Thanks a lot for sharing the strategy with so much detail.
This will be even more disastrous. Retail Traders are not afraid of losses, you think they will think even once about the taxes 
Jokes apart, I don’t think this will happen. Retail Traders are a very small part of the market. Most of the heavy options trading is done by HNIs and Ultra-HNIs. It would be stupid to hurt their sentiments. And don’t forget, government gains the most from this trading. Government earns close to 40,000cr annually from STT and the GST charged on it.
Personally, I get this feeling, from now on, before every budget we will get to hear such rumors. It is equivalent to the dream of Middle - class " Yeh budget mai shayad taxes kam honge." I know for sure, a tax on FnO would hurt the rich and ultra rich, even more than Retail traders. Paying a 30% tax on a 1000rs of extra income monthly, is actually not a bad deal.
But lets see what happens. I just hope they don’t take such drastic steps. Education is much more effective than mere Restrictions. This will just mean this, Rich can have an option to get even richer because they have money to loose. And for someone who is really good at trading has no option but to give 30% as tax, just because he or she is a Retail Trader.
2 Likes
Hi
Thanks for sharing this detail. I am unable to figure out how to save myself when fat finger trades cause market distortions.
For example if the intrinsic value for an option I have sold is 10 rupees, but for a few minutes during the day the options starts trading at 10p. Now if there is sufficient liquidity in the market then my stop loss would get triggered. But if the market is illiquid then I would get a margin call from the broker. I have read a few such cases happening on Indian exchanges over the past couple of years. How can I protect myself in this situation?
So you can’t completely avoid this. Even my Algo couldn’t survive in Sept2023 when the option movement was pathetic and fat finger trades were just adding to the problem. That’s when I realised even my option strategies which have a stop loss, should have a hedge. Hedging is the only way you can avoid this.
1 Like
You said clients. What license does one need to trade on clients capital? If not a license, then what legal structure can be set up to trade with clients money?
So actually you don’t need a licence to create and Market these strategies. I am using this only for myself. There are softwares and some website like Algotest and Quantman, where you can create the strategies and deploy then directly into your trading account. The money stays with you only.
Ok. But even your hedge would depend on sufficient liquidity being available at that point of time. And I am not sure if there will be sufficient liquidity at a price which is so far away from the price of the underlying. What has been your experience?
Well if you are only considering far out of the money option selling, I don’t do that. As you said, there are liquidity issues and risk reward given the margin I have to give for few rs premium, does not make it worth it. I don’t go far out.
But you have to accept these challenges. I am not saying I am completely protected in case of fat finger trade but this is something that is beyond my control.
1 Like
I was reading my older posts and realized that its been over a year since I updated about my own portfolio. There have been many developments, portfolio changes but the allocation strategy remains the same. Identify companies with strong fundamentals and sound businesses with positive tail winds and preferably a sunrise industry.
| STOCK PORTFOLIO | ||||
|---|---|---|---|---|
| NAME | PRICE | QUANTITY | INVESTMENT | ALLOCATION |
| ICICI BANK | 783 | 10 | 7830 | 5.55% |
| HDFC BANK | 1576 | 8 | 12608 | 8.93% |
| HDFC LIFE | 670 | 15 | 10050 | 7.12% |
| SBI CARDS | 850 | 12 | 10200 | 7.23% |
| POLYCAB | 6236 | 2 | 12472 | 8.83% |
| 360 ONE WEB | 1050 | 13 | 13650 | 9.67% |
| KEI | 1519 | 6 | 9114 | 6.46% |
| KPIT | 1138 | 11 | 12518 | 8.87% |
| AURIONPRO | 1668 | 4 | 6672 | 4.73% |
| BAJAJFINSV | 1480 | 5 | 7400 | 5.24% |
| DR LAL | 2361 | 3 | 7083 | 5.02% |
| ZEN TECH | 888 | 3 | 2664 | 1.89% |
| NUVAMA WEALTH | 4686 | 3 | 14058 | 9.96% |
| WABAG | 1493 | 3 | 4479 | 3.17% |
| METROPOLIS | 1728 | 6 | 10368 | 7.34% |
As you see there are a few new names and I have exited some stocks for various reasons. Starting with the new stock-
VA TECH WABAG
I was very fascinated with the water industry. Every year I read the news about drying and polluted rivers, reducing the Underground Water Levels and the recurring cases of drought and water shortage every year. I realized this problem is not getting solved any time soon in India, but this also meant such companies are not given much attention. I started reading articles about how Middle East Countries are battling the water shortage. That is when I can across Wabag.
With an Order Book of more than 15000 cr, this assures of clear revenue outlook for at least the next 3-5 years. They ended this year with a 3300cr Revenue, a significant growth over last year. In one of their concall I noticed that majority of revenue guidance is coming from operating and maintenance activities for project that have been executed in the last few years. Orders are pouring in from the Middle East and now almost 66% of Order Book comprises of Projects in India. This is supported by the growing government spending on cleaning up Indian Rivers. Recently we witnessed the Mahakumbh and read how Water Treatment Plants along the river banks helped the whole event to be carried out safely. In Delhi, the Yamuna Cleaning Project is impossible to achieved without the use of Large Water Treament Plants and STPs.
Coming to the financials, revenue growth has been muted in the last few years, but the revenue guidance is good and the order book is strong and growing. Since, the maintenance and Operating business is a high margin and stable source of revenue, I expect a moderate revenue growth due to project completions and increasing Net Margins supported by higher share of High Margin Business.
Some negative and obvious factors that can affect Wabag is slowing Goverment Spending on Water Purifications and the delays in Project Completions. Another factor is cancelling of orders like we saw the Saudi Government cancelling a tendor last year.
Given the current conditons of water avaliability and the need for such solutions in India, I expect a very good future given everything falls in place. I don’t expect huge returns in next 2 years but in 5 years this can be a good multibagger stock.
Coming to the exits, I exited TATA Consumer, GUJ Flurochem, Kabra extrusion, Minda Corp, Idea Forge and SBI life, mainly due to deteriorating fundamentals and better investment opportunities in other stocks.
1 Like