This is part III of the article DCF Analysis – an example. Please read the article from the first part before continuing with this one
This return of 13.47% was accumulated over a 3 year period. Hence, to make a comparison, we should annualize it.
To understand how annualization works, take this example.
You invest an amount of 100 for 3 years at the rate of 10% and don’t withdraw anything in between. How much money will you get at the end of 3 years?
First year principle = 100
Your first year income = 100 * (1+ interest rate) = 100 *(1+10%) = 110
Second Principle = First year principle + First year interest income = 110
Second year income = 110 *(1 +10%) = 121
Third year principle = second year principle + second year income = 121
Third year income = 121 * (1+10%) = 133.10
Hence, at the end of 3 years, you get a total of 133.1
Actually, the simple way to calculate this is the following formula:
Final Value = Initial Principle * (1+ annual interest rate) ^ no. of years
= 100 * (1+10%) ^3
= 133.10
Hence, if we know final value, then we can calculate the effective annual interest rate in reverse calculation as follows:
Final Value = Initial Principle * (1+ annual interest rate) ^ no. of years
So annual interest rate = (Final Value/Initial Principle) ^ (no. of years) – 1
Now, for 13.47%, the annual interest rate comes out to be 4.3% only.
To cross-check : 100 * (1 + 4.3%) = 113.467 = 13.46%, which matches the value exactly.
On the other hand, for simple plus-minus calculations, we received a profit of 23.76%. Corresponding calculations give an annualized return of 7.36% - which is incorrect as compared to the correct figure of only 4.3%.
Hence, if you take the realistic time value calculations, you will observe that the simple plus minus calculation will always give a highly bloated and incorrect value for profit calculations. We MUST understand this very clearly.
---Modified after comment from Nilesh-----
The reason why I gave a detailed example here was because the 4.3% annual return that you are actually generating on your RISKY stock market returns (over and above the risk free rate of 9%), is this extra percentage justifiable with respect to what is offered by the RISK FREE bank accounts or bonds?
Secondly, We have considered all the investments with POSITIVE RETURNS. Not a single stock investment has been assumed to give negative or loss making returns. The moment we take negative returns even for 1 or 2 stocks, the 4.3% will come down drastically.
Thirdly, this article is not only to compare your returns with those Bank accounts and bonds, but to actually learn to compute the right way of profit/loss.
---Modification Ends -----
That is why I always insist on making correct calculations and then see what you have done in the past, what your positions are in the present and would you be interested in avoiding these mistakes for the future.
Tomorrow, I’ll continue with some more parts of options trading tutorial.
Have questions, please read the comments and post your views and queries in the comments section which helps in open discussion and avoids duplicity of questions.
You may be interested in reading my previous articles. Here is the link to Table of Contents in a chronological order.
Friday, 28 September 2007
Thursday, 27 September 2007
Quotes for the day!
Quote No. 1:
There are OLD Traders, There are BOLD, But, there are NO OLD and BOLD Traders.
Trade Cautiously!
Quote No. 2
People who know, don’t speak.
People who don’t know, speak
The choice is yours!
There are OLD Traders, There are BOLD, But, there are NO OLD and BOLD Traders.
Trade Cautiously!
Quote No. 2
People who know, don’t speak.
People who don’t know, speak
The choice is yours!
Sunday, 23 September 2007
Trading Systems - I
Following my previous article Making Money in Stock Markets, many readers have left comments in search of trading system, trading on options, etc.
I dont want to discourage any of you - but it seems to me that readers are not getting the point!
Some questions to ask yourself:
-To develop a financial system, you need knowledge. Do you have that knowledge and TRAINING?
-Do you have TIME to first get the TRAINING and then trade continuously like Nalin and Sujata are doing?
-Can you keep up your TEMPRAMENT to trade throughout your life and take trading as a full time career? Can you make changes to your trading system as the markets changes during your entire life?
Basically, these 3 questions tell one thing - to become successful in stocks and investments, you should have 3 T's - TIME, TRAINING and TEMPRAMENT.
If you are lacking in even one of them, then trading and investments is NOT for you.
Across the world, thousands of people join financial courses (MBA, etc.) with an ambition to learn trading and earn easy money (I am one of them). By the time them finish the course and realize the truth of investment and money making, hardly 1% of them are left with the courage to actually take trading as a career. The reason – after learning finance, they know that they cannot make great profits easily.
Even the 1% who do take trading as a career, how many of them are successful?
Of the successful, how many can carry on their success for their entire life???
The fact is that there is no system that can be designed to yield enormous profits consistently, year after year.
To add to this article, sometimes I hate these so-called successful traders. They are successful, so they end up showing up in such interviews and articles. However, they will never reveal their secrets. Instead – in an attempt to keep their trading secrets, they may tell something that is either half-cooked or incorrect - atleast from the point of view of the audience.
Add to it the ignorance and lack of knowledge of interviewer, and see what is the end result of publication of such an interview or article.
The end result - Audience ends up making a fool of them, though the successful trader may not do so intentionally. We should understand that communication is a 2 step process - What is told by a speaker is not necessarily what is actually understood by the listener. Then, add to it a third party intermediary, like a rediff interviewer – things go from bad to worse.
Continue to Part II
I dont want to discourage any of you - but it seems to me that readers are not getting the point!
Some questions to ask yourself:
-To develop a financial system, you need knowledge. Do you have that knowledge and TRAINING?
-Do you have TIME to first get the TRAINING and then trade continuously like Nalin and Sujata are doing?
-Can you keep up your TEMPRAMENT to trade throughout your life and take trading as a full time career? Can you make changes to your trading system as the markets changes during your entire life?
Basically, these 3 questions tell one thing - to become successful in stocks and investments, you should have 3 T's - TIME, TRAINING and TEMPRAMENT.
If you are lacking in even one of them, then trading and investments is NOT for you.
Across the world, thousands of people join financial courses (MBA, etc.) with an ambition to learn trading and earn easy money (I am one of them). By the time them finish the course and realize the truth of investment and money making, hardly 1% of them are left with the courage to actually take trading as a career. The reason – after learning finance, they know that they cannot make great profits easily.
Even the 1% who do take trading as a career, how many of them are successful?
Of the successful, how many can carry on their success for their entire life???
The fact is that there is no system that can be designed to yield enormous profits consistently, year after year.
To add to this article, sometimes I hate these so-called successful traders. They are successful, so they end up showing up in such interviews and articles. However, they will never reveal their secrets. Instead – in an attempt to keep their trading secrets, they may tell something that is either half-cooked or incorrect - atleast from the point of view of the audience.
Add to it the ignorance and lack of knowledge of interviewer, and see what is the end result of publication of such an interview or article.
The end result - Audience ends up making a fool of them, though the successful trader may not do so intentionally. We should understand that communication is a 2 step process - What is told by a speaker is not necessarily what is actually understood by the listener. Then, add to it a third party intermediary, like a rediff interviewer – things go from bad to worse.
Continue to Part II
Trading Systems - II
This is part II of the article, Trading Systems - I. Please read the article from part I before continuing with this one
One more thing to note is that both Nalin and Sujata are FULLTIME traders. That is the business for them. They are immersed in it with their heart and soul. Their qualification, experience, and the large amount of capital money that they have (with which they can bet on and are capable of suffering losses) adds to their benefit. Do we have such advantages compared to them?
Nalin mentioned that he quit his well paid job and did research for more than a year in search of finding a trading system. Yet, he almost gave up. Just by luck he spotted an opportunity at the fag end. Do we individuals have the courage to do the same?
With the way Sujata fought against her disease, she had only trading as one of the career options. Do we also have the courage to quit our job and take a year break to learn about the markets and suffer losses in the process and be sure to come out successful at the end of everything?
Another thing that Sujata mentioned in her interview is:
Could you share your success mantras for our readers?
• Read all the advice that you get from various business television channels, newspapers, friends who understand the stock markets but be extremely cautious and disciplined when you act on this advice.
• Never extend your trading bets beyond your means. I speak to my friends; get investment and trading ideas from my brokerages (she is registered for online trading with Reliance Money, Indiabulls [Get Quote] and Kotak Securities).
Nobody can carry on making money just by listening to all the publicly available information – as I’ve explained in terms of Efficient Market Hypothesis in my previous article.
Concentrate on your job or business, or become a full-time trader – nothing works in between. That's what I mentioned in a previous article. Leave your investments to market risk by investing regularly in ETF’s or IF’s. Go for systematic investment plan (SIP). Unless and until you know the fine details about the market and products, don’t jump into it.
Please read the comments and post your views and queries in the comments section which helps in open discussion and avoids duplicity of questions.
You may be interested in reading my previous articles. Here is the link to Table of Contents in a chronological order.
One more thing to note is that both Nalin and Sujata are FULLTIME traders. That is the business for them. They are immersed in it with their heart and soul. Their qualification, experience, and the large amount of capital money that they have (with which they can bet on and are capable of suffering losses) adds to their benefit. Do we have such advantages compared to them?
Nalin mentioned that he quit his well paid job and did research for more than a year in search of finding a trading system. Yet, he almost gave up. Just by luck he spotted an opportunity at the fag end. Do we individuals have the courage to do the same?
With the way Sujata fought against her disease, she had only trading as one of the career options. Do we also have the courage to quit our job and take a year break to learn about the markets and suffer losses in the process and be sure to come out successful at the end of everything?
Another thing that Sujata mentioned in her interview is:
Could you share your success mantras for our readers?
• Read all the advice that you get from various business television channels, newspapers, friends who understand the stock markets but be extremely cautious and disciplined when you act on this advice.
• Never extend your trading bets beyond your means. I speak to my friends; get investment and trading ideas from my brokerages (she is registered for online trading with Reliance Money, Indiabulls [Get Quote] and Kotak Securities).
Nobody can carry on making money just by listening to all the publicly available information – as I’ve explained in terms of Efficient Market Hypothesis in my previous article.
Concentrate on your job or business, or become a full-time trader – nothing works in between. That's what I mentioned in a previous article. Leave your investments to market risk by investing regularly in ETF’s or IF’s. Go for systematic investment plan (SIP). Unless and until you know the fine details about the market and products, don’t jump into it.
Please read the comments and post your views and queries in the comments section which helps in open discussion and avoids duplicity of questions.
You may be interested in reading my previous articles. Here is the link to Table of Contents in a chronological order.
Friday, 21 September 2007
Making money in stock market -I
Shankar has left the following link in the comment of one of my previous post How Interest rates affect stock prices – II.
The link is: At 28, a paraplegic, she makes her living from the stock markets (Opens in a new window). Please read this interview carefully.
The article is actually an interview with one Sujata Burla, who seems to have made considerable amount of money: On her total investment of 15 lakhs (or 1.5 million), she makes a MONTHLY profit of an average 10 to 15 percent, that means she makes a cool 1.5 to 2.25 lakhs each month. As claimed by the article, “September 19, 2007, when the Nifty was up 186 points, Sujata made a cool Rs 600,000 in a single day.”
Now, there is nothing wrong in this news or interview and the claims made. Infact, in my previous article on Traders, market Makers and Individuals, I’ve clearly mentioned that traders do make handsome profit and they earn their living of it.
In addition to the story of Sujata, I can also quote certain instances that trace back to 2005. Here is a story (again on Rediff) about one person called Nalin Pasricha (so-called Systematic Trader). Have a look at this article describing his fortune: Your PC can help you make millions.
Then, after reading the article, do NOT forget to read the comments from the reades which are available at :Readers’ Comments.
See how so many wealthy individuals, so called NRI’s are willing to seek advice and services from Nalin Pasricha, even willing to buy his trading system. All this based upon just one article being published in rediff
The article on Nalin was published in 2005. Till date, I don’t think any of the readers may have received any contact details of Nalin Pasricha. So many people after him, so many willing to give away their wealth to him for earning enormous profits, yet it will be impossible for anyone to find anything about Nalin Pasricha’s contact details.
My understanding is that Nalin knows the right thing and he is doing the right thing by not coming into limelight. He knows that a financial model that he is following will work only if he keeps it as a secret. The moment it is revealed to the world, it will no longer remain profitable. Repeating an example of Infosys: If I know today that Infosys (currently trading at 2000) will be worth 4000 a year later, I will immediately buy it. If more and more people know about it, then the demand for infy stock will increase. It will increase to such a level that infy will no longer be sold, there will be only buyers and no sellers. Even if someone sells it, he will sell it at a price that is near 4000 – the future predicted price of infosys. Hence, a model works only if it is limited to a person and is tested rigorously.
Then, Nalin can also do one thing: Don’t tell the secrets of trading to others, but take money from others and manage it on their behalf. Why is he not accepting moneys openly from other people and manage it on their behalf?
Continue to Part II
The link is: At 28, a paraplegic, she makes her living from the stock markets (Opens in a new window). Please read this interview carefully.
The article is actually an interview with one Sujata Burla, who seems to have made considerable amount of money: On her total investment of 15 lakhs (or 1.5 million), she makes a MONTHLY profit of an average 10 to 15 percent, that means she makes a cool 1.5 to 2.25 lakhs each month. As claimed by the article, “September 19, 2007, when the Nifty was up 186 points, Sujata made a cool Rs 600,000 in a single day.”
Now, there is nothing wrong in this news or interview and the claims made. Infact, in my previous article on Traders, market Makers and Individuals, I’ve clearly mentioned that traders do make handsome profit and they earn their living of it.
In addition to the story of Sujata, I can also quote certain instances that trace back to 2005. Here is a story (again on Rediff) about one person called Nalin Pasricha (so-called Systematic Trader). Have a look at this article describing his fortune: Your PC can help you make millions.
Then, after reading the article, do NOT forget to read the comments from the reades which are available at :Readers’ Comments.
See how so many wealthy individuals, so called NRI’s are willing to seek advice and services from Nalin Pasricha, even willing to buy his trading system. All this based upon just one article being published in rediff
The article on Nalin was published in 2005. Till date, I don’t think any of the readers may have received any contact details of Nalin Pasricha. So many people after him, so many willing to give away their wealth to him for earning enormous profits, yet it will be impossible for anyone to find anything about Nalin Pasricha’s contact details.
My understanding is that Nalin knows the right thing and he is doing the right thing by not coming into limelight. He knows that a financial model that he is following will work only if he keeps it as a secret. The moment it is revealed to the world, it will no longer remain profitable. Repeating an example of Infosys: If I know today that Infosys (currently trading at 2000) will be worth 4000 a year later, I will immediately buy it. If more and more people know about it, then the demand for infy stock will increase. It will increase to such a level that infy will no longer be sold, there will be only buyers and no sellers. Even if someone sells it, he will sell it at a price that is near 4000 – the future predicted price of infosys. Hence, a model works only if it is limited to a person and is tested rigorously.
Then, Nalin can also do one thing: Don’t tell the secrets of trading to others, but take money from others and manage it on their behalf. Why is he not accepting moneys openly from other people and manage it on their behalf?
Continue to Part II
Making money in stock market -II
This is part II of the article, Making money in stock market -I. Please read the article from part I before continuing with this one
The reason is that a model works well only when it is held upon an insignificant amount on money and only by a few individuals. The moment the invested money becomes large, placing a huge trade will be sensed by the market and will affect the prices directly. Like that happens in the case of Mutual funds. When MFs buy stocks, they have to do it in big nos. because they have to invest big money. Hence, the market senses that there is a big demand for a particular stock, the price rises immediately and MF actually ends up buying at a high price. The same thing happens for all kinds of investments.
So if you (or anyone) discovers a trading secret, a trading system or a financial model, keep it to yourself and don’t reveal it to the rest of the world. Remember, people are just looking for profitable opportunities.
Coming to the story of Sujata (and Nalin as well), I really have praise for Sujata for coming out successfully after winning the battle for her health, family and friends. Kudos to her for keeping up the spirits – people like her set examples for others.
However, there are some serious flaws in the way the article is published by rediff on Nalin and the interview of Sujata.
Nalin’s system was designed sometimes in 2003, while Sujata started trading in 2005. Since 2002, the Indian stock markets have only witnessed one direction and that is UPWARDS. Though there have been minor corrections, but they lasted only for a month or so. So it is very easy to say that “I can make up for my OCCASSIONAL losses by the REPEATED profits”.
Though Nalin quotes an example of 17th May 2004, when it was a black Monday for the stock markets – and claims that he made money that day also. Similary, Sujata claims that 19th September 2007 she made a staggering UNREALIZED profit of 600,000 in just one day, because markets went up by more than 4%. Nothing wrong in such claims, but the fact is that all this is a one-day story. After the black Monday on 17th May 2004, the market immediately went for another bull run. All that happened was in a matter of few days, hence it is easy to say I may loose BIG occasionally, but I make small profits regularly and compensate for the losses and overall I’m in profit. Nalin himself claims that the system is not foolproof, as it has never seen a bear market – not even for a period of 1 month.
Continue to Part III
The reason is that a model works well only when it is held upon an insignificant amount on money and only by a few individuals. The moment the invested money becomes large, placing a huge trade will be sensed by the market and will affect the prices directly. Like that happens in the case of Mutual funds. When MFs buy stocks, they have to do it in big nos. because they have to invest big money. Hence, the market senses that there is a big demand for a particular stock, the price rises immediately and MF actually ends up buying at a high price. The same thing happens for all kinds of investments.
So if you (or anyone) discovers a trading secret, a trading system or a financial model, keep it to yourself and don’t reveal it to the rest of the world. Remember, people are just looking for profitable opportunities.
Coming to the story of Sujata (and Nalin as well), I really have praise for Sujata for coming out successfully after winning the battle for her health, family and friends. Kudos to her for keeping up the spirits – people like her set examples for others.
However, there are some serious flaws in the way the article is published by rediff on Nalin and the interview of Sujata.
Nalin’s system was designed sometimes in 2003, while Sujata started trading in 2005. Since 2002, the Indian stock markets have only witnessed one direction and that is UPWARDS. Though there have been minor corrections, but they lasted only for a month or so. So it is very easy to say that “I can make up for my OCCASSIONAL losses by the REPEATED profits”.
Though Nalin quotes an example of 17th May 2004, when it was a black Monday for the stock markets – and claims that he made money that day also. Similary, Sujata claims that 19th September 2007 she made a staggering UNREALIZED profit of 600,000 in just one day, because markets went up by more than 4%. Nothing wrong in such claims, but the fact is that all this is a one-day story. After the black Monday on 17th May 2004, the market immediately went for another bull run. All that happened was in a matter of few days, hence it is easy to say I may loose BIG occasionally, but I make small profits regularly and compensate for the losses and overall I’m in profit. Nalin himself claims that the system is not foolproof, as it has never seen a bear market – not even for a period of 1 month.
Continue to Part III
Making money in stock market -III
This is part III of the article, Making money in stock market -I. Please read the article from part I before continuing with this one
Then, here is an excerpt from the interview of Sujata:
QUOTE:
How much have you deposited with all these brokerage companies?
As I told you earlier, my total deposit with all the three brokers is Rs 15 lakhs. Using this amount I buy Call Options within my overall limits. There is no concept of margin money in options. Whatever money I have earned till now is only through Option trading. You can do risk-less trading in Options using a small amount.
As a safe strategy I never write a Put Option. Put Options are very risky. That way I am a very safe trader. In Puts I can even make 50 per cent a month on my investments; but then I can lose the same amount too. My principle is if I make money I make it; I shouldn't lose money at all.
I usually write a Call Option on the Nifty. I am always long (buying first and then selling at a higher price to make profit) on the markets and whenever the market is too overbought I wait for the markets to cool down.
UNQUOTE:
Have a look at the statement in RED fonts: You can do risk-less trading in Options using a small amount.
Well, well, well, I don’t know of any single money making RISK FREE product. Remember my first tutorial on options trading – the point I highlighted is that RISK FACTORS are always more than the factors affecting returns.
I trade heavily in options. I too make good amounts of money. But the risk is nowhere less. I can get wiped off completely in a matter of few hours, if the stock market go down significantly. Fortunately, since the day I started trading, I’ve never seen a bear market. I’m just lucky (and so are the so called successful traders)
Then, from the above quote: “As a safe strategy I never write a Put Option. Put Options are very risky. That way I am a very safe trader.”
I just don’t know how can a trader make a claim like this. Either it is a mistake of the rediff interviewer while recording the interview, or Sujata’s information is not very comprehensive about the options business or she is doing the right thing – not telling the actual trading strategies to everyone :- )
Another one: “I usually write a Call Option on the Nifty.” Writing a call option may be extremely risky. You may loose more money than what you have invested in.
I’m getting the impression that there are only 3 possibilites:
• Either the interviewer from Rediff did not record the interview correctly (as it was a telephonic interview)
• Sujata is doing nothing but taking bets in the stock market – In that case, she is lucky to have made good profits – just because of the bull market
• She is extremely intelligent – not willing to share any secrets with anyone, using concepts of hedging her positions and regularly cutting the losses, if any.
I’m not sure what is the real truth – but I’m more concerned about publishing of such articles on popular sites like rediff.
In my previous article, I’ve already explained how sites like rediff and moneycontrol are experts in putting up a HIGHLY BLOATED picture of something, and all the readers end up getting a completely wrong picture. As metioned previously, read the comments from readers on the article on Nalin Pasricha – Nobody knows him, no one has any records of his performance, no one has seen how his system will work in a bear market, yet hundreds of Richest of the Rich, NRIs are willing to give the money to him. It only takes a story to be published and people get fascinated about it. GREED is the driving word, and no body thinks about the risks.
Please note that I have nothing against Nalin or Sujata. Nalin is highly qualified, has significant experience in finance for a long time. Sujata also has fought against all odds and have developed a skill of making money from the markets. Hats off to both of them and I wish them good luck.
The only problem that I want to highlight is about such interviews and articles, that end up misleading the common ignorant individuals like you and me. Many claims in these article/interview are false, as explained above. After reading such articles, ignorant investors will think about jumping into the options business. Add to it the way “Safe Investment” is described - “As a safe strategy I never write a Put Option. Put Options are very risky. That way I am a very safe trader.” Individuals will never worry about risks involved in “I usually write a Call Option on the Nifty.”
At the first place, they would hardly understand the meaning of “Writing an Option”, yet, after reading such articles, they will be willing to jump in with their money.
I am working continuously on the next parts of options tutorials. The things I’ve mentioned above will become more clear once we cover next few parts of the tutorials.
Thanks Sankar for bringing this article to my notice.
Please read the comments and post your views and queries in the comments section which helps in open discussion and avoids duplicity of questions.
You may be interested in reading my previous articles. Here is the link to Table of Contents in a chronological order.
Then, here is an excerpt from the interview of Sujata:
QUOTE:
How much have you deposited with all these brokerage companies?
As I told you earlier, my total deposit with all the three brokers is Rs 15 lakhs. Using this amount I buy Call Options within my overall limits. There is no concept of margin money in options. Whatever money I have earned till now is only through Option trading. You can do risk-less trading in Options using a small amount.
As a safe strategy I never write a Put Option. Put Options are very risky. That way I am a very safe trader. In Puts I can even make 50 per cent a month on my investments; but then I can lose the same amount too. My principle is if I make money I make it; I shouldn't lose money at all.
I usually write a Call Option on the Nifty. I am always long (buying first and then selling at a higher price to make profit) on the markets and whenever the market is too overbought I wait for the markets to cool down.
UNQUOTE:
Have a look at the statement in RED fonts: You can do risk-less trading in Options using a small amount.
Well, well, well, I don’t know of any single money making RISK FREE product. Remember my first tutorial on options trading – the point I highlighted is that RISK FACTORS are always more than the factors affecting returns.
I trade heavily in options. I too make good amounts of money. But the risk is nowhere less. I can get wiped off completely in a matter of few hours, if the stock market go down significantly. Fortunately, since the day I started trading, I’ve never seen a bear market. I’m just lucky (and so are the so called successful traders)
Then, from the above quote: “As a safe strategy I never write a Put Option. Put Options are very risky. That way I am a very safe trader.”
I just don’t know how can a trader make a claim like this. Either it is a mistake of the rediff interviewer while recording the interview, or Sujata’s information is not very comprehensive about the options business or she is doing the right thing – not telling the actual trading strategies to everyone :- )
Another one: “I usually write a Call Option on the Nifty.” Writing a call option may be extremely risky. You may loose more money than what you have invested in.
I’m getting the impression that there are only 3 possibilites:
• Either the interviewer from Rediff did not record the interview correctly (as it was a telephonic interview)
• Sujata is doing nothing but taking bets in the stock market – In that case, she is lucky to have made good profits – just because of the bull market
• She is extremely intelligent – not willing to share any secrets with anyone, using concepts of hedging her positions and regularly cutting the losses, if any.
I’m not sure what is the real truth – but I’m more concerned about publishing of such articles on popular sites like rediff.
In my previous article, I’ve already explained how sites like rediff and moneycontrol are experts in putting up a HIGHLY BLOATED picture of something, and all the readers end up getting a completely wrong picture. As metioned previously, read the comments from readers on the article on Nalin Pasricha – Nobody knows him, no one has any records of his performance, no one has seen how his system will work in a bear market, yet hundreds of Richest of the Rich, NRIs are willing to give the money to him. It only takes a story to be published and people get fascinated about it. GREED is the driving word, and no body thinks about the risks.
Please note that I have nothing against Nalin or Sujata. Nalin is highly qualified, has significant experience in finance for a long time. Sujata also has fought against all odds and have developed a skill of making money from the markets. Hats off to both of them and I wish them good luck.
The only problem that I want to highlight is about such interviews and articles, that end up misleading the common ignorant individuals like you and me. Many claims in these article/interview are false, as explained above. After reading such articles, ignorant investors will think about jumping into the options business. Add to it the way “Safe Investment” is described - “As a safe strategy I never write a Put Option. Put Options are very risky. That way I am a very safe trader.” Individuals will never worry about risks involved in “I usually write a Call Option on the Nifty.”
At the first place, they would hardly understand the meaning of “Writing an Option”, yet, after reading such articles, they will be willing to jump in with their money.
I am working continuously on the next parts of options tutorials. The things I’ve mentioned above will become more clear once we cover next few parts of the tutorials.
Thanks Sankar for bringing this article to my notice.
Please read the comments and post your views and queries in the comments section which helps in open discussion and avoids duplicity of questions.
You may be interested in reading my previous articles. Here is the link to Table of Contents in a chronological order.
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