Day: July 3, 2021

nifty index 50 market volatility

Jul21-W1: Volatility reversion to mean is money

Though my view on Nifty for the week was quite bullish, I was already holding strangles since Jun 23rd. The strangles started giving nice profits due to absence of any action on Jun 24th and Jun 25th. By end of Jun 25th, I rolled in the strikes while again having no idea what could happen on Monday.

In hindsight, I should not have had such a bullish view since stochastic on daily timeframe was never going up. Market respected the momentum indicator and started slipping since Monday. However, the pace was not enough to cause any damage to puts. In fact, the put options remained in profit despite the fall.

The sluggish movement of market until Thursday meant that all I had to do was roll-in options on both sides. This helped me in earning a handsome profit for the week ending July 1st. In fact, July 1st must be one of the most boring expiries over the past couple of years.

However, the law of averages spares none. It is incredibly risky for option sellers to hold positions in such a tightly squeezed market. I am therefore forced to take positions which have very little premium in them. So, the coming week may not be as profitable. Absence of volatility might make the next couple of weeks difficult for me.

Jul21-W1: Nifty index 50 trades beat target CAGR

On Jun 23rd, I sold nifty index 50 strikes expiring on July 1st which meant that time to expiry was more than a week. Higher the time to expiry, higher the premium. But it was not the time that made me take positions in advance. The reason was volatility. If you will see intra-day Bollinger bands on Jun 23rd, they were quite stretched out.

So I sold OTM strangle from Jun 23 to Jul 1 whose daily candles were like this:

Here are the results:

Net Profit (after deducting brokerage)Capital deployed (approx)Week’s ROIAnnualized ROI for this weekTotal no. of weeks traded till todayAverage CAGR till today
Rs. 7,232.3Rs. 6,32,1341.144%80.68%351.61%

Where annualized ROI for week = ((1+week’s return in decimal)^52)-1)*100

The following is breakdown of week’s positions:

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.