A critical mistake in our trade execution resulting into massive profit

On 6th May, near the closing time we went long according to this strategy by buy Nifty futures at 24434 and simultaneously shorted 24500 CE at Rs 325. On 8th May Nifty closed at 24177 while our BE point to reverse the setup was pre-decided at 24105. However, on 11th May Nifty opened gap down at 23970 and continued to slide lower offering us no opportunity to reverse our position to the short side by squaring off at 24105. We could have of course taken this action at the market open near 23975-23995 but we didn't do that waiting for a bounce back and that was a big mistake. On that day Nifty closed at 23815, far away from our intended reversal level yielding significant unrealized loss in the account.

Next day also the selling pressure continued with a massive gap down opening and a huge fall in Nifty closing for the day at 23380. Something needed to be done otherwise we were exposed to a massive potential loss if Nifty never recovered during the month. On 14th May, Nifty was trading between 23500 to 23800 which was far away from the 24500 call strike, we decided to book some profit by squaring off that 24500 CE and freshly shorted 24000 CE at Rs 160. On 15th May we entered into the 2nd act of our drama by creating a short bias position but because of the mistake already happened previously, we were still far away from making any profit in this month. We squared off the long future at 23640, shorted fresh lots at that price and shorted 23500 PE at Rs 215.35. Our net position at that moment was 4 lot short futures, 4 lot short 24000 CE and 8 lot short 23500 CE. However, this position did not show any future potential without any further adjustments. As per the strategy, we were allowed to take one final reversal trade only when the upside or downside BE points would be breached but because of the mistake at the very beginning, all the calculations became meaningless by then.

We decided to hope for Nifty to fall from here so that we could lock some potential profit from the short position before going long again for the last time in this series. Not many days were left in this series which was worrisome because the theta decay started kicking in but because the volatility was extremely in the entire May series, the premiums were still decent. Today on 20th May, we became lucky and Nifty opened down near 23450 giving us an opportunity to book profit from the short futures, to go long again with 4 lots at 23420 (futures and sport were at same level) and again shorted 8 lots 23500 CE at Rs 193.24.

After this final adjustment we now have a decent breakeven range between 24390 and 23075. We have only 4 trading sessions remaining after today and if there is no violent movement in Nifty on either side is witness in this final expiry week, we should not suffer much from the fatal mistake happened on 11th May.

Although we do not have to look at the spreadsheet anymore in this series, just for the understanding it is better to keep in mind that according to this MHAF chart, Nifty is in bearish territory well below the EBL/EBR bands. The next buying trigger is currently placed at 23867 which is far away from the current Nifty at 23540

Finally, below is the snapshot of our current position which is looking good so far. With no further adjustment card in hand, we will look for an optimum exit from the entire position in the next 2 days without taking the weekend risk.

Cheers and happy trading.