How much we may loose, if position goes wrong?

Every Strategy has limitations, & off course Mudra Strategy also has some limitations. BUT it has the beauty to limit the loss. Our loss is limited if position goes wrong, as we Hedge. We exit main position at predetermined price, And the the second position (i.e. option bought as hedging) recovers loss & sometimes it gives good profit than loss occurred.

Lets see live example. I have calculated it in CANBK MAY CONTRACT. On 08 May 2023, our premarket levels are as below, for more details, you can see it in this post.

Now see the chart below , which explains the trading positions.

As you see in above chart image, we have traded two times.

The first trade carried out on 10.05 AM. This is the main position (I Bought Fut), in this chart, you can see that the position has triggered the stoploss & exited on 11.50 AM, & the hedging (i.e. ATMPE) exited after some move on 01.15 PM . which is shown in below chart.

Here is the summary of the trade.

The Lot size is 2700 of CANBK FUT.

First Trade:
FUT LONG @ 316.3
FUT EXIT @ 311.55
Loosing points = -4.75
PE LONG @ 9.20
PE EXIT @ 14
Gaining points =4.8
Total points = +0.05
Profit = 135/-

The summary is our position is not in loss, even trade in main position gone wrong.

Lets calculate about second trade:

Market reversed & started upside moving. The order for long Fut triggered on 01.35 PM & at the same time it has been hedged with ATMPE. On 01.45 PM stock fut price has touched our target of 0.75% & I have exited from Fut as well as in hedging position (i.e. ATMPE).

Here is the summary of this second trade.

Second Trade:
FUT LONG @ 316.3
FUT EXIT @ 318.75
Gaining points= +2.45
PE LONG @ 8.0
PE EXIT @ 6.9
Loosing points = -1.1
Total points= +1.35
Profit = 3645/-

(the price of ATMPE dropped to 8.0 from 9.20, as the premium of PE was high in the morning, but it has dropped after noon.)

The first trade was gone wrong, whereas second trade achieved target. Both situation seen in same stock on same day.

The main intention of this post is to calculate & the loss when position goes against us.

Thanks for reading, Happy Trading! Stay Profitable! enjoy!



* ©

*Use this Strategy ONLY FOR paper trading.

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