General Trading Chat

vivektrader

In persuit of financial independence.
I always struggled in position sizing and controlling risk in swing shorts, as one can only carry shorts in futures (lot size is humungous in rupee terms and uneven, fixed). Unlike longs, it's almost impossible to keep risk at 1% in all short trades with exact position sizing.
Simple answer I found for above problem is to long the excess quantity in cash, so if I want to short sell 100 shares of a script whose future lot is 500, I can be long 400 shares in cash and one lot short in futures (entring both positions simultaneously).
There can be slight difference in case there is a relative movement between future price and spot price.
Stock Options are not an option for me, they are illiquid many a times and difficult to get out of.
Will be a bit capital intensive but will solve the problem.
Was common sense afterall, but came late into my mind.
 
I always struggled in position sizing and controlling risk in swing shorts, as one can only carry shorts in futures (lot size is humungous in rupee terms and uneven, fixed). Unlike longs, it's almost impossible to keep risk at 1% in all short trades with exact position sizing.
Simple answer I found for above problem is to long the excess quantity in cash, so if I want to short sell 100 shares of a script whose future lot is 500, I can be long 400 shares in cash and one lot short in futures (entring both positions simultaneously).
There can be slight difference in case there is a relative movement between future price and spot price.
Stock Options are not an option for me, they are illiquid many a times and difficult to get out of.
Will be a bit capital intensive but will solve the problem.
Was common sense afterall, but came late into my mind.
Good, but not as common as the term "CS" suggests . . .

Traders complain, when the margin is increased by 2/4% . . .
and here you are Happy to have come up with a MM which needs 300-500% margin . . .
as I said Not so Common . . . :up:


Happy :)
 

vivektrader

In persuit of financial independence.
Tax/Transaction fees will be high, esp on stocks. For a size of 100, tax will be paid on 500 + 400. 400 stocks is probably equal to tax on 1000 Futures.
Edit - actually thats intraday costs. Stocks cost for holding overnight will be even more.
The above I said, is for an expected move of 5-10% (successful sequential trades on daily), taxes won't matter for such a move.

Vivek
 
Another aspect on taxation is, you are booking losses on short term capital account against profit on business income head . . .

But all this would be a transitory phase, until he gets enough confidence and sufficient capital to trade sizes equivalent to the lot sizes

Happy :)
 

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