NSE REINTRODUCES DO NOT EXERCISE INSTRUCTIONS; TO MINIMIZE LOSSES WHEN TRADING OPTIONS

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The National Stock Exchange will reintroduce a ‘Do Not Exercise’ (DNE) stock option instruction from April 28, 2022 onwards. With the reintroduction of this DNE instruction, a stock market investor can now minimise his/her loss and eliminate the risk of a physical delivery to a certain extent.  Let’s find out more about how this DNE instruction can help an investor minimise a potential loss in a stock option trade and also help eliminate physical delivery risk up to a certain extent. DNE was first introduced in 2017 when the Securities Transaction Tax (STT) used to be charged for the entire contract value, unlike today, where it is charged for the option premium value. By using a DNE instruction, clients could tell their brokers not to exercise the option strike price if the STT amount was greater than the premium value of the respective option contract. But it was discontinued in October 2021 as the STT tax law changed.

What Makes DNE Option Feasible?

On march 31,2022 , the shares of Hindalco closed at Rs 449.65. This meant every long put holder of the Hindalco 450 PE option contract who did not settle his trade before expiry had to deliver the shares mandatorily. One lot of Hindalco 450 PE had 1,075 shares, so the total value of one lot was Rs 449.65*1,075=4,83,373.75. So, either the holders of this put option had to give this amount of money in cash to their brokers, or, they could default, and then this would create a systematic risk for the broker’s operation.

Let’s say for instance that Hindalco is trading at Rs 450. Assuming the monthly stock put option Hindalco 450 PE is trading at Rs 1.2 strike price (the price at which the put or call option can be exercised) for 1 lot (1075 shares), so the money required to buy this option will be Rs1.2*1,075=Rs1,290. The broker will need to collect Rs 1,290 for this trade from you. But if you fail to close this trade before the option expires, then you will have to pay Rs450*1,075=Rs 4,83,750 (assuming Hindalco stock is trading at Rs450/share) at the contract expiry.

Most stock brokers do not allow leverage trading in options, and hence collect the full option premium price upfront. Now, if a large number of clients default on their obligations to pay for their option contract, then it could create a ripple effect in the market. This is why implementing a DNE instruction could help minimise this risk of default, and protect brokers, investors, and other stakeholders.

5 F&O STRATEGIES THAT CAN HELP TRADERS MAKE MOST OF VOLATILITY

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Rises and falls are an inherent part of investing in the stock market. Each phase of the market has its unique characteristics, and it takes an appropriate approach with the right mindset to limit losses or maximize profits, as the case may be.More often, investors fall into illusions and try a long period of correction and stagnation, which leads to negative portfolio values. Contrary to what investors might expect, gains are never linear and are mostly lumpy.
Most stock investors are only buy-side and have no plan to protect the portfolio against potential fluctuations in the market, resulting in underperformance Stock price movements occur in only a few trading sessions. The solution to this is to be a patient investor, as stocks always go up over the long term provided funds are placed in quality stocks with strong fundamentals. Here are some useful techniques that would help you through the volatile phases of the market.

1. Protecting the portfolio
Hedging is an important part of any bumpy ride in the market. One can hedge a portfolio by buying nifty put or bear put spread i.e. H. with monthly contracts or long-term options after understanding the composition of the portfolio. The hedging would depend on the type of stocks in the portfolio and their beta. For example, in a portfolio with a large-cap name like Nifty, it's easy to get into beta and plan a hedging strategy versus mid- and small-cap names. A portfolio with mid-cap names involves choosing the right hedging instrument (Nifty or stocks), the right strike price and amount for the spread, and finally monitoring the position and exit.

2. Create short positions in stock futures
In a bear market, selling futures offers an opportunity as many weak stocks fall sharply. It's always wise to go with the trend until it won't bend anymore. In a weak market trend, the trading short position should be more than taking a long position.a. Based on a top down approach, one can pinpoint the weak sectors and stocks to initiate short ideas to generate alpha in the market. Stock specific put purchases and bear put spreads can also help seize the opportunity during a market correction phase.

b. To pick stocks, T is ideal for picking a stock that has a weak structure. A moving average with crossover and trendline breakdown are some of the technical indicators to identify undershort stocks. Another derivative indicator to identify short stocks can be based on the addition of Open Interest (OI) (short building and long unwinding), higher writing calls and stocks with lower put-call ratios.

3. Generating returns through call writing
Writing calls is the best and most popular way to reduce the cost of holding positions and get additional returns on an existing position.a. To do this, investors must opt ​​for stocks to write options/puts based on stock-specific liquidity and maintain a safety margin when writing strikes. The strike price may be based on the buffer and a sufficient premium yield. Traders need to monitor the position by inserting certain alerts into the system that will help in deciding on an exit or trailing mechanism.b. Writing calls only brings some inflow as a premium, but a larger rise in stocks beyond writing strikes may not help produce a desirable actual return. It is more suitable for participants who are looking for a consistent cost reduction and a specific percentage win scenario.

4. Long & short trades
Pair trading provides an added benefit in such market scenarios as many pairs such as HDFC Bank and HDFC are highly correlated and offer opportunities when they deviate from their mean. The risk is comparatively low when trading pairs as both stocks have long and short positions in the market.

5. Trading in option strategy and option spreads
When market sentiment is bearish, volatility usually remains high, as does the option premium along with higher market risk. Option writing is not recommended in higher implied volatility (IV) scenarios, even if the option premium is high. It is better to opt for Butterfly and Iron Condor strategies than just selling out of the money (OTM) calls and puts. Selling or buying a futures contract must also be hedged with protective puts and calls to mitigate risk. This exercise will help avoid any panic when making margin calls.

Traders are advised to liquidate most naked positions intraday and avoid carrying too much leverage until the India VIX (volatility) drops to the comfort zone. Fundamental analysis is the guide to long-term investing. Similarly, technical analysis is the best tool for traders to make profits in this ever-evolving market.

4800 PROFIT BOOKED IN TODAY'S OPTION CALL PUT TIPS

OPTION TIPS GIVEN IN TODAY'S POST TO CHECK VISIT http://optioncallputtradingtips.blogspot.com/2022/04/blog-post_13.html

NIFTY 17650 CALL ROCKSSS ACHIEVED TARGET 40  BUY GIVEN @ 25 PROFIT OF 1500

HDFC 2400 PUT ROCKSSS ACHIEVED TARGET 55 BUY GIVEN @ 44 PROFIT OF 3300

NET PROFIT 4800

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OPTION CALL PUT TIPS FOR 13 APRIL 2022

BUY 1 LOT NIFTY 17650 CALL @ 25 TARGET 40

BUY 1 LOT HDFC 2400 PUT @ 44-45 TARGET 54-55

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OPTION CALL & STOCK FUTURE TIPS ROCKSS PROFIT 38250

 STOCK FUTURE & OPTION CALL PUT TIPS GIVEN IN TODAY'S POST TO CHECK VISIT http://optioncallputtradingtips.blogspot.com/2022/04/option-call-stock-future-tips-for-1.html

BANKNIFTY 37200 13 APR PUT ACHIEVED TARGET 199 BUY GIVEN @ 160 PROFIT OF 1950

NBCC 40 PUT ACHIEVED TARGET 1.4 BUY GIVEN @ 1 PROFIT OF 4800

HCLTECH 1150 CALL ACHIVED TARGET 29 BUY GIVEN @ 24 PROFIT OF 3500

PROFIT IN OPTION CALL PUT 10250

VOLTAS ACHIVED BOTH THE TARGET 1290/1300 BUY GIVEN @ 1280 PROFIT OF 15000

UPL FUTURE ROCKSSS ACHIVED BOTH THE TARGET 811/815 BUY GIVEN @ 808 PROFIT OF 13000

PROFIT IN STOCK FUTURE 28000

OPTION CALL & STOCK FUTURE TIPS ROCKSS PROFIT 28250

STOCK FUTURE & OPTION CALL PUT TIPS GIVEN IN TODAY'S POST TO CHECK VISIT http://optioncallputtradingtips.blogspot.com/2022/04/option-call-stock-future-tips-for-1.html

BANKNIFTY 37200 13 APR PUT ACHIEVED TARGET 199 BUY GIVEN @ 160 PROFIT OF 1950

NBCC 40 PUT ACHIEVED TARGET 1.4 BUY GIVEN @ 1 PROFIT OF 4800

HCLTECH 1150 CALL ACHIVED TARGET 29 BUY GIVEN @ 24 PROFIT OF 3500

PROFIT IN OPTION CALL PUT 10250

VOLTAS ACHIVED 1ST TARGET 1290 BUY GIVEN @ 1280 PROFIT OF 5000

UPL FUTURE ROCKSSS ACHIVED BOTH THE TARGET 811/815 BUY GIVEN @ 808 PROFIT OF 13000

PROFIT IN STOCK FUTURE 18000

CHAMBLFERT OPTION PLAIN VANILLA STRATEGY FOR APRIL 2022

 BUY 1 LOT CHAMBLFERT 520 CALL @ 10-10.4 

OPTION CALL & STOCK FUTURE TIPS FOR 12 APRIL 2022

BUY 2 LOTS BANKNIFTY 37200 13 APR PUT @ 160 TARGET 199-200

BUY 1 LOT NBCC 40 PUT @ 1 TARGET 1.4

BUY 1 LOT HCLTECH 1150 CALL @ 24 TARGET 29-30

STOCK FUTURE CALL BUY VOLTAS 2 LOTS ABOVE 1280 TG 1290/1300 SL 1268

STOCK FUTURE CALL BUY UPL 2 LOTS ABOVE 808 TG 811/815 SL 803 

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STOCK FUTURE & OPTION CALL PUT TIPS ROCKS PROFIT OF 27180

 CALLS GIVEN IN TODAY'S POST TO CHECK VISIT http://optioncallputtradingtips.blogspot.com/2022/04/blog-post_11.html

NIFTY 17500 13 APR PUT ON FIREE ACHIEVED TARGET 50 BUY GIVEN @ 39 PROFIT OF 1100

BEL 260 CALL ACHIEVED TARGET 5.3 BUY GIVEN @ 4.2 PROFIT OF 4180

SYNGENE 680 CALL ACHIEVED TARGET 29-30 BUY GIVEN @ 20 PROFIT OF 7650

NET PROFIT IN OPTION CALL PUT 12930

TATASTEEL FUTURE ACHIEVED 1ST TARGET 1380 BUY GIVEN @ 1370 PROFIT OF 4250

HAVELLS FUTURE ACHIEVED 1ST TARGET 1284.50 & ALMOST HIT FINAL TGT 1296 MADE A HIGH OF 1291 PROFIT  BUY GIVEN @ 1274.50 PROFIT OF 10750

TATACHEM FUTURE ACHIEVED 1ST TARGET 1011.50 BUY GIVEN @ 1006.50 PROFIT OF 15000

NET PROFIT IN STOCK FUTURE 30000

STOCK FUTURE & OPTION CALL PUT TIPS ROCKS PROFIT OF 27180

CALLS GIVEN IN TODAY'S POST TO CHECK VISIT http://optioncallputtradingtips.blogspot.com/2022/04/blog-post_11.html

NIFTY 17500 13 APR PUT ON FIREE ACHIEVED TARGET 50 BUY GIVEN @ 39 PROFIT OF 1100

BEL 260 CALL ACHIEVED TARGET 5.3 BUY GIVEN @ 4.2 PROFIT OF 4180

SYNGENE 680 CALL ACHIEVED TARGET 29-30 BUY GIVEN @ 20 PROFIT OF 7650

NET PROFIT IN OPTION CALL PUT 12930

TATASTEEL FUTURE ACHIEVED 1ST TARGET 1380 BUY GIVEN @ 1370 PROFIT OF 4250

HAVELLS FUTURE ACHIEVED 1ST TARGET 1284.50 BUY GIVEN @ 1274.50 PROFIT OF 5000

TATACHEM FUTURE ACHIEVED 1ST TARGET 1011.50 BUY GIVEN @ 1006.50 PROFIT OF 5000

NET PROFIT IN STOCK FUTURE 14250