in profits overall (Feb profits + Mar losses) - but I don't like the idea of losing 75k this month. What are the chances of Nifty closing at 5800 by the end of this month? Do I let the position remain, and stand the risk of losing Rs. 1.34 Lacs or stop my losses at Rs. 75k? Or are there any other strategies I can try out to save the position or profit from the current situation?
Click to expand...

Cutting losses is always the best option! You can always re-enter the position wisely the next time round and make up for the lost amount slowly...

Waiting for the markets to listen to you is not wise :thumb:
 
DanPickUp

DanPickUp

Well-Known Member
#3
#3
Hi

Some kind of neutral strategy could be some thing like this:

You could sell now atm calls. The money you get you could use to buy cheap otm puts and otm calls. As you see in the analyzing picture, you then would have a small chance on each side to reduce your loss but you also take more risk on the upper side as you could fall in the whole.



This is just an idea with no guarantee for nothing. Test it on your software as I not can give any prices and strikes you have to follow. The example shown above is a test made in the Dow Jones.

Good luck

DanPickUp
 
smartcat

smartcat

Active Member
#5
#5
DanPickUp said:
Hi


You could sell now atm calls. The money you get you could use to buy cheap otm puts and otm calls.
Click to expand...
If I sell 400 Nifty 4300 call @ Rs. 160, I'll get Rs. 64,000. I like the idea of buying puts with this money (in case markets move down). Need to create a graph to see what'll happen if Nifty reaches 5800 levels or stays in current range though.

NTrader42 said:
You can double your position at nominal additional cost, buy more calls from the profits you have already made, what say? :thumb:
Click to expand...
NTrader Ji, Isn't it supposed to be a risky strategy to average down?
 
NTrader42

NTrader42

Well-Known Member
#6
#6
smartcat said:
NTrader Ji, Isn't it supposed to be a risky strategy to average down?
Click to expand...
Bhaiya risky to hai, what is not risky? You will be taking the same risk if you buy puts now, what if you buy puts and we close at 5500?

If you cut everything now and come back to trade next month, what will you do?

Will you not take risk then? Can you trade without taking risk?

Be happy you are facing these question, when in overall profit and not when only 23.5% of you capital is remaining :thumb:
 
SavantGarde

SavantGarde

Well-Known Member
#7
#7
Just Hold your position till next Friday... depending on what we see on Friday... we shall decide the course of Action...!!!

If you do anything as stupid as this AGAIN... then you shall be directed to the terrace of the Tallest building in your neighbourhood...:)

SG

smartcat said:
I have 400 Nifty 5400 call (March expiry) options bought @ Rs. 335 on 22nd Feb 2012.

Initial investment - Rs. 1.34 Lacs
Current value of 5400 call - Rs. 147

Mark to market losses - Rs. 75,000.

Yes - and you guessed it right. I'm quite new (3 months) to options. I know this is sheer foolishness to have taken such a huge position - but such daredevilry resulted in massive profits in February :p From now onwards, I only intend to take smaller positions.

But what do I do with this position? If I square off position, I will be in profits overall (Feb profits + Mar losses) - but I don't like the idea of losing 75k this month. What are the chances of Nifty closing at 5800 by the end of this month? Do I let the position remain, and stand the risk of losing Rs. 1.34 Lacs or stop my losses at Rs. 75k? Or are there any other strategies I can try out to save the position or profit from the current situation?
Click to expand...
 
NTrader42

NTrader42

Well-Known Member
#8
#8
SavantGarde said:
Just Hold your position till next Friday... depending on what we see on Friday... we shall decide the course of Action...!!!

If you do anything as stupid as this AGAIN... then you shall be directed to the terrace of the Tallest building in your neighbourhood...:)

SG
Click to expand...
Hey SG

Why not few others also join in? we are getting the same stuff at less than 1/2 the price, what say?

If you can help the cat to reach breakeven then just by following the trade we can do 111% :thumb:
 
smartcat

smartcat

Active Member
#9
#9
SavantGarde said:
Just Hold your position till next Friday... depending on what we see on Friday... we shall decide the course of Action...!!!

If you do anything as stupid as this AGAIN... then you shall be directed to the terrace of the Tallest building in your neighbourhood...:)

SG
Click to expand...
OK. Will wait for one more week and not touch the position.

But I might have done one more stupid (but not too financially damaging) move between the first post and now - but I won't reveal that here! :eek:

I guess its better if I don't login to my brokerage account at all for the next one week! Or else, my itchy fingers could just worsen the current situation.
 
You must log in or register to reply here.
Thread starter Similar threads Forum Replies Date
S How did satyam computers share price fell by a massive 82% intraday? Equities 8
W Staring an investment in MF Mutual Funds Discussion Forum 0
R Sebi fines Rs 1-cr for massive IPO fraud Initial Public Offers (IPO's) 0

Similar threads