Stray Thoughts

The Powergrid IPO makes a lot of sense. Yes, we should apply for it.

A raging bull market is going on in Silver.  A little less, but significant enough, in Gold. Our TV channels keep on talking about stocks while the big money was being made in precious metals. If you have control over your trading, meaning you can exit if prices do not move your way, then Gold may have some upside left. I would avoid Silver for now.

ANAS asked “are volatile markets, profitable for traders, who go for writing an option?
(i assume them to be profitable, )
REQUESTING YOU TO CORRECT ME IF I AM WRONG

My Notes: Yes, traders who write an option, (meaning Sell an option) should do so after a large increase in volatility has occured. Volatility expansion is followed by contraction when the value of options will fall, quite sharply, sometimes.

ANAS asks another quesion on mobile enabled trading. “NSEINDIA & BSEINDIA both have launched MOBILE TRADING FACILITY. With that, we can access to our trading terminal, directly from our highend, GPRS enabled mobile handsets. (with direct streaming rates, net position, multiple market watch etc. )”

My Notes: I think this is downright silly. Any trader who is so involved in day trading will probably have a laptop with a portable internet connection. Why should he use a small screen mobile? And, those who are not professional traders will simply get caught in this trading by mobile craziness. Keep trading simple. If you are moving about, you can as well avoid trading on that day.

Keep a Watch on VIX. A low VIX is a sign of complacency. India Vix is quite low. Therefore, follow the up move, but have a clear exit plan.

One Way Street

The Nifty remains well above 6000. We should remember that the same index was at 2500, two years ago, in 2008. Therefore, at 6280 yesterday, the market has done remarkably well. Sentiment was already positive. Now, thanks to QE2 (Quantitative Easing round 2 announced in the USA), the feel good factor has turned into a bubble. We are now told – this market cannot go down, because – this time it is different.

Here are some thoughts:
1. It is never different. All markets go through cycles of optimism and pessimism. We are currently in the optimism cycle. The trend is up, so traders should be looking to go long. This has nothing to do with QE2, or, Mr Obama’s visit, or any other ‘news’. Trend is up because prices are going up.
2. It is possible to lose money buying within a bull market. Some reasons are – Leverage, tight stops, bad selection of stocks, over trading. You will note that all the reasons are actually within the control of the trader. Therefore, a sensible trader should make money in runaway markets – of the kind we are seeing now. Just exercise some control.
3. Do not go short. This is easy to understand. By shorting, you are tryng to catch the corrections inside a bull market. So, why not try to catch the main trend itself?