A critical mistake in our trade execution resulting into massive profit

On 6th May, near closing time, we went long using this strategy by buying Nifty futures at 24434 and simultaneously shorting the 24500 CE at Rs 325. On 8th May, Nifty closed at 24177, while our pre-decided BE point to reverse the setup was 24105. However, on 11th May, Nifty opened with a gap down at 23970 and continued to slide lower, giving us no chance to reverse our position to the short side by squaring off at 24105. We could have taken this action at the market open around 23975-23995, but we waited for a bounce back, which was a significant mistake. That day, Nifty closed at 23815, far from our intended reversal level, resulting in a substantial unrealized loss in the account.

The following day, the selling pressure persisted with a significant gap down opening, leading to a substantial drop in Nifty, which closed at 23380. Action was necessary to avoid a considerable potential loss if Nifty failed to recover during the month. On 14th May, Nifty was trading between 23500 and 23800, well below the 24500 call strike. We decided to secure some profit by squaring off the 24500 CE and newly shorted the 24000 CE at Rs 160. On 15th May, we moved into the second phase of our strategy by establishing a short bias position. However, due to previous errors, we remained far from achieving profitability for the month. We squared off the long future at 23640, shorted new lots at that price, and shorted the 23500 PE at Rs 215.35. Our net position at that time was 4 lots short futures, 4 lots short 24000 CE, and 8 lots short 23500 CE. Nevertheless, this position lacked future potential without further adjustments. According to the strategy, we could take one final reversal trade only when the upside or downside BE points were breached, but due to the initial mistake, all calculations had become irrelevant by then.

We chose to anticipate a decline in Nifty from this point to secure some potential profit from our short position before going long one final time in this series. With only a few days remaining, we were concerned about the onset of theta decay. However, due to the high volatility throughout the May series, the premiums remained decent. On 20th May, we were fortunate as Nifty opened lower near 23450, allowing us to profit from the short futures. We then went long again with 4 lots at 23420 (as futures and spot were at the same level) and shorted 8 lots of 23500 CE at Rs 193.24.

With this last adjustment, we now have a reasonable breakeven range between 24,390 and 23,075. There are only four trading sessions left after today, and if there is no significant movement in Nifty in either direction during this final expiry week, we should not experience significant losses from the critical mistake made on May 11th.

While we no longer need to refer to the spreadsheet in this series, it's helpful to remember that the MHAF chart indicates Nifty is in bearish territory, significantly below the EBL/EBR bands. The next buying trigger is set at 23867, which is quite distant from the current Nifty level of 23540.

Finally, here is a snapshot of our current position, which appears favorable at the moment. Since we don't have any further adjustment options available, we plan to find the best exit from the entire position within the next two days, avoiding any weekend risk.

Cheers and happy trading.