THE ULTIMATE LOSS RECOVERY STRATEGY
— By Divyam Parashar
1. Strategy Overview
This is a strategy that must be used wisely, so that you can make money out of it, any strategy that you get must be used wisely, you should not have blind faith in the market as this market is everchanging and extremely dynamic, therefore, be careful and be disciplined because this strategy requires extreme discipline.
Since this is a loss recovery strategy, you must have a capital that is 3 times more than what you have lost, so for example you lost 1 Lakh rupees, your capital would be 3 Lakh rupees and your risk per day would be 30k Rupees which is 10% of you capital.
Now, you what do you have to do? You must make a long straddle in the market on expiry at 2:00 PM (You can adjust it when you get the closest premium rates) meaning you must buy the Call Option and Put Option of the same strike price, this strike price would be the At the Money (ATM) strike of Nifty 50.
In the example below nifty 50 is prices at 17038 at 02:00 PM afternoon, so you round it off to the nearest strike price which is 17050 and you buy 17050 Ce and 17050 Pe.
2. Method of entering the trade.
Now that you know the strike price, you check the premiums of both 2-3 minutes before it 2 PM so let’s say at 1:57 PM the premiums of Call and Put options are 20 and 25 respectively. Now as mentioned in the above example your capital is 3 Lakh and risk per day is 30k, now you divide this risk into 2 trades because you are buying 2 options, so in each option you must invest 15k.
So, for 17050 call option you place a limit order to buy 750 Contracts @ 20 each and for 17050 put option you place a limit order to buy 600 Contracts @ 25 each.
3. Method of exiting the trade
You must exit the trade at 3:25 Pm when the markets are about to close, now if the market has given a movement in the upside after you entered you PE’s premium would become 0 whereas the premium of CE would increase in proportion to the movement in nifty. Whereas, if the market does not give a descent movement, you end up losing all the premium you invested in, but this does not happen very often if you follow all the rules and read this document closely.
4. Rules to follow
5. My personal advice
The first thing that I want to say is that follow these rules carefully so that you get the most out of this strategy.
Now I gathered the data of my trades and back test a bit more and noticed that this strategy gives better results on those expiries when India vix has a % change of greater than -0.53%
This strategy has a potential to recover your loss between 4 to 9 weeks with an accuracy of 52% and a return of 600% in 57 weeks on employed capital.
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