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Mumbai: A business combination consisting of nifty Options are gaining prominence among savvy trading desks Institutional Investors, The strategy, known as calendar spread, where traders simultaneously sell option contracts in the current month and buy the next month, is being recommended by brokers to institutional clients who see a sharp move in Nifty options. , implied volatility – a key component of options pricing – in September.
Girish Patil, Manager-Derivatives, Antique Stockbroking said, “There is scope to make money by selling current month volumes (implied volatility) and buying September volumes. In this spread strategy, traders use the premium earned by selling the current series to part-finance the cost of buying the option in the next month. “With only a few more days for the August series to conclude, volumes are unlikely to jump in this series,” Patil said.
The futures and options contracts for the August series will expire on the 26th while the September series will expire on the 30th of the following month.
Option sellers, who charge a premium from the buyer, prefer fewer trading days in the trading month due to the time value – another key aspect of option pricing. The time value of options approaches the expiration of contracts, resulting in limited fluctuations in option prices.
Selling Nifty 5500 call options in August series and buying similar contracts in September series is a good strategy in such market, AVP-Derivatives Shailesh Kadam said, PinC Research,
“This strategy stipulates that Nifty will remain in a narrow range and not go above 5500 in the August series, while the undertone is positive next month,” Kadam said.
Over the past month, the Nifty has largely moved into a tight band between 5350 and 5450, resulting in the volatility index – a measure of traders’ expectations of near-term risks in the market – moving in the 15-20% band. Used to be. This is the lowest level since January 2008. This indicates that traders are comfortable about market levels in the near term.
Brokers said that in the absence of sharp volatility in the index, options traders have struggled to make money. “Volume buyers have lost their money while sellers do not have the guts to sell volume at such low levels,” said the derivatives head of an institutional broking house. “Therefore, unless there is a sharp move, calendar spreads seem to be the best strategy,” he said.
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