Nifty Futures Trading strategy | Hold Shorts and Refrain from Option Writing


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Nifty Futures traded in an absolutely narrow range throughout the trading session before finally ending the day forming a harami pattern (inside day). In today’s post, we provide a sneak peak into our proprietary trading system. As per the system, the proprietary momentum and lead indicators are both pointing towards a possible short term reversal. Though they have not signaled any reversal of  trend, there could be a small pause in the downtrend before it resumes again.

nifty-futures-trading-system-feb-11-2013.jpg

NIfty Futures could consolidate before resuming the down trend

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Nifty futures trading strategy is to stay with the down trend; however compulsory traders can trade as suggested below

Aggressive traders may initiate longs above Monday’s highs of 5937 with a stop of the low 5905. In case the market sells off  below 5905 then reverse and go short.  Given our longer term bearish forecast we continue to remain bearish and refrain from taking long positions.

Nifty Options – Implied volatility as per historical precedent should spike

Seasonality studies suggest that during the past three years, just about 3 weeks prior to the budget, the implied volatility, as measured by India VIX has always been in the mid twenties and stayed in just about the same range till the budget was presented. This year is marked by a stark contrast where the India VIX is oscillating in the 13-15 range, however it is showing signs of increasing. In anticipation of a spike given the historical precedent and the current low implied volatility, we recommend option buying strategies and would advice against any option writing.

India-VIX-spike anticipated-feb-11-2013

Seasonality suggests a spike in the implied volatility

As per the trading strategy recommended for the Nifty futures, above 5937 naked 5900 calls may be purchased in case markets rally. However if the markets resume the down trend  5900 puts may be purchased below 5905 levels.

Nifty Options Fact Sheet  (infographic)

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Refrain from writing options given that the budget event can cause volatility to spike

For daily updates on our trading view on Nifty Futures & Options  please send us an email at bolinjkar.vinit@gmail.com or  SMS / WhatsApp on 9730836363. We would be more than happy to oblige our community of investors / traders.

Disclaimer: The opinions expressed here in are strictly for education pupose only. Before investing please make your own thorough analysis or speak to a qualified Certified Financial Planner / Advisor. We are not in any which way responsible for trading losses arising out of  trading decisions taken based on the above. Also read the disclaimer below.

This blog is the personal blog of Vinit Bolinjkar. The views expressed in this article are entirely my own and do not reflect the views of my employer. This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither http://winningtrades1.com or myself accepts any liability arising out of the above information/articles.

logo Vinit Bolinjkar Head of Research, Ventura Securities Ltd
Vinit Bolinjkar
Winning Trades
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