@jesuslovesusjohn
Just to add one more point.
In my earlier posts on this thread, i’m referring to IV.
That stands for “Implied Volatility”. Search on Google about this term to understand it (if you don’t know it already!)
one more thing to note here is that , when there are events sheduled like budget , election results , RBI meet , premiums wont fall or wont fall relatively …
last week finance minster scheduled a meeting on this wednesday(24th) … ATM straddle on weekly bank nifty option settled at 330rs on thursday ( 18th ) , 335 on friday , 355 on mondya and 295 on wednesday …
when any events are expected , its not bad to go long even if the premiums are high
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anyone took bets on budget day ?
i have long strangle on tata motors for the budget …
i have not done iron butterfly or iron condor in bank nifty for the budget , but its a decent bet …
Buy 27400 CE + PE = 410Rs app
Sell 27800 CE + 2700 PE = 170rs app
or any other strikes
Is it because of 600 crore project deal for tatamotors?
I have long strangle on nifty. 11250 CE and 10850 PE
lol … no
i picked it mainly because it wont lose premium during the budget and fair chance of showing decent moveemnt up or down…
did little analysis … it easily moves 3/4% during the budget session …
also auto sales data is lined up on 2nd and results will be out on 5th , so i feel premiums depreciation will be very less … prepared for 10% loss though
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whoever bought straddle or starngle might have lost big esp in bank nifty …
iron condor or iron butterfly in BN might have given decent loss as well
@iSTFF @VelmuruganSengottai @RSOptions After reading complete post, I think long straddle is merely useless and loss bound if Volatility is high at the time of taking position. However just to confirm, can someone comment about this strategy for Feb 2nd 2021 budget session? If my understanding is correct post budget session market IV reduces on the same day itself so there is no use of taking the position on Friday 3 PM (30 Jan) and square off on Monday once good move happens in the market?
Hello Guys,
I trade BN options every week mainly for expiry play.
I deploy short strangle with 1000-1500 points away from the spot starting from tuesday i.e. two days before expiry.
I some times do long straddle also on BN but on intraday basis. The main factor that effects the long straddle is volatility along with the spot price.
Coming to budget day strategy, now is not the correct time for deploying long straddle bcz the options prices have already shoot up due to increase in volatility. The best thing is to open long straddle 10 days before the budget and close it one day before or on opening day of budget.
We can also initiate long straddle on the budget day after 3pm and can carry forward it till expiry. This strategy has been back tested and was profitable 7/10 times in the last 10 years.
The rewards in the above strategy will be very good ranging from 50-100% on capital.
Backtesting results which you mentioned is for Nifty or BN? But the big move will be completed by 3 PM on budget day so still is it wise to go for long straddle till expiry?
Actually I’m seeing conflicting statements for the same strategy so a bit confused, some are saying initiate straddle on Friday evng or Monday mrng (by 9.20) and exit by same day 3 PM or Tuesday 3 PM.
The reason being big move will happen either immediately after budget or by next day.
While some others said the same way as you suggested. But in this case even though volatility cools off a bit I’m more concerned abt the big move.
In my opinion, do a long straddle only if you think that the delta move will be greater than the IV crush after budget. Only then will you be making a profit.
Hi…
The back testing was done on nifty but the same should also equally applicable for BN.
Since the volatility cools off after the event, the option prices should be cheap after 3pm.
Also in most of the years,market has shown trend and made big move either up/down side after the budget till expiry. This strategy mainly depends on the expected after the budget till expiry.
Coming to intraday, u can initiate long straddle in the morning and can close it once u see the volatility is falling. But this needs u to constantly watch the market minute by minute bcz market can give wild swings on budget day.
Only thing worrying me is that market is already trending and can become sideways after the budget.
Pretty good profit indicators.
Yes that is major challenge, considering market movement from past few days it has been a roller coaster ride, so it can go into some range eventually wiping premiums till expiry and benefiting options writers. Anyways I’ll watch out for Monday 3 PM trade based on volatility and market sentiment.
If we feel that market is range bound after entry, we can sell OTM options for covering the position.
Only thing is we need margin ranging from 1.5-3L for doing the adjustments.
That is the main problem, higher capital needed to compensate and book profit. Got small excerpt from news.
The S&P BSE index has climbed in the month after budget day on only two of the past seven years since Prime Minister Narendra Modi came to power, while falling or staying rangebound on other occasions. Risks are compounded in 2021 given stretched valuations.
I am kind of a beginner in F&O and have never traded F&O till now during a special event day. Now everywhere people are into this fear-mongering that the premiums will decay very fast and stuff. Now should I be worried about the existing overnight positions or just ignore whatever BS happens during budget day?
That’s a really daring step for a beginner to take overnight position irrespective of a major event.
Did you take naked options or some strategy?
Naked positions. But these are Feb 25th expiry options. Also these are long puts/calls. I haven’t shorted anything.