Talking about trading on ETMarkets | Derivatives trader Jaipur attacks gold with simple IV formula
“My derivatives strategy on a certain day or during different periods of the market is based on implied volatility (IV). My strategy involves option buy when IV is low, sell option when IV is high and when IV is in equilibrium I hedge my positions with future,” he says.
Edited excerpts from a conversation with Tanwar about his journey and trading strategy:
Let’s start with your family background and early years in Jaipur. What was life like before you started trading and what was your dream?
I come from the army, as both my father and brother are in the Indian army. My father, Shaheed Ajit Singh Tanwar (BSF Deputy Commander), was a role model for me. I have always found a very supportive environment in my home. When it comes to my studies, I completed my secondary education in my hometown of Jhunjhunu (Rajasthan), and for further education I went to Jaipur. I’ve always wanted to start a business, but at the same time, I also wanted to try something different. At first, I thought I would start a business in the auto industry. However, life had a better plan for me; as we say, “If something doesn’t go your way, god always has a plan for you in a better way.”
So while studying engineering, what brought you to the market?
I always read financial news and events, and am curious to know about financial markets and how it works. My friend Sooraj and I always discuss the economy and what’s going on in the financial markets, but at the time, I didn’t think of this as a career. Although it was not in the plan, fate supported me. As time went on, I got a deeper understanding of the market. One of my teachers who used to trade in the stock market also taught me some knowledge about the stock market. This is how I entered the stock market.
Is there any family pressure to do a job rather than endure the unpredictability of the market?
Are not. Since I come from a well-off family and am the youngest member of the family, there is no such pressure when working. At first, when I started this business, I didn’t even inform my family about my trading and participation in the stock market; However, after two years, when I felt I was on the right track, I made the right decision and told them, and they were happy and supportive at the time as well. From choosing a career as an automotive engineer to becoming a full-time trader in the stock market, my family supported every choice I made.As for your trading, you are not limited to options, futures or cash markets but spread across segments. Why is that?
I learned one thing about the market – you shouldn’t create unnecessary opportunities; instead, you can take advantage of the opportunities the market offers you. Making trading and investment decisions depends entirely on market conditions. Sometimes you are optimistic about the direction of the market and you choose to buy options when implied volatility is low.
On the other hand, you must sell options to make a good profit when implied volatility is high. Sometimes you use futures and options to hedge your position. Sometimes, when you know the direction of a stock, but the stock is non-optional or on the F&O blacklist, you can only buy the stock with cash/equity.
When the market is moving sideways then you have to use some other strategy, such as iron butterfly, iron vulture, short choke, short stand, etc., depending on the implied volatility. So I always keep myself diversified according to the market situation and invest in all asset classes whenever needed.
How do you decide your strategy on a certain day or during different periods of the market?
If I talk about the cash market, I use industry analysis along with supply and demand to understand the overall market more deeply. Then I look for trading opportunities with the right risk management. Here I use a top-down approach to picking stocks and making the best decisions.
My derivatives strategy on a certain day or during different periods of the market is based on Implied Volatility (IV). My strategy involves buying options when IV is low, put options when IV is high, and when IV is in equilibrium, I hedge my positions with futures. I believe Implied Volatility is one of the main Greek options and a change in Implied Volatility can have a larger impact on an option’s premium than the impact of delta, gamma , theta and rho add up. Of course, I also give the same weighting to the direction, whereby I use the same cash market approach, which is a top-down approach with supply and demand to gain insight into price behavior. chief.
ETMarkets.comAt Get Together Finance, you have trained thousands of newcomers to the stock market. Why don’t you show them live deals when most influencers proudly flaunt their profit and loss reports?
I can show my P&L whenever my students want to see it (laughs). Seriously, I’m an instructor and I just want to impart knowledge to my students so they can build confidence in trading. I don’t like showing off my P&L and lifestyle because I don’t believe in quick returns. I can proudly say that I am a profitable trader and have the guts to display my profits on a public platform. But that will never help everyone make money in the stock market because every individual doesn’t have the same capital, risk management and time they can spend in the market.
I believe in the knowledge that comes from dedication to being a successful trader. Many people or we can say influencers, are influencing people by showing them screen recordings of their YouTube profits and their lifestyle. But as an instructor, I don’t want to influence people to make impulsive decisions based on my P&L and lifestyle. I never sell a fake lifestyle. In my opinion, a teacher is determined by knowledge, not lifestyle.
How risky is it for someone just starting out on their journey with options trading?
Options trading is a very attractive niche for traders and people believe that by investing a small amount of money they will be able to generate more profits, but I believe that if someone starts Starting over in the market, options trading is always second. choice for them.
There are many factors that need to be considered while trading options, such as the direction of the market, Greek options and volatility. Generally, people ignore all these factors and jump directly into options trading. Options trading requires extensive knowledge and valuable skills, and without these skills is like diving in the sea without knowing how to swim.
Why do you think 9 out of 10 derivatives traders lose money with so many courses, seminars and data?
Like sometimes we say there is some defect to our education system. I believe the same when it comes to the stock market education system. The people who are organizing these seminars are influencing traders to jump straight into options trading, but in my opinion, if you want to learn to drive a car, you will have to learn how to operate it first. ; you won’t just take the car and drive in the city, options trading is that car for me. If anyone wants to succeed in this market, they must first understand the basic terms of the stock market and how it works. They need to understand the role of fundamental and technical analysis and supply and demand in the stock market. They need to understand the role of risk management in trading and investing.
A trader should always start from the equity markets to learn these concepts first. And once you feel confident in the equity cash market, then you should just consider jumping into the derivatives market.
If you don’t want to be part of the 9 out of 10 derivatives traders who lose money, opening a demat account and attending a two-day seminar won’t make you a profitable trader. You need to have a solid skill set and work hard to succeed. Because I believe that trading is a serious business. And successful trading is a journey, not a destination
