F&O - HEDGING IN STOCK MARKET - TECHNICAL ANALYSIS
I have started putting some text on it. Would be good if interested people can go Wiki and read the definition of "What is FNO" & "What is hedge" & "What is Technical Analysis"
So discussion point is FNO, Hedge and Technical Analysis as people who knows me for a long knew it very well I am against above all (when it comes to fully depend on any of it). And this series (also Sept.) and today is an excellent example to convey my message.
As went through various message today across different forum and 90% people are talking they have loosed huge money in Infy today. Even check TM board on MCB too, now people are giving guidance once they burnt their fingers. Experience come only through mistakes. :)
Lets see who can catch it (though both was too tired that time) -
Jimmy Wales, USA, Co-Founder & Promoter of world's no. 1 website - wikipedia
Sandeep Kumar, Mumbai, Founder & Promoter of Brand MudraGuru
Event - MG with Jimmy Wales in Hotel Taj during his India visit, just 2 days prior to Barack Obama's Mumbai visit, & stayed at Taj. Spent a day with him from 11 to 11, while it was difficult for most of person even to meet him.
Good work by all for guessing.
Have Great Weekend.
========== LETS START WITH F&O ==========
What is FNO (Futures & Options) Trading –
This study is require before entering to FNO because first of all you do not pay the actual price to buy such no. of contracts of stock, you just pay a premium (say only 20%-30%) for that contract and not actual price. So, when time passes premium of Derivatives reduces (regardless of in which direction stock is going). It always calculated on time frame & volatility.
==== TO BE CONTINUED... ===
I have started putting some text on it. Would be good if interested people can go Wiki and read the definition of "What is FNO" & "What is hedge" & "What is Technical Analysis"
So discussion point is FNO, Hedge and Technical Analysis as people who knows me for a long knew it very well I am against above all (when it comes to fully depend on any of it). And this series (also Sept.) and today is an excellent example to convey my message.
As went through various message today across different forum and 90% people are talking they have loosed huge money in Infy today. Even check TM board on MCB too, now people are giving guidance once they burnt their fingers. Experience come only through mistakes. :)
Lets see who can catch it (though both was too tired that time) -
Jimmy Wales, USA, Co-Founder & Promoter of world's no. 1 website - wikipedia
Sandeep Kumar, Mumbai, Founder & Promoter of Brand MudraGuru
Event - MG with Jimmy Wales in Hotel Taj during his India visit, just 2 days prior to Barack Obama's Mumbai visit, & stayed at Taj. Spent a day with him from 11 to 11, while it was difficult for most of person even to meet him.
Good work by all for guessing.
Have Great Weekend.
========== LETS START WITH F&O ==========
Dear
All,
Instead
of repeated advice & suggestion you are burning fingers with Options.
Options are very tricky, you can understand it in simple terms as – Options are
like a top spin ball which seems so easy and we feel that we can hit a six, yes if
hit correctly could be a six but if missed in calculations then Duck.
I
personally experienced that (in traders category) it specially attract defeated
players (mean people who have lost good amount in stock market) and then they think
that now they can’t cover those losses without FNO because equity will take a long
time to recover their losses and they don’t have patience for such a long
period. So here I would like to emphasize that FNO are not for impatience
people, they will never earn in FNO, and they can make few deals but not
result.
Take
it this way – Before entering to trade, one need to decide for what he/she is
here, i.e. wither he want to play Test Match or One Day or T-20.
Most
of players like to play One day, that’s correct, T-20 is also going famous.
Well we consider One day. You need to make 250 runs to win (which is your TG in
stock market, where everyone come with a dream that he/she will earn xyz amount in
xyz days). Now if you are going to play one day then you need proper strategy,
that who will open the inning, who will play like Sehwag, who will play like
Dravid etc.
But
people forget all the rules and just start playing like K Shrikanth or Bhajji,
i.e. they want to hit six on every ball, they want to make world record in a
single day. Good, then what will be the result? 5 over 5-7 wickets down. Then
what? After losing almost all they looks like chasing to 10-15 RPO (runs per
over) but we always forget the real mystery that now we dont have sufficient
wicket (amount to put on risk) to put on risk, and finally they lose the match.
Again after a break they collect confidence and come to trade again, this time
they think they will play T20, i.e. either six or out. So this is the process
which continuously swallowing the innocent (yes but greedy or say impatience) traders.
In
short for unknown people who don’t know few simple basics of derivatives this
term FNO is like a ANAKONDA for them. In fact I too make wrong deals in Options and
that's remain most of time careful. And more importantly biggest mistake we do is
- Once its go up we fall under temptation (greed) and forget basics of stocks
and start wishing that it will give you 5X – 10X return, that’s the point and
in next 2-3 sessions it convert loss.
Remember
there’s no mathematics for this, it’s not market of 90s, its 2012 (Digital world, trades done on single click,
within fraction of second SL get hit), its era of tricks, no
moral, fake data presentation, loot are few words to define few big crocos of
stock market. It do not run on Technical Fundamental (it work in equities and
not in derivatives) it run only on how much they can earn by putting down a
stock or how much by pulling up the stock, why? Because they know Options are
just for a certain period of time while stock – one can hold till hundreds of
year or say till company is alive. So lets we try to have a look on what the hell this FNO is.
What is FNO (Futures & Options) Trading –
Derivative trading is also a type
of investment which you can do similar as Equity (but you need to register your
trade account for doing trade in FNO, your broker do all formalities, you just
need to sign separate form for it) at the stock exchange. We buy stock in
derivative trading (either future or options) in lot. Like in Equity you
are free to buy any no. of Equity but its not case in FNO. FNO comes with a
particular lot size (lot size depend on the market cap and decided by NSE
according to their formula for calculation, i.e. lot value require a sum of a
certain amount), so in short, in FNO you need to buy certain no. of contracts
of that stock (lot size) and you can multiple your buying in lot size. This
contract comes with a time frame that means you have to sell that stock within
that stipulated time frame.
What
above info give a thought or say word of wisdom? This mean you need knowledge of
that stock’s movement for that time frame, mean, you should know that in that
time frame where the stock will go. Like Current series expiry is Sept 28 to
Oct. 25 and suppose your stock is Dabur India, on 28 Sept it was opened at
124.25, now you need to study of various facts and moves of this stock till
Oct. 25, i.e. now you need to get clue through your study that where this stock
will be on 25 Oct. (long view), or say where it can go till 12 Oct. (mid view)
or say where it can go on 5 Oct. (short view) or on Intraday basis.
This study is require before entering to FNO because first of all you do not pay the actual price to buy such no. of contracts of stock, you just pay a premium (say only 20%-30%) for that contract and not actual price. So, when time passes premium of Derivatives reduces (regardless of in which direction stock is going). It always calculated on time frame & volatility.
