Rabu, 12 Oktober 2011

diamond rule of booking profit



never book profit by squaring off
book profit by taking reverse at-the-money option.
whether your decision turns right or wrong, you will profit.




let me give an example which is the reason behind my coming out with this rule
i bought 9000call of bank nifty.
bank nifty came to 9330 and as indicated my my trading method, i booked profit by squaring off the call.
had i waited i would have profited as the bank nifty went to 9500.
but instead of squaring off the call had i taken an at-the-money put option (9300 put) and held on to 9000call, i would have lost 50 points in 9300put and got 140+ points more in 9000call - a clean profit of 90+ points.
i have figured out the reverse scenario as well.
i am thrilled with this rule, this rule is my take-away for the day. it has costed my just 1250 per lot.
this rule has many applications with profound practical implications.

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