In June 2001, she met with an accident. In 4 months after that she was told by her doctors that she could not walk again. In March 2004, her Father died. But she was not the one to give it up.
Just last week on one day of trading she made Rs. 600,000! She has a pool of Rs. 15 lakh in three brokerage accounts and does day trading. She makes 10-15% return on that money in a month (RS 200k – 250k) sitting at home on the laptop.
No, she is not an MBA or a finance whiz kid. She has self-taught stock trading to herself. Basically she uses options to make money. Options is the promise to buy shares at a later date for a certain price. Now, when the price of the underlying share goes up the Call Option (promise to buy – Put Option is the promise to sell) goes up! The good thing is that Call options cost fraction of the share price. So, if the share is say Rs 1400, the call option for say Jan 2008 at say 1500 (promise to buy the share on – I think – second week of Jan 2008) maybe Rs 200. Now, as the price of the share goes up, the price of option goes up by the same proportion.
So, she is smart as in she uses a limited pool of money to maximum advantage. Her mantras for success are:
- Read all the advice that you get from various business television channels, newspapers, friends who understand the stock markets but be extremely cautious and disciplined when you act on this advice.
- Never extend your trading bets beyond your means. I speak to my friends; get investment and trading ideas from my brokerages (she is registered for online trading with Reliance Money, Indiabulls and Kotak Securities).
She is quite an inspiration in the way she has managed herself without depending on anyone! Read her interview here.
Now, personally I am not a short term trader and I do not believe this is the best thing to do on a long term basis. But she has made it work for her so all power to her. Most of the world’s best investors have been long term – Warren Buffett, Peter Lynch, Philip Fisher etc. I would still follow them. So, unless you want to use stock market as your monthly income source – which is VERY RISKY – you would be better off doing long term trading. Specifically in India – where Long term Capital gains tax on stocks (holding > 1 year) is ZERO!! Can’t beat that!!
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