From software engineers to young college students, options trading spread like wildfire in India after the pandemic-led lockdown in March 2020. Noida-based trader and trainer Kunal Saraogi, who has trained hundreds of part-time traders to turn full-time, says options trading feels like a game, but new traders must remember that it is a game for pros.
“Options are stocks on steroids. They move faster than you can imagine. A Rs 20 Call option can start trading at Rs 0.50 in a matter of few minutes, something unimaginable in stocks,” he says in a chat with ETMarkets. Edited excerpts:
Let’s start with your family and education background and how you got into markets. Was it by design or chance?
I consider myself fortunate because I knew from an early age that the stock market was my calling. The thrill of watching prices go up excited me like nothing else, and it still does. I got interested in the markets because of my mother, an accomplished trader in her own right and I started by helping her send out her share certificates to companies for transfer while I was in middle school.
I was investing earnestly straight out of school. I was hooked. I finished my education in India and abroad and started looking for ways to become a professional trader. I met with everyone whom I thought knew any better about trading and read up on everything I could lay my hands on.
After some hiccups and many misstarts, my trading took off once I realised that charts can be used very effectively for medium-term investing. A concept we now know as ‘Momentum Investing’. Some initial successes with a bunch of MNC stocks set me on the right track. I got successful because of my belief in a rule-driven trend-following approach where I focused on both absolute and relative momentum to choose quality stocks. I am still using pretty much the same concept two decades later.
Please take us through your individual trading style and how that suits your temperament.
I am a conservative trader and am reluctant preternaturally to book profits. I let my profits run. That, I think, is my biggest strength. Something most traders have a hard time internalising. I am 100% system driven; I have a technical checklist for choosing stocks for deciding on when to enter and exit.
I rarely deviate from the system, and have chosen carefully. This takes the pressure off me and keeps my trading free of emotions.
Besides my momentum portfolio, I trade the index using a trend-following system and make long and short trades using the relative performance of different stocks. I think I am overly cautious as a trader, and that means I am usually conservative and err on the side of caution.
What has been the most successful day in your trading career?
My best day was in 2020, at the height of the Covid crisis! Markets were in panic mode, and VIX was threatening to hit 100. I had shorts in index futures and long put positions. Made incredible single day profits amidst the mayhem.
How has your portfolio performed in the last one year?
It has fared reasonably okay. Quite brilliantly, in fact. My smallcase, as well as my personal portfolio, have beaten both the Nifty50 and Nifty SmallCap 100 hands down, and that is very heartwarming for me. While the index is at the same levels YTD, my portfolio has delivered a remarkable performance in the last year. This, for me, is a greater accomplishment than making money in a crazy bull market. It is easy when the markets are going up. The real test is to do well when the markets are indifferent or negative.
It seems that thousands, if not lakhs, of part-time traders are hoping to quit their day jobs and get into stocks full time. Is this just the beginning of the equity cult in India?
Absolutely, I have never been more certain of anything. Equity culture and societal acceptance of the stock markets are a big sociological development in recent times. People want to make a career in the markets and want to participate seriously. They are not here only for quick bucks, but an increasingly large number of new traders and investors are in the markets for the long haul. By and large, a new trader today knows 10 times more than I did when I first started. New traders are willing to learn and burn the midnight oil, and that is very heartening.
How many part-time traders have you seen or trained who are now successfully doing it full time?
Several hundred. I run a program called ‘Naukri Se Azaadi’ that has empowered several hundred traders to earn their wings and become full-time career traders. They are doing fabulously. Many have bought new homes, repaid loans, sent their children to schools abroad and achieved many other financial milestones from trading. They lead more fulfilling and liberating lives as a result of choosing to trade as a career.
Do you think more than intraday or swing trading, options trading is becoming more popular these days? What are the risks that one should take care of before starting to trade options?
Options are the biggest game in town! Everyone wants to dabble in options. It is enchanting and feels like a game. But remember, it is a game for pros. You must learn before you take the plunge into options. It looks harmless on the outside but can be unsparing for a noob trader. One must learn options and chart rigorously for a year at least before making your first options trade.
Options are stocks on steroids. They move faster than you can imagine. A Rs 20 Call option can start trading at Rs 0.50 in a matter of minutes, something unimaginable in stocks. So it is important to learn options and their pitfalls first before you get involved.