BUDGET DAY OPTIONS STRATEGY- Playing Volatility The Smarter Way

Its budget time, the first major high news based event after the dramatic election results. Expectations are high this time around to deliver the road map for laying out the road map for now famous “ache din aane wale hain” slogan. The budget is expected to give a clear indication of the government intent on lot of key decision issues.

How as a trader are you gearing up for the budget session. How about studying the markets quickly and try and come with a strategy to see if we can be a winner irrespective of the market movement.

Well first lets have a quick look at the NIFTY CHARTS.

NIFTY_ JULY Futures

NIFTY has been seeing the first major fall since the election results were announced in May. Last two sessions also saw a dramatic increase in the volumes.  Critical support as you see now lies in the 7450-7500 zones and markets will look to find some support around that zones.

On the upside critical resistance lies at 7670-7720 zones and a break out above that can see a runaway rally till 7950-8000 levels.

Now what lies ahead or before that. Lets a have a quick look at the options accumulation data. This data suggests that strong resistance lies in the form of huge accumulation at 8000 levels and that is something will take a huge effort to get past. On the downside markets have support at 7400-7500 levels from options OI point of view as well. This completes our price based support analysis as well.

Now what would be a potential options strategy to trade these levels. The fact that VIX is still wandering around 18 levels and looking to break out above that range. We will hence go for a long only strategy here. So here is the strategy outlay: Long 7500 PE, Long 7700 CE.  Total premium paid= 186 INR. Profit per lot if market goes to either 7200 or 8000 = 6000 INR. Here is the graph below on strategy performance against the index

Options Strategy Performance

The author is an independent technical analyst with strong focus on systematic & program based trading & investing solutions. The views presented here are his independent view

MAY-2014 EXPIRY OPTIONS BUILD UP & EXPIRY TRADING IDEAS

May has been an extremely volatile and a big month for the markets and hence it will be keenly watched by option players to see where it tends to close from here. With two days to go for expiry we thought to bring up some interesting statics on the data for this month.

First a look at the options build up for May. As the graph suggests that the maximum buildup of options  is in the 7400 & 7500 range for CE. This indicates as serious resistance and more or less confirms that markets wont be pulling back above those levels in the next few days.

This is inline with our other analysis last week  where we had clearly marked that 7550 would be a big hurdle for the markets and in the last two sessions markets have exactly retraced from there.

On the downside option build up support emerges at much wider band of 7000-7200 levels and hence not much conclusion can be derived for a definitive levels.

Now also a look at the INDIAVIX Charts. INDIAVIX is currently in the consolidation band and faces serious hurdle at 25 levels and support at 13-15 zones. This would largely mean that volatility may further consolidate and hence markets may continue to remain in the wide band of 7200-7400 for a while.

So what would be the option trades for this expiry, we would say look for a pullback options opportunity from 7200 levels on the downside and 7400 on the upside.

We will also post an updated analysis on the morning of expiry day as well on the facebook page. Stay tuned

INDIAVIX combined with the option OI can potentially offer some great trade set ups in the markets. For both writers and option buyers.

NIFTY Options OI Data-27- May-2014

This is inline with our other analysis last week  where we had clearly marked that 7550 would be a big hurdle for the markets and in the last two sessions markets have exactly retraced from there.

On the downside option build up support emerges at much wider band of 7000-7200 levels and hence not much conclusion can be derived for a definitive levels.

Now also a look at the INDIAVIX Charts. INDIAVIX is currently in the consolidation band and faces serious hurdle at 25 levels and support at 13-15 zones. This would largely mean that volatility may further consolidate and hence markets may continue to remain in the wide band of 7200-7400 for a while.

So what would be the option trades for this expiry, we would say look for a pullback options opportunity from 7200 levels on the downside and 7400 on the upside.

We will also post an updated analysis on the morning of expiry day as well on the facebook page. Stay tuned

INDIAVIX combined with the option OI can potentially offer some great trade set ups in the markets. For both writers and option buyers. 

THE BIG DAY: ELECTIONS RESULTS- Our Magic Options Strategy With Minimum Risk & Maximum Returns

16^th of May is the D Day. The elections results for 2014 general elections are going to be out.   This will pave way of the next government.

The entire nation and specially the markets will keenly follow the election results. We all very well remember what the market reaction last time results were declared was.

Most exit polls have sung to the common tune of ab ki bar modi sarkar this time. The exit polls have signaled a positive outing for the NDA . The projections from channels vary from 250 odd to about 340. What is important to watch out is will NDA be able to achieve the magic figure of 272 or get to a close distance of it.  On the other hand we also know that exit polls can go way off the mark too ( last general elections exit polls most agencies got it way to wrong).

So expecting a volatile movement in the markets, we all know at least that the market may not stay at the same levels after elections. How to maximize the gains with a minimum calculated risk potential?

Apart from our advanced trading systems & advisory Powertrade have always endeavored to think out of the box an provide innovative investing & trading ideas (Our long time readers will recall our strategy of covered investing ,when we advised investors to go long in NIFTY ETF 6200 levels then http://powertrades.blogspot.in/2013/11/investment-or-trading-in-markets-at.html)

So lets have a plan to gain in the markets this elections.

Based on the exit polls we want to go Long in NIFTY, yet don’t want to loose if markets crack right?

First an analysis of NIFTY Levels

Nifty Has resistance at 7200 and a long term break out can be achieved above 7500 , where markets can even hit 7900-8000 zones in next sessions if that level is cleared

Similarly Nifty has critical support at 6900 levels and a any indication that NDA may fall short of the magic levels will mean a blood bath in the markets.

So here is our magic strategy to trade based on those two levels (7500 on upside & 6900 on downside)

Type	Strike	Quantity
NIFTY CE Long	7200 CE	100
NIFTY CE Short	6900 CE	50

Strategy Risk Reward:

·         Gain if NIFTY reaches 8000: 23,566 INR Per Lot

·         Loss below 6900 (any level): -1640 INR Per Lot

This strategy is based on the premise that markets will react either way and will not stay at these levels and we want to be sure that we don’t lose if it falls

Alternate Long Only Strategy:

This is an alternate strategy for players who want to earn on either side by  and are expecting a big move in line with what happened after last elections. This strategy is also a long only strategy

Type	Strike	Quantity
NIFTY CE Long	7200 CE	50
NIFTY PE Long	6800 CE	50

Strategy Risk Reward:

·         Gain if NIFTY reaches 8000: 20,461 INR Per Lot

·         Gain if NIFTY Reaches 6300: 10,135  INR Per Lot

Elections 2014 & The Markets

India remains a favourite for #FIIs--------
Positive sentiment on expectations of a Modi-led NDA victory puts India ahead of other poll-bound emerging markets
Puneet Wadhwa | Mumbai March 11, 2014 Last Updated at 22:50 IST Business Standard 

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Despite the overall positive sentiment, analysts caution markets could correct in case the election outcome throws up a hung Parliament or a Third Front-led government. Even if the NDA is voted to power, the rally could take a breather, as investors wait and assess how the economic policies and reform measures in India take shape. “Only the equity market’s worst case scenario of a non-Congress, non-BJP ‘Third Front’ government can, we think, upset the Indian equities applecart,” says Manishi Raychaudhuri, managing director and Asia-Pacific strategist at BNP Paribas Securities.

Cheruvu of RBS says the chances of a Third Front government at the Centre are less than 10 per cent. If the Nifty rises to 6,700-6,800 in the pre-election rally, he expects it to correct to 6,200-6,300 in case of a negative outcome.

Dilip Bhat, joint managing director, Prabhudas Lilladher Group, says, “A decisive mandate might see the Nifty at 6,800-7,000, though it would be significantly ahead of the fundamentals. The question is can these heady levels be sustained? My sense is no. Markets will remain vulnerable to significant corrections from those levels. On the other hand, if a decisive mandate is missing, the Nifty could dip to 5,500-levels.”

Motilal Oswal, chairman and managing director, Motilal Oswal Financial Services, says: “The chances of a Third Front government are very low. However, in case such a government comes to power, we will see a 10 per cent correction in the markets from current levels and FIIs will press the sell button on India. On the other hand, even if Narendra Modi comes to power, incremental buying by FIIs will slow, as they will wait and watch how policy decisions shape up. So, either way, the markets will see some correction for some time after the elections.”

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Well #projections made public are always as confusing as they can be ....We @ Powertrade do not 

know what Markets can do...But unlike the Fundamental Legendary Experts of the Indian Markets we do not take #Trading as a Game of #Betting, instead our Smart Chartists believe TRADING IS A WAY OF LIFE. So Sincere #Chart #gazing and #Disciplined #Money #Management is our specialization to create #Real#Wealth....We Thrive on #volatile moves and TeamPowertrade Promises every member to identify the right moves at the right time...

Investment or Trading in the markets at High levels. Comparative Analysis & Low Risk ideas

In our last blog post we mentioned that Indian Indices are likely to relatively outperform the global indices and also shared some trading/ investing ideas to leverage this opportunity with lower risks

Here is a quick recap of the potential options to capture this opportunity  versus the global indices:

1.     Global futures specially Dow jones and FTSE are traded in NSE and can be used as a pair trading opportunity with our index( that is short in Dow Jones and Long in NIFTY)

2.     Similarly there are mutual funds which offer investing opportunities both in global markets and NIFTY ETF. If one is long on the former it may be a good time to switch into NIFTY ETF’s

3.     For those who want to stay to our markets, one can bet on relative upside and start picking stocks in a mixed manner. By mixed I mean pick up partly sectoral stocks that have outperformed since 2010 and pick up sectoral stocks that have performed mildly or underperformed since then

- See more at: http://www.powertrades.blogspot.in/#sthash.tnukRceY.dpuf

We received many feedback on this and expectedly lot of you want to try out option 3 ( that is keeping investment positions in the indian equity markets with a mix of opportunities

To take it from there we present here a comparative analysis of the various sectoral indices within Nifty.

NIFTY Sectoral Indices- Comparative Analysis

We have considered the following indices:

·         BANKNIFTY (NSE BANK)

·         CNXIT ( IT Stock indices)

·         CNX100 ( Top 100 CNX stocks)

·         MIDCAP Index (CRSMID)

The graph below presents how the indices have done against each other since the highs of 2010 was made.

It is clearly divided into three sections:

·         Outperformance: CNXIT

·         Flat performance: CNX100 & NIFTY

·         Underperformance: CNXMIDCAP & NSEBANK

Potential strategies in equity investments:

1.     Balanced Traders can Keep a mix of stocks especially from the top 2, that is CNXIT,CNX100 and NSEBANK. This way in case of a downward consolidation CNXIT stocks will ensure that the portfolio selection does better overall and in case of outperformance BANKING stocks may outperform the benchmark index

2.     Selective stock picking of not more than 10-20% from the mid cap sector. Look out for midcap banking stocks.

3.     Aggressive traders/investors can look at stock picking exclusively from NSEBANK & CNX100

Markets near All Time Highs? Is it Time to Rejoice??? Or Time For Caution?

Sensex already made the headlines with marking all-time highs and NIFTY followed close with just a few points of the highs?

Few sessions back we wrote that we Indian Markets are likely to outperform the global indices and we are well on track for that.

But we also discussed one more thing, a good measure of calculating highs is to see the relative performance and relatively we are yet some way to go to call it a real high.

A large part of Nifty’s move has been contributed with the IT index while the other indices like BANKNIFTY and CNXMIDCAP are still quite off the high.

Also markets have been very volatile last few months giving tough time to intraday players. How does one trade the markets from these levels?

Discretionary calls? Trading Tips? Traditional Trading systems? Well None of them have worked so far… is’nt it?

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BankNifty Futures- SmartSignals Pro

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Comparative Analysis on Why Indian Market May Outperform Global Indices

A post after quite a time,

This time around we will discuss on how markets are poised to move from here and how we have done so far using a different parameter

While we wander around all time highs how are our markets shaping up to move from here? Performance is usually measured in  absolute terms. That typically means what is the absolute growth we have seen so far.

Which is a near 0% growth since the market tested the highs in 2010. Another refined way of measuring performance is on relative terms.

In relative terms it will be interesting to see how badly have we done against the developed economies? we have underperformed the developed markets ( for comparison we treat DJIA and S&P as reference indices)

Here is a chart to depict the magnitude of the underperformance. One chart as usual is worth many words.

NIFTY v/s DOWJONES RELATIVE ANALYSIS

While US markets have moved 40% since 2010 we have just reclaimed the top (0%).

Now since the degree of deviation is significant, this increases the chance that we will close this gap in the near future. This is a reason to believe that we may look to outperform the global markets in the near future?

This has also been confirmed with the short term move? Now have a quick look at the last two months data point.  Since the last two months we have moved 15% on the upside while Dow has moved about 4.5 %

NIFTY v/s DOWJONES v/s S&P: short term comparison

Note this just means we are likely to outperform. Which means that in case we  are likely to go up more than the global markets and when markets correct we are likely to go down less in percentage terms.

How to use this as an opportunity:

Yes the analysis is fine, but how do I capitalize on this.? Well there are a more than few ways to do so:

1.      Global futures specially Dow jones and FTSE are traded in NSE and can be used as a pair trading opportunity with our index( that is short in Dow Jones and Long in NIFTY)

2.      Similarly there are mutual funds which offer investing opportunities both in global markets and NIFTY ETF. If one is long on the former it may be a good time to switch into NIFTY ETF’s

3.      For those who want to stay to our markets, one can bet on relative upside and start picking stocks in a mixed manner. By mixed I mean pick up partly sectoral stocks that have outperformed since 2010 and pick up sectoral stocks that have performed mildly or underperformed since then