Election Special Market Strategy

F&O Strategy to hedge your portfolio and trades

Election fever has gripped the nation, as we have entered April, the most crucial month in recent times, touching new highs.

 

From here on, the election process will commence, which would increase market volatility in India. Historically, one has seen that increase in volatility has led to increase in trading band. Derivative (F&O) strategies could be useful in the current scenario to hedge portfolio and trades.

 

Following points provide you with a highlight to hedge your portfolio and to implement election-trading strategies:

 

Derivative Positions: Nifty Futures at 6700 (strategy 1, 2, and 3 as shown below in the following figures:

As we expect wide short-term movement in the Index, we would recommend not to short options until the completion of general election. Going Long on ATM Call and Put options could be the best strategy in the current market. Eg: Nifty 6700 CE and PE.

 

Cash Market Position:

 

Derivative strategies are not only for F&O traders. Short and long-term investors could benefit from these strategies as well.

 

Strategy 1 and 2 are shown below in the following figures:

In case the market falls, the premium of the puts would jump. This rise in the premium could offset a fall in an investor’s portfolio. Further, the gain from puts could be used to average out holdings.

 

Note:

ATM – At the Money, OTM – Out of Money, ITM – In the Money

 

 

Happy investing…

 

Akhil Rathi

Equity Research

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

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