India’s benchmark Nifty future witnessed a volatile trading session today, as the index bounced back and forth between 11125 and 10886. After opening 87 points gap down around 10940, Nifty witnessed a sharp upswing of 239 points and recorded a high of 11125. Today was a classic opportunity for swing trading.
The Sell Side Swing Trade
The sell side swing trade opportunity was the first to be triggered around 9:25 am in the 10600 Put Option. After market opened 85 points gap down the covariance factor in the gamma and vega in the 10600 Put option neutralized. The 10600 Put strike was bought at Rs.71 and Nifty scaled down to register a low of 10886 and the Put option registered a high of Rs 84. Although the trade was in profit, the idea was to wait for the option greek calculations to indicate profit booking zones. The Put option fell short of the target by a narrow margin and market reversed. The position was covered at Rs. 61.
The Buy Side Swing Trade
The beauty about greeks based swing trading is, it will create an opportunity in the Call side if the Put side trade is wrapped up before hitting the target zone, despite a match in the gamma Vega covariance factor. This happens because the sum total of the Call and Put option Delta can neither fall short nor exceed 1.
The Swing opportunity in the Call option was triggered as soon as the Put side was wrapped up. The 11200 Call option was bought at Rs.69. Thereafter Nifty zoomed up to register a high of 11125 and the Call option was squared off at Rs.118.
Trading Without Predictions
The idea behind trading without predictions is to help traders maintain high accuracy even on volatile days like today. Following the footsteps of the market with the help of option greeks and staying away from guess trading is a must. If you notice, today the option covariance generated two swing trades. The Put side swing resulted in a marginal draw-down of Rs.10/lot, while the Call side Swing generated a profit Rs.49/lot. Here too the RR was an impressive 1:4.