You just need one day like today to make money on options. I converted the peanuts purchased yesterday into cashwenuts today. Thanks to some short covering, resulting in a mercurial rise in Nifty (up more than 4.5% from previous close), the price of the OTM call options I had purchased yesterday jumped from Rs 7 to Rs 14. This was obviously very very unexpected! But it happens in the kind of unpredictable markets we have nowadays.
There is nothing to party though. I also squared off my previous purchase (my first trade) where I have made a substantial loss. Net net, loss making two deals; the latter just minimized my overall loss.
However, in the current economic environment, the following may make sense:
(a) long term value investing: accumulate in a step wise fashion (like a Systematic Investment Plan) extremely defensive businesses at bargain values. A SIP because of the unpredictability of the market and one’s inability to time the bottom. One can find some value for sure now.
(b) trade using options: allocate a risk capital and bet on the market using options to keep control on the loss. Obviously, one can make a huge loss here too by piling up such individual loss making bets. Unpredictability guarantees volatility. It need not mean bearishness only.
Filed under: Investing | Tagged: call options, Investing, nifty
