India’s benchmark Nifty Future witnessed relentless selling today. The index tanked 290 points from Friday’s closing of 11815 and registered a low of 11527 approx. Although there was negative news about the US Fed not cutting interest rates due to a sharp rise in jobs data. The important question is, “did the news really trigger the selloff”?
Was Today’s Selling News Based?
In today’s session, the 3D delta system captured institutional sellers entering the market. Whether there is negative news or not, option buyers can only make money if the institutional traders participate. During the first few days of the July contract, there was positive news in the market about a settlement in the US-China trade war, and the market began climbing. So why didn’t the call option generate exponential returns despite positive news? Simply because the market makers did not participate in the up move.
However, today, there was negative news and the 11600 and 11500 Put options generated 134% and 160% returns intraday. We are all very familiar with these occurrences, aren’t we? This phenomenon is repeated every month, and traders can capture these swings if they allow the smart money to form the market direction.
So How Can We Simplify The Process & Capture The Real Swing?
Look at it this way, for the institutional traders it really didn’t matter whether the government rolled out a $5 trillion plan in the budget. Or for that matter how the Federal Reserve might deal with the interest rates in the future. They simply wait for the binomial price points and build their positions. Take for example today’s scenario, Nifty fell 290 points. Even if you had not sold on Friday and waited for the market maker to participate and then enter strictly at the binomial price points, you have generated profits. The important point is to allow the market to create the binomial entry points. Today, Nifty remained below the range high throughout the day, that was in itself the biggest clue. These calculated moves help traders simplify the process and capture the big swings triggered by the market maker every time.