HDFC Bank - Options Strategy Executed in my Account -- Outcome
HDFC BANK - OPTIONS STRATEGY EXECUTED IN MY ACCOUNT --OUTCOME
Lessons:
Even though the max loss was only 4500, I ended up registering almost 4 times the loss.
This indicates that there is no fixed risk thing in trading especially when exiting a trade is an issue.
My view on the scrip and the Bull CE spread was a hit as HDFC Bank hit a high of 1725 on 18-10-21.
When I looked at the spot, I checked the Strategy PNL and it was giving me close 5600-5700 gain.
So without much thinking, I exited the Short Call as that is the SOP.
The exit was almost immediate and I was happy as the liquidity was in place which is a must for exits.
My intended exit was at 81 when the Long CE was around 93. However, I had to make one adjustment to exit the Short CE.
By this time, the price had started the free fall.
The next I did was I placed an order at 81 as that is where the last trade was made.
I was unsuccessful as the premium fell further. I placed another Limit Sell Order at 77, 74, 71, and 67 but of no use.
None of my orders got executed and I was already in a loss by then.
HDFC Bank then started recovering and I held on to the Long CE - "In the Hope of it giving me at least a modest gain".
I held on to the CE only because the EOD prices were higher than the day low.
Even when Nifty fell on 20-10-21, this Option was doing alright and it appeared that I may be able to get a break-even exit.
Even on 21-10-21, there was no issue as such but then as Nifty was recovering, HDFC Bank started to fall.
This drove the premium down sharply and I had to make a tough call to place a Limit Sell Order at the Bid price to get "rid" of the CE.
On 18-10-21 itself, I had tried to exit at the market price, but Zerodha did not allow stating that it is an illiquid option.
So I learned very expensive lessons on the strategy.
I have been quite successful in executing strategies so far. This trade was taken by me after a gap of 9 months.
This trade was done with the results and I have till now not done such a trade. So I guess, I paid the price for it.
In hindsight, so many things could have been done. However, I have presented to you the reality as it hit my PNL.
With this dent, I am in no mood to take a real trade related to results-based Option Strategies.
I will now do a better job when Q3 results are announced in Jan 2022.
And as if what I endured was not enough, come Friday the 22-10-21 and HDFC Bank shot up to 1708 and the corresponding high of the CE that I was struggling to exit was 88!!
So I was hit for not being able to hold on to a position for one more night and by 35*550 = 19250INR.
This means I would have banked around 3K gains.
All this is the 20/20 vision in hindsight and what happened was like - the water down the bridge. I can only keep learning and improving.
What do you feel about this? How you would have handled this situation?
Please share your thoughts as I am all ears and eyes open to learn and understand different perspectives.
I wish you greater success in trading!
Umesh
23-10-21
Lessons:
Even though the max loss was only 4500, I ended up registering almost 4 times the loss.
This indicates that there is no fixed risk thing in trading especially when exiting a trade is an issue.
My view on the scrip and the Bull CE spread was a hit as HDFC Bank hit a high of 1725 on 18-10-21.
When I looked at the spot, I checked the Strategy PNL and it was giving me close 5600-5700 gain.
So without much thinking, I exited the Short Call as that is the SOP.
The exit was almost immediate and I was happy as the liquidity was in place which is a must for exits.
My intended exit was at 81 when the Long CE was around 93. However, I had to make one adjustment to exit the Short CE.
By this time, the price had started the free fall.
The next I did was I placed an order at 81 as that is where the last trade was made.
I was unsuccessful as the premium fell further. I placed another Limit Sell Order at 77, 74, 71, and 67 but of no use.
None of my orders got executed and I was already in a loss by then.
HDFC Bank then started recovering and I held on to the Long CE - "In the Hope of it giving me at least a modest gain".
I held on to the CE only because the EOD prices were higher than the day low.
Even when Nifty fell on 20-10-21, this Option was doing alright and it appeared that I may be able to get a break-even exit.
Even on 21-10-21, there was no issue as such but then as Nifty was recovering, HDFC Bank started to fall.
This drove the premium down sharply and I had to make a tough call to place a Limit Sell Order at the Bid price to get "rid" of the CE.
On 18-10-21 itself, I had tried to exit at the market price, but Zerodha did not allow stating that it is an illiquid option.
So I learned very expensive lessons on the strategy.
I have been quite successful in executing strategies so far. This trade was taken by me after a gap of 9 months.
This trade was done with the results and I have till now not done such a trade. So I guess, I paid the price for it.
In hindsight, so many things could have been done. However, I have presented to you the reality as it hit my PNL.
With this dent, I am in no mood to take a real trade related to results-based Option Strategies.
I will now do a better job when Q3 results are announced in Jan 2022.
And as if what I endured was not enough, come Friday the 22-10-21 and HDFC Bank shot up to 1708 and the corresponding high of the CE that I was struggling to exit was 88!!
So I was hit for not being able to hold on to a position for one more night and by 35*550 = 19250INR.
This means I would have banked around 3K gains.
All this is the 20/20 vision in hindsight and what happened was like - the water down the bridge. I can only keep learning and improving.
What do you feel about this? How you would have handled this situation?
Please share your thoughts as I am all ears and eyes open to learn and understand different perspectives.
I wish you greater success in trading!
Umesh
23-10-21
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