Squared off Nifty Strangles

What an unexpected up move it was today !! It was a trailer of up move which we might see on 16th May if NDA gets 270 seats. In my previous post I had mentioned about buying into Nifty strangles (https://writingoptions.wordpress.com/2014/05/06/update-election-strategy-on-nifty/). IV’s at that time were around 34-35, but with today’s up move they have shot up to 44-45. I thought it was prudent to square off Nifty strangles with current IV’s. Nifty is factoring in up move of 9-10% on D-day.

I haven’t squared off my bull call spread & bear put spread on Nifty (https://writingoptions.wordpress.com/2014/05/02/election-strategy-for-nifty/). I will continue with this position till election results.

Disclaimer: These are my personal views and you should do your own due diligence before acting on anything written in this blog. Please take reasonable care while trading in options, especially while selling. I am not advising anyone to sell or buy options. My purpose of writing this blog is to highlight my trading strategies.

Update: Election strategy on Nifty

Continuing with the theme of increasing volatility after completion of the last phase of polling on 12th May, I have bought further strangles on Nifty. I have bought May series Nifty 6500 put & 7000 call. Although Implied Volatility (IV’s) is already high at 34-35 but it should go further north after 12th May. One thing is absolutely clear, Options are the way to play for elections rather than Futures. Also, I want to avoid taking one sided position because I don’t have clue which way results will pan out on 16th May. Given the unexpected outcome of 2004 & 2009 General elections and violent market reaction I don’t want to be caught on wrong foot with one sided position.

I might square off these strangles before 16th May if there is significant increase in IV’s.

Disclaimer: These are my personal views and you should do your own due diligence before acting on anything written in this blog. Please take reasonable care while trading in options, especially while selling. I am not advising anyone to sell or buy options. My purpose of writing this blog is to highlight my trading strategies.

Election strategy for Nifty

Outcome of 2014 general elections is one of the most keenly awaited event this year. Gross mismanagement of the economy by the present Congress government has resulted in strong anti-incumbency this time. It’s anybody’s guess whether that anti-incumbency will result in NDA government led by Mr. Narendra Modi or it will be a Third front government. We will get to know on 16th May who is forming the government at centre. But one thing is certain that there will be high volatility with the end of last phase of polling on 12th May. Exit polls will also be aired on news channels starting from 12th May evening.

Indian markets also reacted violently after 2004 and 2009 general election results. But the big question is will there be such big reaction after election results on 16th May ? I doubt if market reaction is going to be any different and we are headed for another roller coaster ride beginning 13th May. If you take position and get it wrong then you will have tough time digesting those losses. I don’t want to take any one-sided position. With this thought process I have initiated spreads on Nifty. I have bought 6700 straddle (6700 call & 6700 put) and sold 6200 put and 7200 call. You can argue why I need to sell OTM call & put option (7200 call & 6200 put) ? I am confident about increase in volatility but also trying to reduce the cost of trade. In case the event does not pan out as I expect, my losses will be reduced. In this strategy I need Nifty movement of 5% from current spot levels of 6700 to make money.

Disclaimer: These are my personal views and you should do your own due diligence before acting on anything written in this blog. Please take reasonable care while trading in options, especially while selling. I am not advising anyone to sell or buy options. My purpose of writing this blog is to highlight my trading strategies.