Market Down, Too Painful to Cut Loss? Read this for solution

Majority of the traders in the market now are having a common problem.

"Should I cut loss? But is too painful to cut!"

 

Buying more at a lower price doesn't make you feel better. Because it might end up losing more and more stressful and more sleepless night. Because you don't know how far it will fall.

 

Shifting your portfolio to other industry doesn't help. Because other industry are falling too! Most important thing is if you enter now, the price might go down lower!

 

So what can you do? Be your own Hedge fund manager!

Bursa Malaysia have many different financial instrument to help you to "hedge" your risk, IF you know how. It is not necessary to be overseas market is better for trading or investing. Malaysia is a place that offer the same thing too! (Except for short selling at the moment.)

 

Many people have heard about hedging. But not many knows how to do it. For example, in the current market everything is down but you can't click on the sell button to sell your stocks. So what you can do go for Hedging!

You can also be a hedge fund manager of your own.

 

Here is how you can do it. We have Futures market for KLCI, Put warrant for KLCI. Do you know what's the function of these financial instrument? If you have a future account, at this moment you can short FKLI to hedge against your losses.

 

But if you do not have a futures account and take sometime to open 1 and fund it. You can go for structure put warrant for FBMKLCI. Any warrant of FBMKLCI with a H, are put warrant. With C will be call warrant.

 

What's the different between Put Warrant & Call Warrant?

Put warrant is a financial instrument where it gives you the right to sell the underlying asset at an agreed price of the put warrant set on a specific date. You may choose to exercise the warrant or sell the warrant back to the market for a profit. 

Example : a put warrant agreed price to sell FBMKLCI at 2000 level when maturity. Now the KLCI is at 1800 level. You can buy the put warrant if you expect the price will stay below the agreed sell price until maturity. When the warrant is mature, you may pay the additional to buy the KLCI contract at 1,800 and sell to the company who issue the warrant at 2,000. Then you will earn 200 points of profit.

 

Call Warrant is where you have the right but not obliged, to buy the underlying asset at an agreed price on a specific date. You may choose to exercise the warrant or sell the warrant back to the market for a profit.
Example : a call warrant agreed price to buy FBMKLCI at 1500 level when maturity. Now the KLCI is at 1800 level. You can buy the call warrant if you expect the price will stay above the agreed sell price until maturity. When the warrant is mature, you may pay the additional to buy the KLCI contract at 1,500 from the company who issue the warrant and sell to the market at 1,800. Then you will earn 300 points of profit.

 

How do you apply to the current market?

With our Operator analysis, we find that the big boys in the market are pumping up the price 2 weeks ago to attract more retailer to buy their shares so they can sell off before the market falls.

 

A week ago on Wednesday, we see majority of the big boys in the market started to dump the shares in their hand bit by bit without retailers knowing (the technique they use is to create buying volume to keep you in a stock by shifting the shares from different account. So retailers will still think there are many buyers coming. But those volume are created. ).

 

That's where we started to move our position into FBMKLCI PUT WARRANT. UP to date our position in put warrant are giving us profit of 8.22% from H4R, 23.08% for H4M.

Refer to this link to our previous blog post : https://klse.i3investor.com/blogs/roundnsurge/148989.jsp

 

 

The amount to enter into put warrant depends on your portfolio, so that you can hedge it to cover your losses.

 

For us, we are not using it to hedge our position but making profit from it. Because we have no stocks holding since last week Wednesday. We took profit on all of our position before the market turns to bear and move into put warrant and making profit with it. Which is a bonus to every traders, consistent profit from the stock market and do not need to stuck in a bear market.

 

This is how you can still keep your valuable stocks and at the same time make profit while the market is down to cover the losses of your holdings. Ofcause it is also important for you to understand the market and react to it like how we did.

 

Find out more about how we track big boys effectively in our Facebook and YouTube Channel :

 

 

This blog is for sharing our point of view about the market movement and stocks only. It is not and advice or recommendation to buy or sell financial instrument. Viewers and readers are responsible on your own trading decision. The author of this blog are not liable for any losses incur by any investment or trading.