Trading Stock Futures - Profitable Even On A Down Day

I have been harping on this power of leverage that Stock Futures enjoy. This power has been evident in Indian markets even today. From the time the Indian markets opened today on 7th July 2010, there has been immense selling pressure. In the first half, Indian markets took cue from weak Asian markets and then got fully hugged by Bears after European markets opened weak in the second half. There was just no escaping the relentless selling by Bears. Nifty gave up all its gains it made yesterday.

In such a scenario, if you were a retail investor there was no room to hide, trading in cash segment. Like it or not, retail investors are perenial Bulls and cannot imagine going short. And in cash segment, today was just not the day for going long. But its a different story if you are trading in Stock Futures. Power of leverage will help you to make reasonable money on the long side by exploiting the intraday volatility. Let me illustrate the point by highlighting the following trades which were squared off today as per my recommendations at http://www.stockezy.com/ :-

1. Bharti Airtel July Futures :
   Bought at 273.5 and covered at 278.5. Lot size = 1000.
   Investment = Rs 54000/-.
   Profit = 5x1000= Rs 5000/-.
   Remarks : This lot was bought today morning and squared off intraday with reasonable profit of Rs 5000/- for investment of Rs 54000/-. If one had bought the scrip in cash, it would  have been difficult to exit with profit of just Rs 5/- per share. For making Rs 5000/- profit in cash segment, one would have had to invest Rs 2,73,500/- in this scrip.
2. Cummins India July Futures :
   Bought at 596 and covered at 602. Lot size = 500.
   Investment = Rs 59000/-.
   Profit = 6x500= Rs 3000/-.
   Remarks : Here it would have been even more difficult to exit with a profit of just Rs 6/- per share, if one had traded the scrip in cash segemnt. To achieve a profit of Rs 3000/- you would have had to invest Rs 5,96,000/- in cash segment.

Today's closed trades in Stocks Futures yielded total profit of Rs 8000/- (5000+3000) against a total investment of Rs 1,13,000/- (54000+59000). That means a return of 7.1% on investment in long trades, on a day totally in the grips of Bears. Hope I have made my point amply clear about power of leverage in stock futures trading.

PORTFOLIO ANALYSIS - SAMPLE 7 (J P SHARMA)

Presently we are going to do an interesting portfolio analysis of Mr J P Sharma where the choice of companies is rather fascinating. There is immense scope in this portfolio for impressive gains over the next one year. Shall we begin then?

Unitech
Holding 500 shares at an average price of Rs 83. Closing price on 23 Sep 09 was 109
6 mnth tgt- 160, 1yr tgt- 200
Since you are sitting on profit and market correction is expected soon, you may like to sell 50% of your holding at about 120 and release your capital. After the correction you may like to pick up Unitech at 75/80 level. Then hold your position for one year's target of 200.

Suzlon
Holding 500 shares at an average price of Rs 96. Closing price on 23 Sep 09 was 94.6
6 mnth tgt- 180, 1yr tgt- 320
Suzlon should be bought at every dip. So be ready to add to your holding in small packets till level of 80. Such accumulation in the scrip will pay you handsome dividends in one year. Sell your complete position once the scrip reaches the price target of Rs 320.

DLF
Holding 90 shares at an average price of Rs 343. Closing price on 23 Sep 09 was 423.6
6 mnth tgt- 700, 1yr tgt- 900
DLF may correct till 300 and may on extreme conditions go down as much as 250. You can keep a stop loss of 385 and keep holding your position. You may then re-enter the scrip at 300 for the price target of 900 in one year or so.

Bhartiartl
Holding 50 shares at an average price of Rs 612. Closing price on 23 Sep 09 was 413.5
6 mnth tgt- 550, 1yr tgt- 750
Hold your position in this scrip and plan to add to your position during the correction. Fall below 390 can take the scrip to 340/350. Buy 50 additional shares at 350. Hold the scrip for one year's target of 750.

Mundra Port
Holding 50 shares at an average price of Rs 610. Closing price on 23 Sep 09 was 537.5
6 mnth tgt- 800, 1yr tgt- 1100
Mundra port can slide down to 400 if it closes below 520. Double your holding if the scrip touches 400. Hold your position for one year's target of 1100.

RNRL
Holding 200 shares at an average price of Rs 140. Closing price on 23 Sep 09 was 88.15
6 mnth tgt- 145, 1yr tgt- 190, 2 yr tgt- 250
RNRL can correct to 70 once it closes below 83. Keep accumulating the scrip from 70 downwards till 60. Hold your position till one year's target of 190.

Alok Industries
Holding 1000 shares at an average price of Rs 22.45. Closing price on 23 Sep 09 was 22.7
6 mnth tgt- 33, 1yr tgt- 42
Alok Industries can fall to 15 level but you should keep holding your position. You should start accumulating at dips right from 19 till 15. You can then sell your positions comfortably at one year's target of 42.

SBI
Holding 60 shares at an average price of Rs 343. Closing price on 23 Sep 09 was 2142
6 mnth tgt- 2300, 1yr tgt- 3200
You have SBI at IPO price so just keep holding it till its one year target of 3200.

GMR Infra
Holding 100 shares at an average price of Rs 143. Closing price on 23 Sep 09 was 140.7
6 mnth tgt- 200, 1yr tgt- 260
GMR Infra may correct to 110. You may start building up your position from 110 downwards. Hold the scrip for one year's target of 260.

RPL
Holding 160 shares at an average price of Rs 146. Closing price on 23 Sep 09 was 130.4
6 mnth tgt- 200, 1yr tgt- 235, 2 yr tgt 290
RPL can move down to 110 during the coming market correction. But you should only think of adding to your present position. Sell only when the scrip touches 290.

NTPC
Holding 260 shares at an average price of Rs 198. Closing price on 23 Sep 09 was 208.8
1yr tgt- 300
NTPC looks quite dicey below 200. You have a choice to move out of this scrip at current market price and re-enter at 170. It may go down to even 150 level, but over one year it will surely touch 300.