We saw it with Sensex few times, understandable that there’s still not much liquidity in BSE options
We saw it with Midcap Nifty a few days back, extremely dangerous 2% dip for no reason and reversal but still options aren’t fully liquid.
But today’s move in nifty was VIOLENT. 200+ points in a jiffy and I checked later to see whether it was news based thing like war etc but it was not. Just pure liquidity drain and a sudden dip.
How are you managing these positions as both option buyers and sellers? The risk is getting too eminent now
Exactly felt same today. As i experienced it in the sensex, midcap indexes but didn’t think, it would happen in nifty. As i explained about it in another reply
( Revision in lot size of NIFTY, FINNIFTY and MIDCPNIFTY - #11 by sanjay_lavudya )
It’s extremely dangerous to trade indexes with low liquidity (all bse index ). So please mostly avoid them.
So what’s the Solution for this?
Hedging is only our chance to minimise risk to some extent but not fully. If you’re daily maximum Stop loss hit just turn on kill switch (thanks to zerodha for this feature)
Sellers should be very careful if you sell a 100 Rs premium of CE, hedge it against by buying a 10 Rs CE vice versa for PE Side selling.
I hope it’ll help you.
Sayonara…