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Options Trading Strategies on Budget Day 2025A Comprehensive Guide on Nifty, Niftybank, and Sensex Options Introduction Trading options on Union Budget day can be an exhilarating yet challenging endeavour. The Indian stock market sees significant volatility on this day, influenced by the budget announcements made by the Finance Minister. This guide will provide insights into trading options on the three major indices in the Indian markets: Nifty, Nifty Bank, and Sensex. We will also analyse the past data of these indices on budget days and examine how India VIX have fluctuated during these days. Based on this data we will deploy 4 delta neutral strategies and see how these strategies have performed on the budget days for all the 3 indices. The basic idea of this study is to find out the optimal strategy that can be deployed on budget day. Also please note since Sensex is a new instrument for weekly options data for the strategies is only available for 2024 Understanding the Major Indices • Nifty: The Nifty 50 index, representing 50 of the largest companies listed on the National Stock Exchange (NSE). • Niftybank: The Nifty Bank index, comprising the most liquid and large capitalized Indian banking stocks. • Sensex: The Sensex or BSE 30 index, representing 30 of the largest and most actively traded stocks on the Bombay Stock Exchange (BSE). Historical Performance on Union Budget Days To make informed trading decisions, it is essential to analyse how these indices have performed on budget days over the past decade. The following tables provide detailed data on the indices' performance, including values for Open, High, Low, Close, and percentage changes from Open to Close and High to Low. Additionally, the tables include India VIX movement throughout the day. Analysing Implied Volatility and India VIX On Union Budget day, implied volatility and the India VIX are crucial indicators to watch. Typically, an IV crush occurs post the Finance Minister's speech, leading to a significant drop in volatility. This section will explore these trends based on historical data and provide insights into how traders can capitalize on these movements. PS: The IV considered here will be the ATM Straddle IV Options Trading Strategies Although multiple options strategies can be deployed on budget day we are going to consider deploying a Directional and a Non-Directional Straddle with protective hedges. We will compare the strategies to see which strategy has given the best back testing performance and we will compare the performance of these strategies for all indices Nifty, Bank Nifty and Sensex. Short Straddles using Wait & Trade A conventional short straddle involves selling an ATM call and an ATM put option. However instead of entering both the legs at once we are going to perform a wait and trade directional straddle. This means that we will enter the call leg or the put leg only when the premium falls below 5%. We will take the reference time of entry as 9:20 am and exit time for the strategy will be 3:25 pm. We will check the reference price of both the calls and put options at 9:20 am for the ATM Straddle strike price. Let us say the Nifty on budget day is trading at 22500 then we will check the premium of the 22500 CE and 22500 PE and note down these prices. Let us say both are trading close Rs 100 each then we will enter only when the price of those options goes below Rs 95 implying that there is some direction in the market. So we will enter only that leg and avoid executing the other leg. If the market takes a direction we are bound to profit from the leg that has been executed. If the market moves up first and then down then it is likely that both the legs will get executed. The stop loss on the individual legs will be 70% each. One can execute this simple strategy via an algo execution platform. Pros: This strategy profits from the decrease in implied volatility and can be profitable if the market remains sideways or directional. Cons: This strategy will tend to loose money in a V-shape or U-shape market since there is a possibility of both stop losses triggering. Iron Butterfly An Iron Butterfly strategy involves selling an ATM straddle and buying protective wings (an OTM call and an OTM put) to limit risk. The offset units will be purely selected on the basis of the breakeven points of the straddle to keep it simple. This strategy is limited risk limited reward strategy. We will execute this strategy on all indices at 9:20 am and exit at 3:25 pm on all budget days. Pros: On budget days the usual tendency of the market is to make some extreme movements but tend to close flat or closer to the open. If on the budget day the market tends to behave in this manner then the strategy turns out to be a high profitable strategy. Cons: On budget day if the market becomes extremely directional then this strategy will end in a limited loss Back tested Results The back tested performance of short straddles and Iron Butterfly on Nifty, Nifty Bank, and Sensex indices are summarized in the following tables. These tables will help traders understand the potential profitability and risks associated with each strategy. For some strategies there is lack of back tested data available, so it is denoted as NA in the column of the strategy name Note: All the strategies deployed as a part of this exercise are time based straddles. To optimize the performance of these strategies one can look at ATM straddle charts and can add some technical indicators such as super trend, vwap or moving averages to plan precision entries and exits for these strategies. The usage of these will definitely help increase the probability of the trade. Please find the link below for your reference with all the data Historical Data Indices.xlsx The software used for backtesting the strategies in StockMock. Conclusion Budget week brings volatility; traders should employ delta neutral strategies to benefit from price fluctuations and implied volatility changes Some of the key highlights of all budget days: 1. Budget week is highly volatile, with significant price movements expected. 2. Historical analysis shows an average 2-2.5% movement from high to low on budget days. 3. Implied volatility typically decreases around 11 AM on budget day. 4. Delta neutral strategies are recommended for traders lacking directional clarity. 5. Various strategies like straddles, strangles, and iron condors can be employed. 6. One should use algo platforms to automate executions since markets will tend to move very fast and in such situations, execution becomes extremely critical 7. Also do your own study by backtesting, forward testing and only then deploy your strategy in the live market Hope you found the above article useful in helping you to prepare yourself in advance for Budget Day. All the best!
NSE:NIFTYEducation
by VishalSubandh
10
SBC - Volatility Contraction Pattern (VCP) - Breakout -DailyAlways welcome for any comments with your feedback, or give it a like if you find it useful. Name - SBC Pattern - Volatility Contraction Pattern (VCP) Timeframe - Daily Status - Breakout Volume - Very good volume Cmp - 35.33 Target - 45 SL - 32 SBC Stock gave breakout on 5th Sep with very good volume. Currently it looks like retesting the breakout level -32. What is the Volatility Contraction Pattern (VCP)? The VCP is a chart pattern that shows a series of price contractions, where each contraction is smaller than the previous one. This pattern typically forms during a consolidation phase after a significant price move. The idea is that as volatility decreases, the stock is preparing for a breakout. Strengths The company has shown a good profit growth of 74.06% for the Past 3 years. The company has shown a good revenue growth of 19.74% for the Past 3 years. Company’s PEG ratio is 0.86. The company has an efficient Cash Conversion Cycle of 53.09 days. Limitations Promoter pledging has increased from 16.22% to 18.24% in 1 quarter. Company has negative cash flow from operations of -11.79. The company has a low EBITDA margin of 3.60% over the past 5 years. The company is trading at a high PE of 84.37. The company is trading at a high EV/EBITDA of 54.49.
NSE:SBCLong
by VCharts_TA
NSE:JETFREIGHT: Bullish Breakout with Significant Volume SupportSummary: NSE:JETFREIGHT Jet Freight Logistics Ltd NSE:JETFREIGHT has recently exhibited a strong breakout following a period of consolidation, supported by robust trading volume. The company’s fundamentals show a mix of strengths and weaknesses, with notable performance in certain areas, making it an intriguing candidate for short-term trading opportunities. Fundamentals: NSE:JETFREIGHT High Shareholder Yield: Indicates strong returns to shareholders Significant Return Over Last Week: Demonstrates recent positive momentum Prominent Player: Well-established in the Air Freight & Logistics industry Low Revenue Valuation Multiple: Suggests the stock may be undervalued compared to its revenue Weak Gross Profit Margins: A potential concern for long-term profitability Stock Behavior: Often moves in the opposite direction of the market, indicating unique trading patterns Technical: Strong Breakout: Indicates a bullish trend Little Consolidation: Stock consolidated briefly, suggesting a base is forming Breaking Out of Box: The stock is breaking out of a defined range, signaling potential further gains Strong Volume: High trading volume supports the breakout, indicating strong investor interest NSE:JETFREIGHT
NSE:JETFREIGHTLong
by hrishikeshrahalkar
2
#RUBYMILLS on the weekly chart analysis#RUBYMILLS Weekly Chart Analysis 📊 ◽️ Volatility Contraction : A tightening of price range has been observed. ◽️ Volume Surge : Recent increase in trading volume suggests growing interest. ◽️ Breakout Potential : Breakout with volume confirmed on both weekly and monthly timeframes. ◽️ Short-Term Target : Potential for a 25-30% move, with a target around 30%. 📌 Disclaimer : This analysis is for educational purposes only and is not a buy or sell recommendation. Keep an eye on this one! 📈 Keep learning. All the best.
NSE:RUBYMILLS
by breakboxtrader
bajaj holdings & investments consolidating buying opportunity ->bajaj holdings conatins bajaj finserv,baja auto ,bajaj finance (results on jan 20 2020)where everything hit all time high ->but bajaj holdings still trading below precovid levels still lacking 25% from precovid level of 3900, ->& results are there on jan 21 ,and bajaj finserv might also get banking license mostly the event is expected by jan15, ->if we look at valuations usually any holdings company will trade at 60% of their ture value, even factoring that bajaj holdings should trade at 5000 but still at 3100 (5000 i am expecting based on my analysis of financial report of bajaj holdings and investments 2019-2020) ->fundamentally it is like a mini mutual fund, mainly consists of bajaj group companies mentioned above along with other companies like Bajaj Auto Holdings Ltd Maharashtra Scooters Ltd. Bajaj Electricals Ltd. Mukand Ltd. Hercules Hoists Ltd Mukand Engineers Ltd and investments in companies like nse , bse , etc(there many read financial report 2019-2020 to know more ) so i think it is good pick for long term which is also diversified in risk & now the share is consolidating it might breakout in jan itself as other bajaj group companies results are also there in jan and are at all time high ,bollinger bonds are also contracted in day chart, rsi at 56.8 and mfi 51.1 as of jan 1 2021, and some analysis i did based on bajaj holdings and investments financial year report 2019-2020 where bajaj holdings holds the following shares 1. Bajaj Auto Ltd. --------> 35.77% (results on jan 21 2020) 2.Bajaj Finserv Ltd. -------> 41.63 (results on jan 20 2020) 3.Bajaj Auto Holdings Ltd.----> 100% 4.Maharashtra Scooters Ltd. ---> 51% (results on jan 18 2020) so those are bajaj holdings holds the above mentioned % of shares in those companies and those companies results are mentioned above and bajaj holdings result is also there on jan 21 2020 mostly results will be +ve and finance serv banking licence news might also trigger bajaj holdings along with finserv so in short term we may expect 3300-3500 and in long term 4000-5000 dis claimer :- this is not an investment advice just my opinion trade at your own risk , thank you this my first idea i am publishing plz support :) if you like it thanks for reading jayasurya gunturu
NSE:BAJAJHLDNGLong
by techno_funda_guy
Data Patterns, a defence and aerospace proxy ready to move?-In a very long base, last time it breakout long base gave 80% move in just 20 days. (always read history of stock how it move, how to form base, how it react to moving averages, how volumes come etc etc) -from strong sector (sector is always imp as strong sector's stocks move faster) -Good shakeout and Fake-out also there means kicking weak players by hunting their SLs (stoplosses) -Inside Bar on latest candle -Volatility contraction
NSE:DATAPATTNSLong
by takmanish007