How to make massive gains in event based movements without a risk

Budget day movement came a surprise to many and for our traders that was a massive gainer. We got few questions on how to trade event based news with minimum risk and yet be able to gain good gains out of them.

First we have to have two hypothesis  to trade events- 1  Is that the outcome of an event can be any, or in case of something like budget the interpretation of the even by the market can be either positive or negative. 2- Based on the outcome we will see a massive change coupled with increased volatility in a short time.

So how to trade based on these two hypotheses. Normally we don’t recommend buying options at all but these are the best situations that an option trade can be taken in  a hedged manner.  Why hedged? Because as per hypotheses 2  as a trader I don’t know what is the outcome of the event. So I will take a hedged trade ensuring that either way the movement is I gain out of it? Yes that’s the beauty of trading a hedged option long, you will make profits on movement of either way.

Let us review the trade we took,  when NIFTY FUT was hovering around  5800 we asked our traders to buy equal quantity 5800 CE and 5800 PE. Both were trading at around 22 rs per lot. So total payout is 44 INR per pair of option.

Since we don’t know the outcome but as per our hypotheses we know a strong movement can happen either way. But now at that stage we were in complete peace as our trade would had been profitable where ever the market moves.

When markets fell and NIFTY FUT closed near 5700 our 5800 PE closed at 110 levels and 5800 CE was just 2 INR. Net gain per pair was 112 INR.giving our traders a gain of a whooping 155% profit per pair without  any risk at all.

Lets say the markets would had moved in the positive direction and closed at 5900 levels. In that case the 5800 CE would had been around 110 and the 5800 PE near 2 INR still giving us the same gains of 155% irrespective of the outcome.

See the graph at for a better illustration of the movement and outcome.

option pair trading for News event- Risk free outcomes