Friday, August 16, 2019

How to make 500 Rs Daily with 10k capital by option selling

Yes this is possible but needs some experience and a broker offering good leverage.
This is about option writing which 90% people don’t think of trying due to high capital requirements.

Let’s do some Maths behind why buying an option has probability of success merely 33% whereas if you sell an option the probability of success is 67%.
Lets try to understand what an option is.
In lay man’s term it is a contract signed between buyer and seller to buy or sell an underlying asset at a price known as strike price in stock market terms.
A simple example:
You want to buy a house which costs 50 lakhs as on today and you know government is going to announce a policy which can increase/decrease the price of the house . There are 2 parties involved in this deal you and the developer. Please note the price can increase or decrease after the policy announcement date say in next 30 days. don’t forget this :p
  1. You
    You want the price to decrease so you are expecting the value of underlying asset the house to fall.
  2. Developer
    Developer wants the price to increase so he is expecting the price of underlying asset to rise.
Now you don’t like uncertainty so does the Developer so you both sign a deal or contract that you will buy the home at 50 lakhs by paying a premium of say 25k so you bought a CE (call option) of strike price 50 lakhs with validity of 30 days post the policy is announced.
Similarly the builder signs a deal that he will sell the home at 50 lakhs by paying a premium of 25k so he bought a PE(put option) with validity of 30 days post the policy is announced.
Two possibilities of outcome
  1. Price IncreaseSuppose after the policy is announced the new price of the house is 55 lakhs so the contract you signed CE (call option) for 25k is now worth 5 lakhs and you save 4.75 lakhs on the increase price.

    Since the price is now 55 lakhs the developer would not want to exercise the PE he bought as the market price is higher than the price he agreed to sell at (strike price 50 lakhs). So developers 25k premium is now worthless.
  2. Price DecreaseSuppose after the policy announcement the new price of the house is 45 lakhs so the contract the developer signed for 25k is now worth 5 lakhs and he saves 4.75 lakhs due to this abrupt fall.

    Since the price is now 45 lakhs you would not want to exercise the CE option as market price is cheaper than price you agreed( strike price 50 lakhs) to buy at. So your 25k premium is now worthless.
This summarizes the derivatives and how it is a hedging instrument to cater volatility in the price. Now lets see the derivatives in the stock market and how time value of the contract plays a role.
So coming to the point how to make 500 daily from 10000 capital for that you need to understand a little more.
In stock markets also similar contracts like one we saw above are executed between two parties and they are of 3 types ITM( In the Money) OTM( Out of the money) and ATM( At the money options).
The most interesting thing here is the time value of the contract and this is why 90% option buyers loose money. ATM and OTM options have 0 intrinsic value which means they just have time value so as the options near expiry their premium erodes drastically. This is how we can make money selling options.
Now the usual question is, Why do people buy options even though their probability of success is just 33% ?
Simple answer capital requirement the capital requirements for buying an option is dirt cheap you can buy Bank nifty and Nifty options for as low as 500 INR or 10$.
Why in this world they don’t sell it even though probability of success is 66%?
  • Capital requirements are huge needs 50K to sell a single lot of option worth 60–70 Rs or 1$
  • A lot of patience is needed.
  • Max safe returns you can make in an expiry is around 5–7% and with leverage 20%.
  • Unlimited Risk the most dreaded word used when people talk about option selling yes the risk is unlimited but with proper option strategies one can have control on the losses.
80% of the option expire worthless and i.e. why more than 80% option buyers loose money.
Now you just have 10k and you thought you could not write an option but that’s not true any more. Below is a screenshot of one of my student who made 7.5k using 10k capital selling options.
Few Points to consider:
Yes making 500 from 10k capital is fairly achievable, making it everyday please read the below rules.
Rules for option selling
  • There are 22 trading days in a month and with modest accuracy of 65–70% you will be profitable 15–16 days and will loose 6–7 days just ensure you don’t loose more than 300 if your target is 500 so at the end of the month you will be net profitable. There is no holy grail or anything like 100% accuracy.
  • Have the positions hedged or deploy a strategy like Bull Call Spread, Bear call spread, Iron condors etc. by hedging trades you would know maximum loss you can incur in that trade.
  • Try to have high level view of the trend and macro economic factors.
Now you would be wondering Vinay just said that you need 50k to write a single option there is this broker called Astha Trade that gives good leverage for option writing i.e. 20X so you can sell Nifty and BN option at just 2500/- INR . I use this for just selling options and don’t recommend for Options buying. You might feel 35 Rs is too much for per lot but believe me for option selling this is the best in industry that offer leverage.

Open a paperless account in less than 5 mins and get 12.5% discount on brokerage. Usual charges 40 Rs per lot account opened through below link charges are 35 Rs per lot.

Also get trade ideas on my free telegram channel.

Happy Investing !!!

Sunday, March 4, 2018

Fundamental and Technical Analysis of Man Infra March 2018

Fundamental and Technical Analysis of Man Infra March 2018

Man Infra
About the company
The group is divided in to 2 verticals one foccussing on construction other one on Real State
Construction Vertical
Man Infraconstruction is a leading construction company in India that has executed construction work for some of the most significant port projects in the country. We continue to alter the structural landscape through several other prestigious projects in the residential, commercial, Institutional and industrial space as well. Our commitment to excellence in quality was personified through India's first premier private port project for Nhava Sheva International Container Terminal at Jawaharlal Nehru Port Terminal, Navi Mumbai in 1997.
Subsequently, we have successfully worked on five ports viz., Jawaharlal Nehru Port Trust, Mundra Port, Chennai Port, Vallarpadam Port and the Pipavav Port. Man Infra has successfully executed construction of high rise building with 3 Residential Towers of 55 storey which is one of the tallest towers’ in western suburb of Mumbai. We have relentlessly explored and seized construction opportunities across various business verticals.
As a natural extension and in line with the aspiration to climb up the value chain, Man Infra (The Group) has entered into Real Estate Development. The Group is currently developing premium Residential Projects with an approximate sale-able area of 5 million sq. ft. in various suburbs of Mumbai. We aspire to be one of the top builders in Mumbai.
Real Estate Vertical
A Leading Real Estate Developer from Mumbai, MICL Group is a one of the pioneering real estate developers with its base in Mumbai. Our legacy dates back to 50 years+ in the field of construction that began with our parent company, Man Infraconstruction Ltd. We may be just 7 years into the field of development, but definitely not new has 50+ years of experience in construction domain.
Fundamental Analysis
Current Price: ₹ 54.50
Book Value: ₹ 28.21
Stock P/E: 21.46 which is less than industry average.
Dividend Yield: 1.98%
Face Value: ₹ 2.00
52 Week High/Low: ₹ 74.60 / ₹ 38.05
Promoter holding: 62.04%
Pledged percentage: 0.00%
Profit growth: 68.82%
Debt to equity: 0.47
Net profit preceding 12months: ₹ 61.72 Cr.
QoQ Profits: have declined by -4.09%
Order Book not very strong enough.
Technical Analysis
The stock price has corrected nearly 40% of recent high but there is no sharp decline in OBV indicating strong hands continue to hold position in the stock.
The stock is available near a strong psychological support of 50 Rs if 50 is breached next support is at 38.
The dip in Nifty can be used to accumulate this stock and fundamentally looks really good for 30–35% returns in short term.
Such analysis are shared regularly for free on my free telegram channel for retail investors for real time updates and news. You can be part of it through the link Faadoo Stocks
Happy Investing !!!

Sunday, January 14, 2018

How is Ashirwad Steels & Industries Ltd for investment ?

How is Ashirwad Steels & Industries Ltd for investment ?

About the Company: Ashirwad Steels & Industries Ltd
The Company’s main business is manufacturing of Sponge Iron using Iron-Ore and Coal as the Raw Materials. It has two Sponge Iron Manufacturing Plants of which one is located at Adityapur Industrial Area, Ghamaria, Jamshedpur – 832 108, with an annual installed capacity of 30000 M.T. and the second one is located at Vill. & P.O. Veliminedu, Mandal Chityal, Nalgonda – 508 114, Telengana, with an installed annual capacity of 60000 M.T. The Sponge Iron is used as input by the Steel Melting Shops (Induction Furnaces) to produce M. S. Ingots/M. S. Billets which are thereafter re-rolled by the Rolling Mills to produce end steel products like TMT Rods/Bars, Plain Rounds, Angles, Flats, Channels, Girders, etc.
Besides the Company has two Hydrocarbon Gas Bottling Plants of which one is located at Vil. Kisnapur, Raigarh – 496 001, (Chhattisgarh), and the second one is located at Uluberia Industrial Growth Centre, Uluberia, Howrah – 711 315, West Bengal. The Uluberia based Bottling Plant has been given on lease to M/s. SHV Energy Pvt. Ltd.
Fundamental Analysis
It is a debt free company
Promoters have increased their stake in the company and are currently holding around 60% in the company
Stock is trading at 0.44 times its book value so appears undervalued.
P/E is highest amongst the industry peers It has a P/E ratio of 40 whereas industry average is 20
QOQ profits have declined by 150%
Technical Analysis
The stock took support on trendline and has moved 50% from there now may face a strong resistance around 20.
One can make an entry if the stock closes above 20 levels for 24 targets which is another resistance above 24 we may see 30+ levels
Markets appear too stretched to consider this as a value buy, people who have entered around 12 levels will now consider booking profits if the trend in Nifty becomes negative.
So if I would like to enter for long term I will wait for some correction and would enter around 10–12 levels or wait for next Quarterly results to see if there is any improvement in profits.
Such analysis is shared for free on our telegram channel Faadoo Stocks and below are some interesting charts for next week.
KTK Bank
Such analysis are regularly shared on our free telegram Channel Faadoo Stocks to help retail investors find hidden gems.
Happy Investing !!!

Thursday, December 28, 2017

Technical and Fundamental Analysis on Aurobindo Pharma Jan 2018

Technical and Fundamental Analysis on Aurobindo Pharma Jan 2018

Technical and Fundamental Analysis on Aurobindo Pharma.
Technical Analysis
The stock made a triple bottom and took support at trendline with good volumes there is a bullish Divergence in OBV indicating strong accumulation that has happened at current levels.
The RSI also indicates a reversal of trend from just being oversold trying to breach the 50 value from below.
Fundamental Analysis
Company has reduced debt.
Company has good consistent profit growth of 65.36% over 5 years
Company has a good return on equity (ROE) track record: 3 Years ROE 31.21
Promoter holding around 52%
The P/E is around 16 which is quite less comparison to the industry average of 25
Market Cap.: ₹ 40,118.25 Cr and Debt of just 3300 crores which brings the Debt/Equity ratio 0.08 among the safest
The only pharma stock which grew 15% YOY basis but did not participate much in the rally experienced by other small-cap Pharma stocks namely (Bliss GVS, Marksans, Mangalam Drugs) .
The fact the big bull Rakesh JhunJhunwala still continues to hold position in this stock is also an indicator that company is fundamentally good and we can expect a turn-around from this company and sector at large.
Happy Investing !!!!

Friday, November 24, 2017

Governments reaction to Stable rating from Standard and Poor

The government, after Standard & Poor's affirmation of India's sovereign rating and outlook, said the rating agency was more cautious in its assessment than Moody's but agreed that fiscal consolidation was a concern in financial year 2017-18.

On Friday, S&P reiterated its BBB- rating and 'stable' outlook for India. Also, that despite two quarters of weaker-than-expected growth, the economy was forecast to grow robustly in 2018-2020 and foreign exchange reserves to continue rising. Also, that sizable fiscal deficits, a high net general government debt burden and low per capita income detracted from the credit profile.

"They (S&P) have the same two concerns Moody's had -- fiscal deficit and low per capita growth. So, my sense is that S&P chose to play a little cautious this year, though their assessment is also almost in line with Moody's and possibly is waiting for some time to upgrade," economic affairs secretary Subhash Garg told reporters after S&P's announcement.

Last week, Moody's Investors Service upgraded India's sovereign bond rating by a notch, the first time in 14 years, showing confidence in the Narendra Modi government's initiatives such as demonetisation, the goods and services tax (GST) and efforts to resolve the bad debt crisis of banks.

"We are not disappointed but the hope will be that S&P will take an overall view, and on all the factors where the story may be much clearer next year, even on the fiscal side, growth story... perhaps S&P will also be able to take a more favourable view," Garg said.

News agency Press Trust of India quoted Sanjeev Sanyal, principal economic advisor as saying the reiteration of the rating was "a bit unfair".

S&P said in its report that given the planned ramp-up in public sector-led infrastructure investment and persistent deficits, especially at the state level, fiscal consolidation will remain difficult. Garg said the assessment of state debt, "to my mind, does not appear very sound", as states are constrained constitutionally from exceeding prescribed borrowing limits.

Garg reiterated the views he had presented to Business Standard last week, when he'd said 2017-18 was not an ordinary year in that the Centre had implemented GST, bank recapitalisation and other measures, and the effects of demonetisation were still being felt. Hence, there would be some effect on the Centre's fiscal consolidation path.

"This is a year of transition, lot of reforms are being done, structural reforms, fundamental in nature, which have made their impact on growth, on revenues and others. But, the commitment of the government to stay on course on fiscal consolidation in the medium term is completely there. Transition may induce some temporary blip but we have to still make that assessment. Transition is challenging, definitely. How much, whether it is substantial, whether it's anything meaningful, for that, the assessment is still to be made," Garg said on Friday.

Wednesday, November 1, 2017

Will Idea cellular be next RCom

Some fundamental Analysis before we jump in to any conclusion

Good network

Company has low interest coverage ratio
Company has low return on equity of 7.11% for last 3 years
Contingent Liabilities 55053 crores
Cashflow negative -613 crores
Profit Growth is -197.46%

Idea today moved around 7% as Bharti Airtel posted not very bad numbers but with Idea there is no chance the results will be bad and is expected to deliver a loss of -500 crores most of the profit will be used in paying interest on liabilities.

The stock again closed below resistance of 100 and selling in last 30 mins clearly showed weakness. 

The results will be much bad qoq basis last quarter the loss was just -61 cr and could be -500 cr the tower sale would just reduce the debt by 6000 crore still outstanding debt of 49000 crore could be next RCom in making

Reality Check

How many of your friends or family who used Idea continue to use it ?

It is providing a great opportunity to short or use bear put spread option strategy

Happy Investing !!!!

Tuesday, October 31, 2017

Should I apply Mahindra Logistics IPO ?

Mahindra Logistics IPO

During the financial year 2016-17, Mahindra Logistics reported total revenues of Rs. 2,676.25 crore and profit after tax (PAT) of Rs. 46.07 crore as against Rs. 2,077.13 crore and Rs. 35.97 crore in the previous financial year, there by generating a net profit margin of 1.72% in 2016-17 vs. 1.73% in the previous year. At Rs. 429 a share, the company is valued at 64.80 times its reported diluted EPS of Rs. 6.62 for the financial year 2016-17 and 50.12 times its annualised diluted EPS of Rs. 8.56.

The company is running its business with some wafer thin profit margins and they have been on a declining trend since FY 2013-14. During FY 2013-14, it reported profit margins of 2.08%, which have fallen to 1.72% in FY 2016-17. The company reported 29.45% as return on net worth (RoNW) during FY 2013-14, which has fallen to 13.11% in the previous year. Despite operating in such low margins business, I think seeking a multiple of 50+ times is not justified. I think it is the market euphoria which is making these companies price their issues on a higher valuations than what they deserve.

The valuations Mahindra Logistics is seeking are on a higher side but with what is happening in the economy, the logistic sector getting more organised and its unique business model, there is a huge scope for the company to improve on its profitability and margins.

I personally feel the valuations are far stretched and may not give much listing gains one can avoid.

Monday, October 30, 2017

What is RSI or Relative Strength Indicator

What is RSI?

RSI stands for Relative Strength Indicator. It is a momentous oscillator used to identify trend reversal


Who invented RSI ?
RSI was invented by Welles Wilder Jr.
What is concept of RSI? RSI calculates strength of stock trend and helps to predict their reversals. RSI value oscillates between 0 to 100. As per Wilder when RSI value is above 70 its is considered as overbought and when RSI is below 30 it is considered as oversold. Some traders use 75/25 or even 80/20 to define overbought and oversold.
A value between 35 to 65 is a no entry or exit point for traders who rely on RSI as primary indicator. However their movement can help supplement other indicators signal. Another use of RSI is to determine divergence between price and RSI. Divergence indicates trend reversals.

A divergence is formed when

a. In a downtrend RSI is making higher high and higher lows while price is making lower high and lower lows.
b. In a upward trend RSI is making lower high and lower lows while price is making higher high and higher lows.
Uses of RSI
1.Identify overbought stocks.
2.Identify oversold stocks.
3.Identify trend reversals.
4.Identify direction of the trend .
5.Excellent tools for swing traders .

Tips to trade with RSI.
1. A general rule of buying when RSI moves from below 30 to above with combination of another indicator like rise in volume or Moving average crossover or any other indicator of your choice.
2. A general rule of selling when RSI moves from above 70 to below with combination of another indicator like rise in volume or Moving average crossover any other indicator of your choice.
3. When RSI trend is falling and price trend is rising and RSI is in overbought state then a reliable sell signal is generated.
4. When RSI trend is rising and price trend is falling and RSI is in oversold state then a reliable buy signal is generated.
5. For those who use end of the day data may profit from RSI in 1-7 days or more days.

6. Less risky traders should wait for RSI move above 30 from below 30 to take a position. Aggressive traders sometimes even take 35/65 as oversold and overbought range.
7. RSI values can be altered for different types of stocks. For extremely stable stocks or small price ranging stocks a value of 35 may be a good entry point and for highly volatile stock a value of 25 may even be considered as high risk.
8. Trend reversal at 70 /30 is considered to be 75% accurate.
9. Trend reversal for divergence is considered to be about 80% accurate.
Divergence looses its significance in sideways market.

Warning :-
a. Buying stock just based on its value below 30 may lead to losses. In stock down trend RSI may stay below 30 for long time with continuous fall in price.
b. Similar to aforementioned point selling just based on RSI above 70 may reduce your profit.

c. In extremely strong trend , RSI can yield wrong results.
d. In some cases RSI and price divergence can last for longer time before trend reversal. Traders needs to be patient with it.
e. Not all stock movement will generate RSI buy/sell signals