India’s benchmark Nifty witnessed a sudden spike in volatility during the 2nd half of trading today. The index opened 45 points gap up in the morning and climbed 118 points to register a high of 11186 approx. So what triggered the upswing in the 1st half, and why was Nifty hit with sharp volatility in the 2nd half? Let’s discuss.
The Buy Swing & The Volatility
In today’s session, Nifty displayed ample confidence during the first half of trading. The index scaled up 118 points and witnessed a sharp rise in volatility during the 2nd half. The up-move in the 1st half was powered by the neutral covariance factors between the Call gamma and vega in the weekly options contract. The weekly neutral zones are highly conducive for intraday trading as it creates opportunities with ultra-low risk and exponential returns for options traders. The 2nd half was rigged with volatility due to profit booking in the intraday positions in call options. It is very important to note that today’s intraday positions in Call options have been squared off as Monday is a trading holiday.
Trading Without Predictions
Trading without prediction is an act of flowing with the market. It is about strictly moving along with market maker between 9:15 and 3:30 pm. There are 3 strong advantages to this approach. First, the market makers build their position in congruence with the option greeks. Second is the sheer size of the institutional positions. The third is their ability to execute trades with zero emotions. This is what gives them high accuracy and the edge to generate attractive returns. In today’s session, for instance, the 11300 weekly call option was bought @ Rs.19 when the gamma and vega covariance factors neutralized. The risk in this trade was just Rs.4. The call was bought around 11:30 am. Thereafter, Nifty climbed and registered a high of 11186. The call went on to make a high of Rs.34; it was later squared off at Rs.31.50.