Fortune Favours the Bold : My first loss-making day in options trading!

Yesterday I began trading in options, and today, I have made my first loss. This is the story of my early mistakes so that you do not make them.
Egged on by the videos of Rachana Ranade ma’am, P R Sundar sir and Ankur Warikoo sir, I too decided that now the time is ripe to try out my hand at options trading. To begin, I do not have a lot of bankroll at my disposal, so options buying, that too, out of the money. By the way, if you want to know what options are, or what OTM, ITM, ATM means and other nuances of trading in derivatives, check out the videos from the teachers I mentioned earlier, you’ll get the hang of it. So, with a limited kitty of ₹6000, I opened an account in Zerodha.
Yesterday, I put in my first options trade, cautiously. I did not put a stop loss in place but then the market was bullish all the way. As soon as I made about ₹100 profit, I bailed out. Of course, way too cautious I must say. And by the end of the day, had I persisted, the profit would have been about ₹1500. I felt a bit silly. So, last night, I made the plan. Assuming the market opens in the green, I’ll enter a buy position quickly in the morning and then hold on to the position for the day, or until I see a loss of a maximum of ₹500 (around 10%).
Today morning, as the markets opened in the green, I put my plan to action; rather, tried to put it into action. The first hurdle, the stop loss.
In my understanding, if I want to buy a position at a certain value, I enter that as the limit price. The stop loss is where I don’t want the price to fall beyond and limit my losses. So, that value must go in the stop loss value. But this is not how Zerodha functions. No matter what I do, Kite (Zerodha’s trading platform) would just not let me enter the stop loss that I want, rather it wants me to enter a price above the last traded price. After fighting with the system for some time, I just put in values at market price and sent out an order. The stop loss was about 50p below the buy price. In about 10 minutes, I was stopped out and exited the trade. Now, in an options trade, the ticker does not necessarily go down by 50p each time. It might drop by quite a value before the stop-loss kicks in. So, I have a loss of about ₹200. Still within my budget for the day.
I tried again, this time, I raised a ticket with Zerodha, explaining what I thought should be stop loss, and sent out another order. This time I got stopped out after about half an hour. Another loss of almost equal amount.
Then I found out the correct way to do it. You enter a buy position. Then, you put a sell order, with the stop loss that you feel is correct. So, this works as your safety net. Upon having this revelation, I tried once more. This time, the order was correct, and based on my expectations, I put in a stop-loss order. My order got completed with a loss of another ₹250 in the next 20 minutes. And I thought to myself, enough for the day. The market is not good, let it be. All of this happened by about 10:30 – 11:00. But then, the itch remained, and at about 13:00 I opened the site again and imagine my amazement, to see the prices, which had made me lose about ₹500 already, are soaring. I mean, had I remained in the last loss-making position, I would gave been seeing an upside of at least ₹600 at that time.
So, what did I do? What any normal person does, I put in another trade. This last trade, I am tracking it. Tenaciously. Increasing the stop loss gradually so that I get maximum profit out of it, but then, the earlier trades have done so much damage that despite being up in double-digit percentages, the last trade will not be able to make an overall profit.
Anyway, what is the learning from my ordeal of the day? Have patience. And read the manuals. I was ready to deal with a 10% loss right at the beginning and had that been my initial stop loss, in the very first trade of the day, I would not have been stopped out 3 times and would have enjoyed quite a bit of profit.
I know for sure that this will not be the last time I am making a loss in a trade, but then, now I know how to put the stop loss in place correctly.
Thanks for being my reader today. I hope you have a nice trading session ahead.
Cheers and have a nice day!

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