Friday, September 23, 2005

Coming of Full Cycle

It is long since I have put even my spare thoughts. Did I not get any during this long hiatus! Its not like that. The problem is that of the crawling speed of the Reliance net connection I had. It has been painstakingly slow in opening sites like Fortunately, I am sitting today with a high speed connection and so I thought why not update my blogs.
It was 25th of March, 2003 when I bought my first shares in the stock market. Noone from my family had ever got into stocks. So I had no mentor. I had opened my ICICI Direct account in Sept, 2002. I was among the very first customers in Guwahati who had opened online trading account with ICICI. Then started the process of learning how to invest and more importantly where to invest. I spent hours watching CNBC and listened to what they say. I kept following the share prices and so them going up. Sensex was most probably at 2700 level then. After lot of introspection I bought 500 MRPL shares @Rs.8.5. Thus I got sucked into this weird world of stock market on the 25th of March, 2003. I had made good progress initially though I had sold off many shares too quickly. That was inexperience. For example I bought McDowell @40 and sold off @45. The same stock now sells @400/- plus. I also lost 12000 rupees in one single share that eroded almost a third of my earnings. The year ended with about a quarter lakh of net profit. Two years have passed since then. Sensex had grown to unimaginable figure of 8500. I had also mastered the art of making money with money and had made my first one lakh in the second year.
I had always wondered about the world of derivative trading. I knew it is the real market. Here you make money without money. In stocks, you need money to make money. I studied the process and got an idea of what it is. I wrote many mails to ICICI helpdesk seeking clarification and help me out. ICICI helpdesk had always been helpful. I had gathered enough information to explore this new world. This is much riskier than stocks, specially in a volatile market. You can easily take positions in a bull or bear market. Some kind of hidden fear kept pulling me back. Then came a new regulation that I have sign somekind of agreement with ICICI for trading in derivatives as I had opened my account before Sept, 2002. That had been a painfully long process. Believe me, it took 45 days for me to get the account enabled for derivative trading. I must say that customer service of ICICI had gone down many notch as had grown. It now takes 5/6 days to get a reply to your mail. In 2003, they would reply in 2 days.
So I got ready and waited for the right opportunity. ICICI sends you a daily derivative call. I had understood that Option is much safer than Futures as your downside is limited. Further, in Future trading, you need a big big bank balance to stand cover for daily fluctuations. So, I had decided to get into Options only. Then came a call from ICICI to buy NTPC Sept 100 CALL at a premium of 3.85 or lower. I bought my first Option contract on 9th Sept, 2005 paying a premium of 11500/-. On 14th Sept, 2005, i.e., after just 5 days, the premium rose to the first target of 5.1 and so I squared off my position. In 5 days I made a net profit of 4400/- by investing just 11500/-. Encouraged I get into another contract and made further profit.
From stocks to mutual funds to derivatives -- I had complted the full cycle in investing in stock market. And that too on my own. I had no family background in investing and lived in a small place to get help from others. It is very satisfying to make money utilising your ability and idle time. I am still in the lower end of the learning curve. People have made millions. May be someday I will too.