wiseman

I don't mind at all. Good question.

After one has made as well as lost money based on positions he/she has taken, one learns to be flexible and adaptable to the constant change in the markets.

There are 2 kinds of people in the case of researchers.

One kind is the theoretical kind that will learn a (generally imperfect) model or theorem and become dogmatic about it (as though it is perfect and Gospel). The lot includes such lumineries as Scholes, Merton, etc (Nobel winners) who built the Black-Scholes model of pricing using perfect market as the basis. This might have got them the Nobel, but the company they built to speculate - LTCM - blew up in 1998-99 spectacularly and nearly collapsed the International Financial markets. So, while their model is still taught in the classroom, it has not served the test of real markets. So, these models are useful to a point in understanding the variables involved, but do not help you trade successfully (which is one of the reasons you want to figure out the intrinsic price of any asset).

The other kind is the one that learns/builds models based on empirical data from the market and which assumes that there is always the possibility of an "impossible" event happening at any time (mostly when you least expect it) however remote it may seem (Lehman's apparently "impossible" collapse in 2008).

If you take dogmatic positions in the market you will get wiped out. Besides, the market is a moving entity which swings from one extreme to the other. Why would any sane person take a position and stick to it despite data telling him otherwise? Dangerous!

So, I have a model for option trading that keeps a timeframe of trading within 2 - 10 trading days (most times), buying both Calls as well as Puts (in a staggered way) and the aim is to minimise risk while making profit every trading day of the year.

And it seems to be working very well. Even on the day I lost money in my Put trade (bought 9th at 28 and sold 13th at 18), I made a significant profit on the Call side (bought at 25 and sold at a rate over 100!).

So, instead of being a dogmatist, learn to become a realist who has a system that worlks generally (so understand that it fails once in a while and keep stops to bail out in time) who moves when his system tells him to move in a particular direction.

No confusion then.

Btw, I still am selling on every rise and though short term outlook is bullish, longer term outlook even for India is distinctly bearish as far as I'm concerned. If this was a healthy rally, would NOT have made a new high of $1270 on the same day this rally also made a new high. Almost everyone out there is desperately trying to load up as much as possible, especially Central Banks (Bangladesh just went out and bought 10 tons of it last week). This unprecedented buying is a sign of deep fear in the markets about the world's economic imbalance in general and its repurcussions!

So, I trade with an upward bias while keeping an eye for when the market may suddenly crash! ... There is an old saying in the market. Bull market climb the stairs. While bear markets jump out of the window.

As 2008 showed, what you gained in 4-5 years, you could lose in 1 and if you had the misfortune to buy in 2006/07, then you were deep in the negative (in the darling stocks of those times, like Reliance at 3200, DLF at 1200, Sobha at 1200, etc - even today these are deep in the red as compared to their highs) and possibly still so. And we are nearing the position of being near the highs of this rally. If you buy today (rather than sell), where would you be after the next fall? Careful! And make your own decisions to buy and sell afte reading up diverse views on the markets.

cheers

pcpune

Well, 500 points from 20K on senx, well, its time to say balle balle...I am surprised there are still 62% people who believe 20K will NOT be breached...proves the fact that market reacts adversely to common/research/general perception.

At the start of this poll, only 8% people believed the market could cross 20K, and I was one of THEM.

wiseman

Was I lucky or what?! Though I did not believe that 20k would be breached.

But whats worrying is that gol.d is hitting new highs against the $$$. And this is apparently being done due to buying based on fear or as protection - against what?! Perhaps the $$$ going down significantly (watch the Dollar Index slipping below its supports) and a fear of loss of confidence in the $$$ as well as US Treasuries?

Therefore, in my view this rally will be rather risky as it will be faced with sudden high-impact influencers from the West. Like the recent rumor that the FED is planning to buy another $1 Trillion in Bonds. This will lead to serious weakening of the $$$ (strengthening the Rs and hitting exporters hard) and send stocks rushing up! All of which are dangerous for the medium/long term as they tend to end up in massive crashes with attendent large losses in asset values!

cheers

punerebuyer

Hi PCP

Need your expert views on

- Gujrat Alkali
- Ahmednagar forgings
- Mangalam Cement
- Hotel Leela
- UTV
- Tourism finance

Thanks in advance...

pcpune

I think generally all stocks except maybe Tourism Finance (which is pricey today) are second or third rung stocks, and there is a layer of 3rd,2nd and the leader in each of the segments. I firmly believe you should always buy the leaders/2nd or 3rd rungs, than risk on one of the companies which is like bottom of the pyramid.

Better buy a good mid-cap/small-cap mutual fund, and I believe they could better manage your money with these stocks.

simsim

i agree Mah composites NPM & RoE is low .thats why it is available with a market cap of just 35 cr with a annual sales of 45 cr & EBITA margin of 11-13 %

i see this as a oppertunity for investers to get this mahindra group company under its portfolio

when things will change for better growth as company is working hard to get over this the same Mah composites will not be available at current price

but i fully agree with u those who dont understand company business should never invest in such company

about your views about management & shareholders interest sorry my friend thats not true at all

cheers

mindguru

Well I dont mind people having opinions but when u try to justify your smartness by taking cheap potshots at Merton and co, I would expect you to know something about option pricing. I doubt u can solve a simple partial differentiation and also comprehend the strategy LTCM was adopting but u feel u are wiseman to give a discourse with such a naive strategy of selling naked puts. Please wisen up and grow up from selling from kormangala calls.

wiseman

Mindguru,

I will not go down to your level and get all emotional!

But where did I talk about selling puts? Given that I am risk averse, I have never sold (written) an option even once in my life, nor have I ever dabbled in Futures, not have I taken naked positions in options ...

But I do cover my option positions not by doing the boring, standard "strategies" you read in books - which as one of my friends said, minimise profits - but by doing something that covers "surprise market movement" but also provides profits both ways.

Btw, if the "genius" of LTCM could almost bring on the greatest financial crisis of modern times, then I'm better off with my strategies.

**************************
In mathematics, a partial derivative of a function of several variables is its derivative with respect to one of those variables, with the others held constant (as opposed to the total derivative, in which all variables are allowed to vary). Partial derivatives are used in vector calculus and differential geometry.
**************************

Where have you used this area in Math in the derivatives market? I have not. Neither have many very successful option traders, who don't even know that there are such sophisticated methods of blowing up the financial markets!!!

Maybe you could educate us on how successful you are in your attempts to use Partial Derivatives in Derivatives Trading or Product creation?!

Making wild statements don't cut ice with people who make money in the markets, dude. Have you made money on it? I will then become your student if your method is better than the one I use, thats about it!

cheers

pcpune

Well, you you think the management is transparent, just look at the Mahindra results, meeting deadlines, its performance for all its companies since last 20 years.

For me, Mahindras,Birlas,Goenkas create WORST Shareholder Value...

Tatas,Adanis,Ambanis,Agarwals....have created the most...

Its important to KNOW history than JUST the technicals.

wiseman

There is always the slip between the cup and the lip.

And it is reminder that we live in a world of probabilities and not certainties.

So, though I might ultimately be correct (and so will many others who think the worst is not yet over for the global economy), in-between the markets may go anywhere.

We may see the 20k mark crossed this time around and rather quickly. How long it will remain high and how high it will go depends on the duration and strength of the liquidity injection currently going on into our markets.

I have many friends calling me up and telling me that their portfolio has not gone up at all and in some cases is actually down.

Just so everyone is aware of the increasingly worsening situation in the macro fundamentals, Montek has just upped the Trade Deficit target for this year from $120 Billion to $135 Billion on the basis of record monthly deficits (while exports are rising slowly, imports are jumping sharply). As markets in US and EU implode, our exports will get hit even harder in the 2nd half until the local population wakes up to reality. The increase of $15 Billion is around 70,000 Crores and where is this going to come from? This will further put pressure on our interest rates.

Stay cautious.

cheers