Friday, April 23, 2010

Harvesting Time in Intra-day Futures Trade : Through Stockezy

In my last post I had mentioned about this community investment platform called Stockezy (http://www.stockezy.com/) where investors in stock markets help each other to firm up their own investment decisions. And lately I have been closely associated in rendering advice to this community. In the following paragraphs I would like to illustrate the nature of  my recommendations and the outcome of such calls.


On this day of 22nd April 2010, volatility ruled the roost in Indian stock markets. One must admit that it was a tough day in office for traders. What started off as a uninspiring and unsteady rise from day low, accelerated into a  spectacular bull charge at around 11AM. And from 1.30PM to 2.30PM markets threatened to break free from day's high of 5332. But that was not to be. Quite contrary to expectations, markets tumbled suddenly and dramatically to retrace almost all the intra-day gains, catching most traders on the wrong foot.


If we analyze intra-day movement of Nifty, we find that Nifty rocketed from day low of 5221 to a high of  5332. This means that Nifty notched up an intra-day gain of 111 points from day low. But from day high it plummeted to 5246 in the last hour of trade, which means that Nifty lost 86 points from day high. At close Nifty managed to lift itself by 20 odd points, but the damage was already done. Bulls were caught on the wrong foot and there was no place to hide for many long-side-intra-day-traders.


Against the backdrop of circumstances just described, let us now evaluate the performance of intra-day trades in stock futures which were executed as per my recommendations. Today I had given two sell calls of stock futures during market hours. This was at a time when the market was reverberating  with the sound of bulls all around. Many may think that as an act of bravado or even misplaced defiance. But before jumping to any conclusion, it will be my earnest appeal to thoroughly examine the performance of these sell calls:-

1. Siemens Apr Futures:- Recommendation was for selling one lot between 734/736 for target of 725 with stop loss at 738. The scrip made a day high of 735 and fell sharply to hit the target. The point to note here is that in a raging intra-day bull market, the high of the scrip was exactly within the recommended sell price range. It was a Rs 2/- range given for a scrip worth  730 plus and yet the scrip could not break free of this tight sell range. Moreover, notice the tight stop loss of just Rs 2/- above the recommended selling price.
Now for calculating profit, if we take the average of the recommended price range then our sell price works out as 735. This sell position met the given target at 725, thereby accruing a profit of Rs 10/- per share. Since the lot size is 752,  
total profit  = 10x752 = 7520/-



2. India Infoline Apr Futures:-It was recommended to be sold between 117/118 for target of 115 and stop loss of 119. The scrip reached a high of 117.35 and then started falling. As the scrip fell, the target of 115 was met. If we take a careful look, here again the scrip could not break out of the recommended selling price range of 117-118. Even the stop loss given was only Re 1/- above the selling range.
For the purpose of calculating profit it is assumed that one could sell at 117.25 and then covered the position at given target of 115. Since the lot size is 2500, 
total profit = 2.25x2500 = 5625/-



Overall profit in intra-day trade from selling two stock futures = 7520+5625 = 13145/-