GuruSpeak | Manoj Mishra - How a telecom executive quit his high-profile job to trade options

Many people struggle with their day jobs and look for a way out to have their own business and achieve financial freedom. Since the last decade, markets have been the favourite go-to destination for these dream chasers.

Though it may look like making money in the market is easy, there are only a handful of traders who have made it big. The market is littered with the carcasses of traders who quit their job to try full-time trading.

This week, we have a prudent trader, who left a well-paying senior-level position in the telecom industry to become a full-time trader. He took paper trades for months before deploying money. And only after he started making money equivalent to his salary did he decide to quit his job.

Manoj Mishra, an Indore-based trader was in various senior-level positions in almost all telecom companies in the country before he decided to become a full-time trader.

An option seller, he prefers to take directional bets, keeping his bet at a safer distance from where the market is, allowing him room to manoeuvre in case the market turns against him.

Besides trading almost the entire day--he trades commodities and currencies too---Mishra listens to music and podcasts. He enjoys going on long drives and makes it a point to take a trip every two months.

In this interview, Manoj Mishra talks about his journey and trading strategy.

Q: Can you briefly talk about your education and family background? When did you enter the markets?

I have done my MBA from Devi Ahilya University, Indore and have over 15 years experience of working with various telecom giants like Reliance Communications, Idea Cellular and Vodafone.

I come from a non-business joint family. My father, now retired, has been my main motivating force, working as an engineer in the Indian Railways. My family completes with a very supportive wife and a loving son.

I first came across the stock market in 2010 but could make an entry only around 2015.

Q: How did you start your market journey?

I was always fascinated with numbers, calculations, balance sheets, and financial statements. This was my motivation to jump into investing using my knowledge about the subject. I continued investing for about 3-4 years, but the returns were not exciting enough. I concluded that this method of participating in the stock market does not suit my personality.

I shifted my mindset and focus from investment to trading. In trading, I gradually understood that index trading offers higher returns as compared to stock trading.

Like most newbies, I started with options buying and soon became a part of the 95% traders community who lose their capital. Looking at my losses I realized that this is not working well and I am losing money very fast and I began the search for some methodology that can be used to win in this game.

I immersed myself in data analysis, trend study, and options data mining and got to know that there is another game called "Options Writing". This method hit the right nerves and I started working on it intensely, backtesting various strategies and measuring their accuracy levels. I did paper trades for nearly three months and only after hitting a success ratio of 70%, I took my first trade.

I took my first real trade, which was selling a far out-of-the-money (OTM) short in Nifty. I was overwhelmed to watch the premium value erode and become worthless on expiry, allowing me to keep the entire premium that I had sold. It was like watching the magic unfold before you. It was an epiphany for me where I realised that trading can be effortless, provided your data analysis is correct and you are an option seller, which has its inherent advantage.

The success motivated me and I started projecting data in Excel with all the permutations combinations of winning strategies, and percentage returns based on positions in different option strikes and the risk involved with each strategy.

After the continuous success of 4/5 expires, I increased my capital and started preparing for the big game. It was only after I started making more money than my monthly pay cheque, which was a handsome amount given that I was a Country Head in a service sector industry handling Pan India Operations, that I decided to make trading my full-time career and gradually shift from corporate life to become financially free.

However, the journey was not smooth and had many ups and downs (pre and post-Covid). But with each expiry, my conviction and confidence improved and I finally quit my corporate life to take up my trading to the next level.

Q: How did you trade when you started options selling?

When I started I was trading Nifty50, but later I realized the Bank Nifty has a much wider range and rich premiums compared to Nifty. After trading Nifty and Bank Nifty both for some time I gradually shifted to writing options in Bank Nifty.

Earlier, I was also writing stock options in the last week of the month based on chart patterns, trends and events.

In those days I tested almost all strategies like Iron condor, Iron fly, Strangle, and Straddle, Cross calendar, to name a few.

Now I am a directional trader taking spread trades with pyramiding position sizing (further the strike price, higher the quantity). Nearly, 95% of trade I take are positional and are spreads. Only on 5% of the time I take intraday trades. Whenever I get intraday setup perfect, I keep my quantity big, else positional is always a good and relaxed setup for me.

With time I have also started trading options in Commodity (Natural Gas/ Crude) and Currency markets (USDINR), this helps in optimal good utilization of time that keeps me involved till late hours.Q: How do you presently trade?

My trading methodology can be described in the following steps:

To select the strike to sell I calculate the premium that gives a return of 1% on margin in the weekly expiry.

Along with the percentage return, I also check the support and resistance levels on charts and start hunting for strikes that are 1% above/below the last two reversals.

If the market gaps up then I will short next week's OTM premium as it is much safer and more profitable.

I normally keep my bets higher on the Call side and lower on the Put side as I have observed that the market falls without hurdles but climbs with difficulty.

I validate my trades on various options data platforms like Sensibull and Opstra.

I divide my capital into 5 parts and deploy 20% on each day till expiry as per the market movement.

Q: How do you trade on expiry day?

On expiries, I check the initial momentum.

If the market is opening with a gap up, then I wait for 15 minutes for the trend to pick up. If the market is making new highs, then after visible reversals I start shorting 200-point OTMs and bring strikes closer gradually as per the direction.

If the market is sideways, then I short calls of strikes that are above the previous day's high and keep adding volumes till noon.

If the market opens with a gap down then I short far OTM puts and if by noon time the market reverses on account of European markets, I may short at-the-money (ATMs) strikes after clear reversals from highs.

Q: How is your performance in the market?

Option writing has a profitable edge on account of time decay (Theta). It is possible to target a 1% return a week, anything more than that would be risky, given the small room for winning an options writer has. As the saying goes - Option writers eat like chickens and shit like elephants; one wild swing may erode your 2 / 3 month's gain.

Despite the edge many of my trades go in losses but my edge is in trading with spreads and deploying money in parts and not at one go. I was caught on the wrong side of the market in July'23 when Bank Nifty moved approximately 2500 points in just 3 weeks. This rally pushed me back by 4 weeks. But losses are part of the game and give us time to pause and think and restart the journey.

My winning ratio is 70% and I am happy generating one percent a week on my capital.

Q: What would you advise a new trader?

I would like to give my golden rules, which I have learned from my mistakes as a trader.

You can make small money with big capital but it's difficult to make big money with small capital. So keep your targets low and try to achieve consistency.

The market will always open the next day. People trade like there is no new opportunity available and invest their entire capital on a trade.

Never exit in panic - Remember the market is down; not Shut Down.

There is no concept like fast money in the market. "Rome was not built in one day." Great things take time.

The Market has the potential to uplift your lifestyle and can generate money even for your upcoming generations, provided you play with patience. The market is always supreme. The market is the best medium to live your all dreams and keep yourself financially free and help you be your own boss.