Trade that gave me 20 sleepless nights

  • There are many things to learn from market but the best things one can learn is from his own mistakes. So here I am sharing one of the best example of trade from which I learnt so many things during this single trade.
  • A trader can make many mistakes in their trade, and this one trade is the combo for all the mistakes. All possible mistakes (silly mistakes) I did in a single trade. I bet you will at least learn something from this small 5 minutes article and it’s worth a read for a trader.
  • Don’t try to protect your first mistake, better to quit at the first place.
  • Let me start from explaining my trade which gave me sleepless nights for 20 days.
  • It was 28th november 2018 (a day before monthly expiry). I planned a trade which was on ICICIBANK. As per the options chain data it looked like ICICIBANK will be expiring near 355 in November 2018, so I initiated 355 short straddle with total premium of 4.5. I missed to hedge the position on long side, although I did hedge on downside.
  • Next day there was a gap up opening in market and market opened in untested zone of full month (which means market can see a short covering on the expiry day). My ICICIBANK too opened with a gap up of 2.5% so I decided to hedge my 355 ce short with DECEMBER FUTURE, so I bought ICICIBANK DEC FUT @ 364.4 at opening itself. Although after a gap up ICICIBANK didn’t move much up, I somehow managed to come out profitably from ICICIBANK trade as shown in the first pic below. But now I was holding a ICICIBANK DEC FUT which was in 3 point (8000 INR) loss, instead of closing my position I opted to carry it with hedging. So I did sell on 365 CE sell @ 10 Rs Premium.

 

  • Complete trade which I took is shown in below image.So this was the first mistake I did, which was carrying a mistakenly taken position home although it was a loosing position. So if you commit a mistake get out at first place instead of trying to rationalize your mistake. Never carry a loosing position home.
  • “Ek galti to bhagwan bhi maaf karta hy”- yes Market gave us an opportunity to get out of the trade next day at my cost. Now greed came into picture and I wanted a profit from this trade and I did not close my position.
  • Now it was my time to get punished by supreme (market). The same day it closed 5 points down. I booked out gains from 365 CE and rolled over to 360 CE @9.7 Rs Premium. So I was still in a trade In a impression that I have my position hedged so I can handle my position even if it goes in opposite direction.
  • So let me tell you guys if anyone does hedge with shorting call/put he is not fully protected.
  • Now it was 3rd Dec 2018, ICICIBANK open = high was there, so Monthly charts started with a open=high. Ideally I should have closed my position there but I still didn’t do the same. Again one more mistake by not following your own setups , so punishment was indeed.
  • On 3rd december 2018, I shorted one more Call of 370 @5.55 to give more protection to my Future position.
  • Stock fallen few more points by 6th dec 2018, I shorted one more call of 365 CE @3.65 Rs Premium.
  • So by 6th december my position was one future long + 3 call short. (Indirectly we can say now even if stock goes up I will loose). Created a mess of the position such that neither on upside move nor on downside move I would be in a profit. ??
  • I BOOKED out gains from 360 & 370 CE on 6th December 2018 and rolled it over to 355 Ce @ 6.15 Rs Premium.
  • It fallen more on 10th DECEMBER , I booked out from 360 ce and rolled over to 350 ce @ 8 rs premium.
  • The Judgement day has came now, election day 11th Opened with huge gap down I booked out from 355 ce also and rolled to 345 Ce @7.6 Rs. Now my position turned like one future long from 364.4 + 2 calls shorts (345,350 ce with total premium of 16 Rs).
  • I have realized gains of approx. 35k from my calls which I used for hedging & unrealized loss of 65k approx. from my future. Was quit relaxed at that point as now I had 16 rs premium taken and felt now stock will not be falling more (the worst has been gone).
  • Now stock reversed from 337 to 354 in 2 days only and as per our options chain data as well as from chart it was having resistance in this zone of 356. So I closed my future long at 350.75 (realized loss of 40k). The biggest mistake came now, I closed my future but didn’t close my calls (345 , 350 CE).
  • So when a trader is doing hedging initially but closing only one side is dangerous. A trader should always close both it’s position together which I failed to do even though I know all this rules of my rulebook.
  • So if a trader doesn’t follow his own rulebook, market is always there to give a punishment.
  • So it’s my turn now to get punished, stock fired up like anything and was all set to fire more.
  • 18th December 2018, after lots of mistakes first thing I did correct when I found a breakout. I did sell 350,355 PE respectively to protect my 345,350 CE (which was deep ITM) now. Also shorted 370 CE.
  • So at 18th December , my position was 3 call short (2 deep ITM + 1 OTM) + 2 Put short (2 OTM)
  • NEXT DAY STOCK SHOOT UP Like anything (but my system gave me a signal of false breakout) & that’s where I took a perfect decision. I squared off all my PUTs in profits and Created fresh SHORT ON Future from 367.7.
  • Now on 19th December 2018, I turned completely short and kept a stop-loss of 371 for all my positions.
  • “Your mismanagement gets punished in market like wise Your good management gets rewarded by market”.
  • So I followed my setup, placed a stop-loss and let it run as long as it can. I got rewarded from market finally.
  • The day has finally came 21st December 2018, market fallen in a knee jerk reaction and I closed my ICICIBANK FUTURE with 11 points of gains.
  • Initiated new shorts on 365 CE also when I closed future.
  • I am carrying 4 call shorts as of now which I will be closing on this coming Monday.

  • Although I managed to come out with decent profit in this trade would like to share some learnings from my this trade which gave me 20 sleepless nights.

  • Learnings from my mistakes
  1. If you commit a mistake, be quick enough to accept it and close your mistake before it goes out of your control.
  2. Never carry a loosing position home.
  3. When you hedge your position, close your both position together.
  4. Even in positional trades one should apply a stop loss.
  5. Risk management is crucial part of trading, never take unmanaged risks.
  6. Follow your rulebook and control your emotions such that your nights won’t be sleepless as mine.

 

  • NOTE : TO PERFORM All THESE TRADES I HAVE USED Almost 6 LAC RS.
  • THE SOLE MOTTO BEHIND WRITING THIS SMALL ARTICLE IS “ONE DOESN’T ALWAYS NEED TO LEARN FROM HIS OWN EXPERIENCE, SOMETIMES IT’S BETTER TO LEARN FROM OTHER’S MISTAKE.”

  – Pathik Patel

@pathik03924121

This Post Has 4 Comments

  1. Thank you for sharing your experience

  2. Amazing learning

  3. Thank you for your lot of information.Trading means learning and experience equal to profit.

  4. THANK YOU

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