Fierce Competition Between Buyers & Sellers
India’s benchmark Nifty witnessed fierce competition between buyers and sellers in today’s session around 11270. Yesterday’s closing at 11265 had created a window of opportunity for the buyers to regain control of the index. In today’s session, the buyers tried to take control of the index towards the 1st half but they failed as India Vix spiked above 28 and caused the implied volatility to shift in favor of the institutional sellers who carried forward short positions overnight.
The institutional sellers used the implied volatility thumb rule to neutralize the theta dilation in Put options and triggered yet another fall till 11153. Implied volatility thumb rules can be applied by retail traders during major events like the Lok Sabha election in congruence with Black Scholes calculations.
Will It Trigger Fresh Sell Off?
Although Nifty has tanked 143 points today, it has failed to break today’s range low. The one parameter which will decide the direction tomorrow is the drift in implied volatility in Put options. Today’s closing at 11162 indicates that sellers have regained control of the index after yesterday’s profit booking. The 3D Delta system is indicating that the institutions are waiting for the arrival of new information and might need a gap down opening to trigger a fresh sell-off.
Today’s closing at 11162 has tilted the scales in favor of the sellers. The 3D delta system is indicating that institutional sellers are waiting for additional news. Although implied volatility is a phenomenon used by institutions during major events, Nifty might witness fresh selling even if the market triggers a gap down opening below tomorrow’s range low.
What are the odds of a bounce back? For a buy bounce back to happen, institutional buyers must enter the market. Profit booking can be triggered by institutional sellers, only if the news that they are waiting for does not come and they fail to break tomorrow’s range low.
How To Execute Intraday Swing Trades In Bank Nifty
Intraday swing trades can be executed on days like today when the buyers and sellers are busy deciding the market direction. The gamma vega covariance factors of Call and Put options can be used to identify the neutral zones of the range and intraday trades can be executed.
The important question is why did the software choose Bank Nifty and not Nifty? It is because intraday swings need to be swift and must be backed up with aggressive vega shifts.
The 3D Delta system scanned the market and picked up a long trade in Bank Nifty when the index hit a low of 28765 in the first half. Since it was a contrarian swing trade, the stop loss was just 25 points, with an upside target of 100 points. Bank Nifty futures were bought @ 28790 with a target of 28890. Bank Nifty was bought @ 28790 around 1:21 pm and squared off @ 28890 in 12 mins sharp at 1:33 pm.
Bank Nifty Options Data