India’s benchmark Nifty witnessed a choppy trading session today, despite India Vix dropping below 12. The important question is how can traders take advantage of low vix scenarios and make money from the market? In order to understand this, let us take a close look at market volatility.
What Is Volatility?
Volatility is the statistical measure of deviation in the returns generated from an instrument. The greater the deviation, the higher the probability of returns. However, options traders have the ability to generate returns during high and low volatility if they use highly sophisticated softwares like the 3D Delta System. This software helps options traders spot the trend and the shift in market volatility ahead of time. Since implied volatility is the primary causes of deviation in the price of an option, there is huge opportunity for those who can catch the swings early. The expansion in the options gamma during high Vix causes exponential returns for option buyers. Thus buying options can generate returns ranging between 80-150% intraday. Take for example, on June 9th; Bank Nifty collapsed almost 750 points intraday and the 30900 Put options generated more than 200% returns. During low volatility, there is a significant drop in the options Vega, thus the 3D Delta system catches opportunities by selling options. The trick lies in identifying when the Volatility will rise or drop before the impact is factored in the price of the option strike.