Bank Nifty Trade for Outcome of UP Election Exit Polls

Bank Nifty is trading in a range for last 3 weeks awaiting outcome of Elections across various states and especially UP. Tomorrow after 5.30 pm Exit polls will give some picture about outcome of these elections. Market will react to these Exit polls on Friday!

Strategy for this scenario can be as follows for option trading by buying options:

Buy Put and Call weekly options expiring Mar 16 in equal lot of strike price almost 400-500 points away from spot price of Bank Nifty at around 3-3.15 pm tomorrow. The premiums will be on higher side due to increase in volatility(that's not favorable to buyer of options).

On Friday Bank Nifty likely to open 300 points Gap Up/Down. In that case The option where Index move is favorable may become 2.5-3 times of purchase price while other side option may fall to 0.5-0.25 times of purchase value that should be exited as soon as market opens for trade. But one will get Net profit of 50-100% of capital invested. The option premiums will drop due to drop in volatility but sharp price movement on one side will help to achieve profit.

In case there is no major Gap Up/Down (very Low probability, but can't ruled out), losses would be higher due to reduction in premiums due to drop of volatility and one will have to immediately exit all position at the opening of market.

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VIX Analysis

The daily VIX chart shows the formation of Doji candles at the bottom and reversal. The daily RSI crossed the previous resistance level of 40. The MACD signal gave bullish crossover suggesting bullish move in VIX. So the daily chart shows the possibility of VIX moving towards 28 levels in the coming days. The weekly chart shows the formation of wedge and reversal from the bottom. VIX may move towards the upper wedge line @ 29-30. So VIX suggesting the bearish mood of the market and hence the high possibility of fall in Nifty-50 and Banknifty in the coming days/weeks. VIX Gann Box: The daily Gann Box shows a reversal from the mid-zone of time factor points. The next time factor date is Jul-21. So will VIX continue to move high till Jul-21 or it will reverse from angle point? Wait and watch. Using VIX to spot Intraday Reversal on Indices: VIX is a very useful indicator to spot reversal during day trade. If the price of an index moves up and @ resistance zone watch values of VIX. If VIX s...

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BankNifty Update For Jul-09,2020 - Weekly Expiry

Banknifty opened Gap up @ 22700 and then achieved all our bullish targets of 23900/23000. But the upmove was very choppy and looked like terminating pattern and was not easy to trade. So I did not take a trade on the upside. My observation was Banknifty good up (250-300 points) while Nifty was not at all moving up and was just 10-15 points up and VIX was increasing. That was a signal that there is a high probability of reversal. (I twitted this around 12.30 pm). Banknifty continued its upmove and VIX was not falling, so I was sure that reversal is on the card from the strong resistance zone of 23900-23000/50. In yesterday's post, I mentioned about daily RSI @ resistance. That was another reason I was expecting a high probability of fall after it moved higher levels to come to at least yesterday's close levels or below. I got down-trade from almost 23000 to 22700 (got out earlier as it was intraday and not much time left though I was expecting at least 22600. It gave a much lowe...

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