India’s benchmark Nifty fell 90 points intraday after a gap down opening in the morning. The important question is, why was today’s selling not aggressive despite the presence of institutional sellers in the market?
Why Was Today’s Selling Not Aggressive?
The answer to this unique phenomenon lies in the gamma imbalance in the Put options caused by the surprise 200 points fall on the 1st day of the June contract. Today, the 3D Delta System captured the institutional seller entering the market in the morning after the gap down opening. It also indicated that the downside target for the institutional seller was around 11852. So why did the market bounce back 25 points ahead of the downside target?
Why Nifty Bounced Back Ahead Of The Target?
Although institutional traders always set a time and target before entering the market, they manage their positions intelligently to negotiate the threat of theta decay as time passes by. We all know the adverse correlation between the price of an option and its theta decay. Today, the 3D Delta system indicated that the institutions waited till 1 pm today keeping in mind the existing gamma imbalance in put options and the implied volatility of the designated option strike. Thus positions were squared off at 1:15 pm, above the downside target of 11852 approx.
Today’s Trade Execution
At Amplify we never predict the market; we trade if institutional traders enter the market. It gives us the edge over the rest, and provides extreme levels of accuracy. To test the accuracy of the 3D Delta System, we bought the 11800 Put @ Rs.72 today after the institutional sellers entered the market in the morning. The downside target was set at 11852. The position was booked alongside the institutional seller. Put options were squared off around 1:10pm at @ Rs.87.